Tatul Manaseryan, the head of Alternative think tank, in an exclusive interview with ARKA news agency, voiced his views on advantages and disadvantages of Armenia’s European or Eurasian integration.
ARKA – Could you please comment on President Serzh Sargsyan’s statement about Armenia’s intention to join the Customs Union?
Manaseryan — I think this statement should be considered the way it was made – it shouldn’t be separated from the context. The president said Armenia was ready, but it doesn’t mean that this will be done right now. The Customs Union is still in the process of formation, and I would point out that some former Soviet republics, including Ukraine, haven’t made their final decision yet though there were statements. This should be considered as a process which Armenia couldn’t distance itself from. The same applies to the establishment of the Eurasian Economic Union – it would be reasonable to be its cofounder rather than to join it later.
I would like to stress that the president’s statement doesn’t downgrade integration processes between Armenia and Europe. On the contrary – there was a clear message that membership in the Customs Union shouldn’t affect our relations with the European Union. Besides, it would be better to hope that Brussels will show understanding, like Moscow, though it is difficult to expect it given particular factors. It is a fact that Armenia has to choose between integration with the EU or a membership in the Customs Union. However, even if Armenia signs the Association Agreement, it won’t become a member of the European Union. I would also like to remember that Turkey, having a similar status of an associated member, enjoys all the free trade regime preferences, like European countries.
ARKA – In speculations over Armenia’s choice between European and Eurasian integration, political, not economic advantages and disadvantages are pointed out. What can you say about economic pluses and minuses for Armenia in these integration processes?
Manaseryan - Nobody is gauging economic advantages. Our think tank has made approximate calculations, since more detailed calculations need more time and resources. The Customs Union and the Eurasian Union, if it is established and starts functioning, imply trade without customs tariffs. Our calculations show that in this event Armenia, a country which imports huge volumes of commodities from Russia and the CIS countries and has a sizeable portion of its revenue generated from customs duties, will lose part of it and will have to cut social, education and healthcare spending. Our problem with Europe is a little different. We have quite close trade and economic ties with it. The European Union and its member countries are our big partners. But it is rather about export than import. I would like to remember that seven or eight years ago more than half of Armenia’s exports was sent to EU countries, particularly to Belgium (jewelry and diamond-cutting industry’s products). Certainly, such dependency is unacceptable, since diversification is needed. But this is still export (now also the mining industry’s products), which implies no customs duties, and if we enlarge our export (though there are problems related to European standards, but this is a separate mater), then we will have not as grave problems in exporting goods as in import.
However, taking into account our imports, including natural gas, wood, metals, machinery and foods, we know that in dealing with the Eurasian Union or Customs Zone we will inevitably sustain immense losses, which shouldn’t be omitted. What will compensate for these losses? A political union is understandable, but the Eurasian Union may not live much long without an economic basis. That is why it would be reasonable to consider room for opening a railway through Abkhazia and restoring industrial giants, which will be able to revive the national economy and compensate for budget losses.
ARKA – Nevertheless, Russian experts find it impossible to compete with the European agriculture, for example, given that this sector is subsidized by the European Union.
Manaseryan — This concern has ground. I think the lack of subsidies is a big trouble not only to our country, but also to other developing countries. This problem loomed large amid the global recession inflicting a huge damage to the European Union. I think there are substantial revisions in the European Union now, since subsidies and budget allocations for these purposes are cut amid the crisis. As a result, food prices are going up creating a food crisis in the world. There is the necessity of revision in this case, and I hope that subsidies will have no considerable impacts. I would like to say that Armenia has an absolute advantage here in terms of agriculture output, since very little territories remained in the European Union fit for cultivating organic products.
The same applies also to our region. If there are no political problems, then Turkey may become a large market for Armenia’s organic products. We have also an agreement with Turkey to export 4.5 billion kilowatt/hour electric power, but the agreement remains only on paper so far because of known obstacles.
We learned recently that we have quite big opportunities in neighboring countries. But the European Union put forward tough requirements, especially those relating to food safety. There are experienced exporters in Armenia, but I am talking about the entire country and whether Armenian companies are ready to enter European markets.
ARKA – Nevertheless, imports from Europe dominate Armenia’s agriculture market. Don’t you think that after signing agreements with the European Union the government will lose all the levers of support for the agriculture sector?
Manaseryan — The most vulnerable area in Armenia is still agriculture, but there are also smaller problems in agriculture, which can be solved with governmental support. Insufficient awareness of reasons for cultivation of one or another crop, which is among these problems, leads either to excessive production or to deficit accompanied with price hikes. It is necessary to do something here, and this work is not connected with financing. Organizational problems are waiting for their solutions as well. It is necessary to explain farmers the domestic market’s demand for certain agricultural crops and expected profits. Besides, it shouldn’t be omitted that Armenia caters for domestic market demand for many types of foods. In this case, farmers, leaning on this support and professional advice on quality, standards and requirements, may reach success in exporting their products, if the process is organized properly. There is the experience of Turkey that without membership in any political union sells its products and services across the European Union. Armenia can do the same, if organizes the process properly.
ARKA –Is it possible for Armenia to maintain economic cooperation with both the European Union and the Customs Union?
Manaseryan — I think it is possible at the current stage. Cooperation can be continued. As a rule, any type of economic integration implies loss of part of sovereignty. For example, Belgium, France or Germany, can’t independently make decisions related to tax, customs and monetary policy. Armenia in these matters maintains its independence, but accepts the European Union’s requirements. It shouldn’t be forgotten that there is little difference between the EU and WTO requirements. It would be strange to play off one against the other. Non-discrimination principle can’t be breached in joining any regional organization. For example, membership in the Commonwealth of Independent States doesn’t hinder Armenia from being a member of the Black Sea Economic Cooperation Organization. But it should be noted in case of the Customs Union or Eurasian Union that Armenia has no common borders with any of its member countries. We have discussed the matter with some economists, including Sergey Glazyev, with whom we considered Greece as an example. But it shouldn’t be forgotten that Greece, an EU member, has a common sea border with the EU space, while Armenia has no border with Eurasian area. It means Armenia will have to make appropriate procedures with Georgia. Russia should analyze better geopolitical factors before embarking on Armenia-related issues.
ARKA – Sergey Glazyev, advisor to Russian President Vladimir Putin, has already threatened Ukraine with economic collapse, if the country signs the Association Agreement with the European Union. Could you, please, comment on this statement, considering it also as a warning to other CIS countries involved in European integration process?
Manaseryan — As for Glazyev’s statement, I regret that such a person of influence and the economist I respect displays tough approaches, though I understand Russia’s concern, but as an economist, I think economic interests are more important than the administrative and command principles and approaches imprinted in subconsciousness. As for Armenia, I will say both economy and politics are important here. But I am opposed to presenting the benefits of Armenia’s membership in the Eurasian Union by capitalizing on political context. Here are some arguments indicating that the Eurasian Union is just an illusion though very desirable and very important to us, since we should necessarily develop mutually beneficial relations in this region, but without a clear idea about a mechanism for forming it and without understanding what result it will produce. The Eurasian Union is the fourth, the highest form of economic integration, like, for example, the European Union, and talk about the matter began far earlier than the signing of the CIS Free Trade Agreement.
This is at least nonsense, in terms of economics, since in classical sense there are four kinds of economic integration – free trade area, customs union, common market and economic and political union. Strange is that in our case talk about Eurasian Union came first, and after that the topic of Free Trade Area Agreement returned, and only after that the call to join the Customs Union emerged. I want to remember that the renowned North American Free Trade Agreement (NAFTA) space was initially formed as a free trade zone, and for two decades, three developed countries – the United States, Canada and Mexico – have not managed to reach the next stage of economic integration – customs zone. That is why it seems incredible how transition economies have already formed customs zone without creating free trade zone before and now want to establish the Eurasian Union without creating a common market. -0-