Armenia Might Face Sanctions: There's 4-5 Years

    • Business - 15 November 2017, 21:46
The chapters of the EU-Armenia agreement concerning trade mostly refers to the requirements and principles of World Trade Organization. If the Customs Code of the Eurasian Economic Union contradicts the principles of WTO, and Armenia is led by the principles of the EEU, sanctions may be applied to Armenia, the head of the Union of Employers Gagik Makaryan said.

On January 1, the EEU Customs Code will become effective, rise in prices of some products is expected determined by the rise in the excise tax and customs duties on imports from third countries.

According to Gagik Makaryan, essential changes are expected in January. He recalls that when Armenia officially joined the EEU in 2015, it took a two-year “vacation” to prepare for the changes. As of January 2018 the excise tax will rise, which is an EEU requirement.

“It is not about prices of goods but the excise tax on fuel, alcohol and tobacco set by the Armenian legislation which are below the average in the EEU. Consequently, the excise tac must increase every year, between 2018 and 2022. This will lead to rise in prices of some products,” he said.

As to imports from third countries, Makaryan said that other customs duties will be applied, pushing the prices of goods up. He draws attention to an important circumstance: “There is an interesting aspect. Since the EU-Armenia agreement is supposed to be signed, many chapters in it refer to the requirements and principles of World Trade Organization. In other words, that agreement should proceed from the WTO regulations. Though the agreement with the EU is not considered an economic agreement, economic issues are covered quite extensively in it. Since it is not economic, we must ensure the economic part through the EEU laws and maintain the principles of WTO under the agreement with the EU. However, WTO regulates the customs duties on imports to Armenia. Hence the EEU Customs Code should not contradict to the principles of the document to be signed with the EU,” he said.

Makaryan is hopeful that as Serzh Sargsyan states later the EEU will follow the WTO rules. However, as long as the EEU Member State Belarus is not a WTO member, the problem is complicated. “As long as there are countries in the EEU which are not members of WTO, contradictions may occur,” he added.

In answer to the question what contradictions may occur and what Armenia should expect, Gagik Makaryan said: “If there are contradictions, the force models will work. In other words, the EEU may require Armenia to follow its customs rules, Armenia will get into a conflict with WTO. And not fulfilling commitments means that sanctions will be used against Armenia.”

In this situation, according to him, Armenia may be saved by the fact that some provisions in the agreement to be signed with the EU will not be used at once, there will be a transition period.

“After signing Armenia must meet about 80% of requirements of the agreement in 4-5 years. We hope by that time all the EEU member states will be WTO members, and the EEU will adhere to WTO principles. In other words, we have 4-5 transition years,” he said.

Regarding the rise in excise tax, the expert says the EU-Armenia agreement contains a provision on equal opportunities for local products and imported products.

“In other words, we should not create obstacles to goods through some excise or other mechanisms and give advantages to another one. At one time, the EU put pressure on us for the excise tax, said excise tax on local drinks is low, competition is not equal. Now we must look at this issue from another point of view. It is possible that the rise in excise tax is not exclusively the EEU requirement, the EU stance is similar,” Makaryan says.

He notes that the EU approach is to have equal opportunities for local products and imported goods.