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THE LEGAL RELATIONSHIP IN GOODS BETWEEN THE REPUBLIC OF ARMENIA, THE EUROPEAN UNION AND THE EURASIAN ECONOMIC UNION

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Student: Levon Hayrapetyan

Master track: European Union Law (International and European Law) Supervisor: Prof. Steven Blockmans

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Abstract

The aim of the paper is to analyze whether Armenia can act as an intermediary between the European Union and the Eurasian Economic Union where companies will benefit using Armenia as a transit point. Consequently, to what extent will a company benefit from exporting a product from a member country of the Eurasian Economic Union to the European Union via Armenia. Similarly, if a company wants to export from a member country of the European Union to the Eurasian Economic Union member country, what type of benefits are in place. The purpose is to analyze and see to what extent the foreign agreements that Armenia signed up for can benefit businesses. For this purpose, the different agreements are analyzed that Armenia contracted, namely, the Comprehensive and Enhanced Partnership Agreement between the European Union and Armenia, Treaty on the Accession of the Republic of Armenia to the Treaty of the Eurasian Economic Union and the Generalized Scheme of Preferences Plus preferential tariff system. In analyses further aspects are taken into consideration, namely, European Product Standardization, Pan-Euro Mediterranean Preferential on Rules of Origin, product-specific requirements, institutional dominance by Russia in Armenia, and participation of Belarus being a member of the Eurasian Economic Union but not a member of the World Trade Organization in the movement of goods between the two Unions. The result of the research shows that Armenia can act as an intermediary between the Eurasian Economic Union and the European Union, yet, certain limitations apply. In terms of product movement from the European Union to Armenia and then to the Eurasian Economic Union, companies can benefit from reduced tariffs for a certain category of products. As Armenia acceded to the Eurasian Economic Union, it is currently in transitional period until 2022 after which the Eurasian Economic Union will decide upon the external tariffs for the Union. Similarly, it is feasible to import products from the Eurasian Economic Union under zero tariffs and then export it to the European Union with zero tariffs as well assuming the conditions set by the Generalized Scheme of Preferences Plus are met. These requirements are inter alia, product-specific requirements, product standardization, wholly or partly obtaining the product in Armenia. Finally, the paper analyses whether Armenia can benefit from being and intermediary for a long term. In conclusion, at this point, Armenia can provide benefits for companies engaged in trade and these advantages are in the form of reduced tariffs.

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Table of Contents

Introduction...2

Armenian relationship with the European Union and the Eurasian Economic Union...5

The relationship between the European Union and Armenia...5

The relationship between Armenia and the Eurasian Economic Union...7

Generalised Scheme of Preferences Plus...8

Pan-Euro-Mediterranean Preferential on Rules of Origin...11

European Standardized Products...12

Institutional Dominance by Russia...14

World Trade Organisation membership and Belarus...16

Analyses...21

Product movement from the European Union to the Eurasian Economic Union...22

Product movement from the Eurasian Economic Union to the European Union...23

Product-specific requirements...26

Rules of origin...27

General safeguards for protecting the economy of the European Union...28

Bibliography...33

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Introduction

Nowadays, we observe a rapid change of the world where countries engage in treaty relationship to boost economic development. Whereas this process has various positive effects towards the economy, there are complex legal issues that limit the movement of goods and services. On the 10th of October 2014, the Republic of Armenia acceded to the Eurasian Economic Union which came into force on the 2nd of January 2015, hence establishing both economic and political close relations between the members of the Eurasian Economic Union.1 Since then, Armenia also signed the Comprehensive & Enhanced Partnership Agreement (CEPA) with the European Union on the 24th November 2017. The agreement established an enhanced political partnership between the European Union and Armenia.2 Hence, it is possible to argue that Armenia is aiming for a closer relationship between both the European Union and the Eurasian Economic Union. However, aiming to establish a closer relationship with both unions, has its own limitations. For example, being part of the Eurasian Economic Union, Armenia is limited in the area of movement of goods and services, namely, considering that the movement of goods and services within the Eurasian Economic Union is free, the Republic of Armenia cannot establish the same system with the European Union.3 In case of Armenia, having two free trade agreements is not possible as Armenia has already committed to joining the Eurasian Economic Union. As a result, the Eurasian Economic Union will decide upon foreign trade agreements similar to the case in the European Union. In the meantime, it is clear that both the European Union and the Eurasian Economic Union have similar objectives for economic integration as similar to the European Union, the Eurasian Economic Union is establishing a broader single market and common external tariff policy.

The “Eurasian Economic Union - Armenia Cooperation” business forum was held on June 2nd 2018. Artsvik Minasyan, RA Minister of Economic Development and Investment, 1 “EURASIAN ECONOMIC UNION” (Ministry of Foreign Affairs of the Republic of Armenia)

<https://www.mfa.am/en/international-organisations/6> accessed June 25, 2018

2 “New Agreement Signed between the European Union and Armenia Set to Bring Tangible Benefits to Citizens - EEAS - European External Action Service - European Commission” (EEAS - European External Action Service) <https://eeas.europa.eu/headquarters/headquarters-homepage/36141/new-agreement-signed-between-european-union-and-armenia-set-bring-tangible-benefits-citizens_en> accessed July 5, 2018

3 “EU Armenia New Agreement” (Open Media Hub) <https://openmediahub.com/wp-content/uploads/2017/11/EU-Armenia.new-agreement.pdf> accessed July 12, 2018, p 2

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stated, "As a member of the EU GSP + Commercial Regime, Republic of Armenia has wide opportunities in terms of creating strong commercial ties with Eurasian Economic Union and Iran, as well as creating a platform for the involvement of third world countries in the Eurasian Economic Union.”

Even though there are many economic and political differences between the European Union and Eurasian Economic Union, it might be possible to establish a closer relationship within a certain category of goods and services via Armenia acting as an intermediary. The research question is as follows: Can Armenia become a bridge in European Standardized Products (ESPs) between the European Union and the Eurasian Economic Union? The sub-questions are as follows: What legal gaps exist that may facilitate the movement of European Union goods and services to Eurasian Economic Union and vice versa? How can the exporters benefit from the advantage of using Armenia as an intermediary? Until what timeframe do these benefits last for and can they be extended? The topic is of particular importance for businesses engaged in external and internal trade between the Eurasian Economic Union, the European Union and Armenia. The practice can be compared to arbitrage where an intermediary is used to transport goods which is usually less costly. The objective of the paper is to support companies that can utilize the trade advantages that the European Union and the Eurasian Economic Union provide via Armenia. This paper will also assist exporters to understand what advantages Armenia can provide as an intermediary between the two Unions. Additionally, the paper looks at the technical and administrative requirements, rules of origin in particular. Consequently, for example, if a company would like to export a product from Russia to the Netherlands, by transporting the good via Armenia the company might have certain tariff reductions. Assuming it is possible for the products to be exported to the European Union from Eurasian Economic Union country via Armenia and vice versa will provide significant cost saving in terms of unpaid tariffs. Consequently, this way the businesses can utilise the opportunity provided for them by the governments. Furthermore, this will lead to a lower price for the products, therefore, it is beneficial for both consumers and foreign producers. For the local producers and the local government, this opportunity is problematic as there will be more competition from foreign companies against local producers and less tariff income for the government. The process is also analysed if a product is transported, for instance, from the Netherlands to Armenia and to Russia. The objective is to analyse what legal barriers are limiting the movement of goods, in particular,

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European Standardized products from the European Union to the Eurasian Economic Union and vice versa. Hence, to analyse the feasibility of movement of European Standardized Products, the agreements at a place between the European Union and Armenia, and the agreements between Armenia and Eurasian Economic Union must be analysed. Subsequently, the paper is tied to the foreign policy of the European Union. The paper will have the following structure. First, the CEPA and Treaty on the Eurasian Economic Union will be analysed. Second, the unilateral Generalised Scheme of Preferences Plus is explained with regards to rules of origin by taking the example of Pan-Euro Mediterranean Preferences on Rules of Origin. Third, the requirements of European Standardized Products (ESP) will be explored and the feasibility of applying such standardization in goods produced in Armenia and in other Eurasian Economic Union countries. Fourth, the institutional dominance by Russia in Armenia is analysed to understand the dependency of Armenia towards Russia. Fifth, the movement of ESPs will be analysed based on the conditions of the World Trade Organisation (WTO) and relationship of WTO with Belarus.4 Afterwards, the paper considers all the mentioned elements and analyses the feasibility of Armenia becoming an intermediary between the European Union and the Eurasian Economic Union. Finally, the paper will look at what type of non-legal issues are at place which might threat Armenia acting as an intermediary for the transport of goods.

Armenian relationship with the European Union and the Eurasian Economic Union

The relationship between the European Union and Armenia

Armenia abandoned the process of concluding Association Agreement and related Deep and Comprehensive Free Trade Agreement with the European Union in 2013 and started negotiations to join the Eurasian Economic Union. The Association Agreement contained economic advantages. The Comprehensive and Enhanced Partnership Agreement (CEPA) signed on November 24, 2017, was a 4-year long process which established a new framework to develop the relations between the European Union and Armenia. The CEPA is also sometimes referred as

4 Liik K, “Russia's ‘Pivot’ to Eurasia” (European Council on Foreign Relations)

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Association Agreement lite.5 The agreement provides more job opportunities, more business opportunities, fairer rules, and better value for money, better education and more opportunities for research, more safety and security, strengthened democratic and human rights and a cleaner environment. However, it does not contain articles regarding economic aspects. These characteristics, such as trade liberalisation are excluded from the new agreement. Consequently, Armenia would have more advantages in the European Union. The aspects relating to trade have been calibrated while taking into account the international commitments taken by Armenia, which is the reason there are no articles relating to tariff reduction or product standards harmonization in the CEPA which existed in the DCFTA. Nonetheless, Armenia still benefits from unilateral tariff reductions in the area of the Generalised Scheme of Preferences Plus. The Head of EU Delegation to Armenia told Ampop.am: “The DCFTA aimed at strengthening the trade and investment performance of both economies, while facilitating Armenia's progressive integration with the EU economy of 500 million consumers.6

On the other hand, the Deep and Comprehensive Free Trade Agreement (DCFTA) between the European Union and Ukraine was not an option for Armenia as again, similar to the Association Agreement, the external policy is governed by the Eurasian Economic Union. Since 2016, the European Union and Ukraine applied the Deep and Comprehensive Free Trade Area (DCFTA) which constitutes part of the Association Agreement signed in 2014.7 The political aspects of the cooperation have been implemented since 2014. After the DCFTA has been enforced goods and services will be mutually opened for both markets assuming the trade rules remain predictable and enforceable. This creates improved opportunities for business, investors and citizens from both the European Union and Ukraine. With the alignment of the European standards with the standards of Ukraine, the DCFTA will provide better quality for products and services as well as improve the level of environmental and consumer protection. In this case, as stated in Chapter 1 of the Association Agreement between the European Union and Ukraine the tariffs on goods and services must be eliminated. For example, import tariffs of wheat, cereal and other agricultural products will be reduced to zero. The elimination of tariffs is a mutual effort as 5 Kostanyan H and Giragosian R, “EU-Armenian Relations: Charting a Fresh Course” (Centre for European Policy Studies November 27, 2017) <https://www.ceps.eu/publications/eu-armenian-relations-charting-fresh-course> accessed June 1, 2018

6 “EU Armenia New Agreement” (Open Media Hub) <https://openmediahub.com/wp-content/uploads/2017/11/EU-Armenia.new-agreement.pdf> accessed July 12, 2018, p 2

7 “Trade Policy Ukraine” (European Commission) <http://ec.europa.eu/trade/policy/countries-and-regions/countries/ukraine/> accessed July 5, 2018

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Ukraine should also implement the EU acquis.8 This option will not work for Armenia as establishing DCFTA between the European Union and Armenia would contradict with the commitments of Armenia to the EAEU. In the meantime, if Armenia signed the Association Agreement she would have the same benefits as Ukraine does, meaning zero tariffs for the movement of goods to the European Union. However, if Armenia joined signed the DCFTA, Armenia could not have joined the Eurasian Economic Union as it would violate the requirements set in the DCFTA, namely in regards to free movement of goods as one of the requirements to join the Eurasian Economic Union is to shift the aspects concerning foreign trade to the Eurasian Economic Union.

The relationship between Armenia and the Eurasian Economic Union

The Eurasian Economic Union is an international regional economic integration organization, with an international legal entitlement, established under the Treaty on Eurasian Economic Union in signed on May 29th, 2014 in Astana, capital of Kazakhstan, by the leaders of Russia, Kazakhstan and Belarus. Eurasian Economic Union provides free movement of goods, services, capital and labour, as well as maintaining a coordinated, coordinated or integrated policy in the field of economy. The Eurasian Economic Union creates a platform for the free movement of goods, capital, services and people. The treaty creates common policies in the macroeconomic sphere, transport, industry and agriculture, energy, foreign trade and investment, customs, technical regulation, competition and antitrust regulation among member states. In the future 5-10 years, it is planned to have a single currency which will contribute to the greater integration of trade and economy within the countries.

The Eurasian Economic Union aims to create a sustainable living condition in the Member States and make the national economies competitive in the international market. Current members of the Eurasian Economic Union are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, Republic of Kyrgyzstan and the Russian Federation. Armenia signed the agreement to enter into the EAEU on October 10th 2015. The agreement entered into force on January 2nd, 2015.

8 “EU–Ukraine Association Agreement ‘Quick Guide to the Association Agreement’” (European External Action Service) <https://eeas.europa.eu/delegations/ukraine_en/10418/EU–Ukraine Association Agreement “Quick Guide to the Association Agreement”> accessed July 2, 2018

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From the accession treaty of Armenia Kazakhstan and Kyrgyzstan, it is clear that by joining the single customs union the countries will be required to raise their external tariffs. These countries enjoy special lower tariffs than of the tariffs set by the Union. By increasing tariffs the welfare is usually reduced as there are less competition and fewer alternatives for the consumers to choose from. Consequently, by joining the Union these countries might face certain welfare issues. However, as there is free movement of goods, services, capital and people in the Union the increased external tariffs might be compensated for the improved internal trade leading to a higher welfare standard. Nonetheless, this will be made clear years after the transition period is over.9

After joining the Treaty in 2015, transitional period of 5 years was established for Armenia to adjust to the Eurasian Economic Union’s common tariff schedule.10 Until then, Republic of Armenia may apply different tariffs for various tariff lines. As a result, uncommon instruments have been built up for observing the intra-Eurasian Economic Union versatility of these merchandises, and in specific for an instalment of obligations as they cross intra-Eurasian Economic Union borders. Thus, the transitional period will end in 2022. Since then the tariffs will be equalised for all good within the Eurasian Economic Union import duties. Annex 4 of the Treaty on the Accession of the Republic of Armenia to the Treaty on the Eurasian Economic Union of Mary 29, 2014 states the import customs duty rate that will change between 2015 and 2022.

Formally, Armenia avoided around 800 national duty lines that constitute approximately 7% of the total tariffs.11 In any case, in imports terms, the exceptions are much more essential as it constitutes approximately 40% of the total values imported into Armenia from non-Eurasian Economic Union member countries as seen in Appendix 1.12 Most of the exclusions are 9 Movchan V and Emerson M, “The Eurasian Economic Union's Problematic Customs Union” (Understanding the EU’s Association Agreements and Deep and Comprehensive Free Trade Areas with Ukraine, Moldova and Georgia) <http://www.3dcftas.eu/publications/other/eurasian-economic-union’s-problematic-customs-union> accessed July 6, 2018, p 12

10 Agreement on Accession of the Republic of Armenia to the Treaty on the Eurasian Economic Union, dated May 29, 2014, annexe 3, 4

11 Movchan V and Emerson M, “The Eurasian Economic Union's Problematic Customs Union” (Understanding the EU’s Association Agreements and Deep and Comprehensive Free Trade Areas with Ukraine, Moldova and Georgia) <http://www.3dcftas.eu/publications/other/eurasian-economic-union’s-problematic-customs-union> accessed July 6, 2018, p 3

12 Movchan V and Emerson M, “The Eurasian Economic Union's Problematic Customs Union” (Understanding the EU’s Association Agreements and Deep and Comprehensive Free Trade Areas with Ukraine, Moldova and Georgia) <http://www.3dcftas.eu/publications/other/eurasian-economic-union’s-problematic-customs-union> accessed July 6, 2018, p 4

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anticipated to stay until 2020. In 2020 as it were 10% of Armenia’s non-Eurasian Economic Union imports will be exempted, in 2021 as it were 5%, and none from 2022.13

Generalised Scheme of Preferences Plus

The Generalised Scheme of Preferences was originally created in 1971 under the United Nations Conference on Trade and Development. The objective was to provide the less developed countries with tariff reductions to boost their economy. The Generalised Scheme of Preferences of the European Union is governed under Regulation (EU) 978/2012.14 The initiative is to allow developed countries to grant a different, more privileged treatment to imports from developing countries to the European Union. This is done in the form of reduced tariffs. GSP has a specific and defined purpose, which is solely focusing on tariff preferences for trade in certain products. The program allows economically developed countries to individually decide which

economically developing countries should be included in their GSP schemes and which specific products should be subject to their criteria.

Because the needs of developing countries are different, the Generalised Scheme of Preferences gives varying approaches based on different needs. Thus, the GSP+ program was established, which is a Special Incentive Arrangement for Sustainable Development and Good Governance, specifically designed for vulnerable countries. It grants deeper tariff preferences to the country members. At the present, there are 13 beneficiaries, which are Armenia, Bolivia, Cape Verde, Costa Rica, El Salvador, Georgia, Guatemala, Mongolia, Pakistan, Panama, Paraguay, Peru, and the Philippines as seen in Annex II.15

Regulation (EU) No 978/2012 is aimed at assisting developing countries economically by providing preferential treatment for products in terms of lower tariffs.16 The preferential treatment 13 Movchan V and Emerson M, “The Eurasian Economic Union's Problematic Customs Union” (Understanding the EU’s Association Agreements and Deep and Comprehensive Free Trade Areas with Ukraine, Moldova and Georgia) <http://www.3dcftas.eu/publications/other/eurasian-economic-union’s-problematic-customs-union> accessed July 6, 2018, p 6

14 Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012

applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 L 303/1 15 Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012

applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 L 303/1, annex II

16 Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012

applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 L 303/1, para 7

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is in compliance with the World Trade Organisation requirements, in particular with the Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing countries adopted under General Agreement on Tariffs and Trade (GATT) in 1979.

Annex IX of the Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012 applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 states the list of products that are listed in the special incentive arrangement.17 Beneficiaries need to meet certain criteria to be included in the scheme stated in Article 4 of Council Regulation (EC) No 732/2008. Initially, the country needs to be recognized as "vulnerable". A vulnerable country can be defined is the following factors are relevant. Vulnerable can be considered countries which have not been considered by the World Bank as a high-income or middle-income country for three years in a row.18 To put it in other words, the country needs to be a beneficiary of the standard GSP. Secondly, the list of products that is imported to the EU is very limited, with 7 largest sections of the GSP-covered imports into the EU consisting more than 75% in value of its total GSP-covered imports and imports of products listed in Annex IX should be less than 2 percent of the total imports of the particular product from the originating country during the last three consecutive years into the Union.19 Finally, the country has a low level of imports into the EU, meaning that the country’s GSP-covered imports into the EU consist less than 6,5% in value of the EU's total GSP-GSP-covered imports from all GSP beneficiaries. Another provision which does not fall under the category of requirements to participate but more in terms of product requirement is that the origin of the product must be from the beneficiary country. Consequently, for a product to be exported to the European Union under preferential tariff system must be originating from Armenia.20

In return for the benefits offered by the program, countries are asked to improve Good Governance. Therefore, in order to be part of the GSP+ scheme and maintain the positions, 17 Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012

applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 L 303/1, annex IX

18 Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012

applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 L 303/1, article 7

19 Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012 applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 L 303/1, annex VII

20 Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012

applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 L 303/1, art 33

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countries need to fulfil the 27 core international conventions and efficiently implement them. Among 27 fundamental conventions listed is Elimination of All Forms of Racial Discrimination, Elimination of All Forms of Discrimination against Women, Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, Rights of the Child, UN Framework Convention on Climate Change and so on. The beneficiary country needs to accept reporting requirements and monitoring applied by the conventions. Countries need to constantly accept and cooperate with the EU monitoring procedures.

Armenia has been identified as a vulnerable country and was given advantageous access to the EU market. The Republic joined the improved system from 2014. The scheme will last until 2023.21 Armenia is able to implement and maintain the 27 conventions. As a result of being part of GSP+, Armenia can export 6291 from 9655 of EU products' classification to the EU without customs duty.22 The GSP+ utilization rate in Armenia is 93%, which is high.23 Currently, Republic of Armenia benefits in the spheres of metals and ore mineral that is 80% of the export, 17% textile, 1.5 % processed food such as juices, jams, 0.8% tobacco and 0.4% clocks.24

Pan-Euro-Mediterranean Preferential on Rules of Origin

The Pan-Euro-Mediterranean Convention on Rules of Origin the beginning conventions of which comprise of identical rules of origin.25 There are 23 contracting parties to the Convention, namely, the European Union, the European Free Trade Agreement States, the Faroe Islands, the participants in the Barcelona process, the participants in the EU Stabilisation and Association process and the Republic of Moldova. Neighbouring nations or regions of Contracting Parties may apply to be a Contracting Party to the Pan-Euro-Mediterranean Convention given that they have a Free Trade Agreement in origin, with at least one of the 21 Regulation (EU) No 978/2012 of the European Parliament and the Council of 25 October 2012

applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 L 303/1, art 43

22 “EU Generalised System of Preferences GSP Armenia” (Enterprise Europe Network) <http://eenarmenia.am/en/multicontent/usefull_links/252/> accessed June 26, 2018

23 Joint Staff Working Document, The EU Special Incentive Arrangement for Sustainable Development and Good Governance ('GSP+') assessment of Armenia covering the period 2016 – 2017, p 17

24 “EU Generalised System of Preferences GSP Armenia” (Enterprise Europe Network) <http://eenarmenia.am/en/multicontent/usefull_links/252/> accessed June 26, 2018

25 “The Pan-Euro-Mediterranean Cumulation and the PEM Convention” (European Commission)

<https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/arrangements-list/paneuromediterranean-cumulation-pem-convention_en> accessed July 7, 2018

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Contracting Parties. For example, the Republic of Moldova connected for participation in July 2013 and got to be the 23rd Contracting Party on 1 September 2015. Even though Armenia is not a signatory, understanding the rules of origin in terms of cumulation of products is important to understand the Generalised Scheme of Preferences Plus that the European Union provides for Armenia. Thus, Armenia cannot directly cumulate products imported from the Eurasian Economic Union. However, it can cumulate depending on the product and requirement set by the Generalised Scheme of Preferences Plus.

Cumulation is the term utilized to portray a framework that permits originating products of nation A to be modified to products originating in nation B, in the same way as if they originated in country B. The end result of the products would have the origin of nation B. It can only operate in a way that the two countries have indistinguishable rules of origin.

One of the vital aspects is that the products imported from country A must be sufficiently modified to meet the list of rules.

Four methods of cumulation exist, namely, bilateral, regional, full and diagonal. Bilateral cumulation works between two nations where a free trade agreement or independent course of action contains an arrangement permitting them to cumulate origin. This is often the fundamental sort of cumulation and is common to all beginning courses of action. Merely originating products or materials can advantage from it.

Regional cumulation is provided in specific areas only, namely where Generalised Scheme of Preferences are provided to certain countries, for instance, countries part of Association of South-East Asian Countries benefit from regional cumulation.

Full cumulation allows parties to an agreement to carry out working or processing on non-originating products in the area formed by them. Full cumulation means that all operations carried out in the participating countries are taken into account. Full cumulation is available in between the European Union, European Economic Area, Maghreb and Overseas Countries and Territories.

Diagonal cumulation operates among at least two countries considering that there is a valid Free Trade Agreement where provisions for cumulation are identical among them. Similar to bilateral cumulation purely originating from the given area can be used for diagonal cumulation. When two or more countries are involved in the cumulative, the original of the product will form the country it was last assembled or processed assuming there was more than a

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minimal operation. In order for Diagonal cumulation to occur the countries ought to be in the “pan-Eur-Mediterranean cumulation zone”.

European Standardized Products

Standardizing products is a practice to set certain rules and requirements for producing or operating various products. The standardized documents allow to repeatedly use the products the set standard for certain activities. The standards are created by cooperation between all the stakeholders and interested parties, namely representatives from producers, consumers, government, users, suppliers etc. All the involved parties benefit from the process as such standardization simplifies the process, makes the products safer and decreases transaction costs, which in its turn leads to lower prices.26 Standardization gives people, organizations and businesses with a shared basis designed for common understanding. There are three established and recognized standardization organisations in the European Union, namely, European Committee for Electronic Standardization (CENELEC), European Committee for Standardization (CEN) and European Telecommunications Standards Institute (ETSI) as seen in EU Regulation 1025/2012.27 The CENELEC is responsible for standardization in electrical engineering in particular. The European Committee for Standardization provides proficient structure for interested parties in the areas of goods and services, namely, air and space, chemicals, construction, consumer products, defence and security, energy, the environment, food and feed, health and safety, healthcare, ICT, machinery, materials, pressure equipment, services, smart living, transport and packaging.28 The ETSI provides standardization for the telecommunication industry in particular in the areas of mobile, internet, fixed or radio technologies. Hence, the European Standards is defined as a standard recognized by one of these three organisations.

26 “European Standards ” (European Committee for Standardization)

<https://www.cen.eu/work/products/ENs/Pages/default.aspx> accessed July 6, 2018

27 Regulation (EU) No 1025/2012 of the European Union and the Council of 25 October 2012 on European standardisation, amending Council Directives 89/686/EEC and 93/15/EEC and Directives 94/9/EC, 94/25/EC, 95/16/EC, 97/23/EC, 98/34/EC, 2004/22/EC, 2007/23/EC, 2009/23/EC and 2009/105/EC of the European Parliament and of the Council and repealing Council Decision 87/95/EEC and Decision No 1673/2006/EC of the European Parliament and of the Council, OJ L 316/12, para 2

28 “Who We Are ” (European Committee for Standardization) <https://www.cen.eu/about/Pages/default.aspx> accessed July 6, 2018

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European Standards make an essential share of the Single European Market. Albeit rather specialized and generally obscure to people, these standards reflect the most vital issues that organizations face. Standards allow the codification of the best practices and most of the time is quite advanced.

As Armenia is now part of the Eurasian Economic Union, the Armenian standards

Institutional Dominance by Russia

In 2013 Armenia was planning to sign Association Agreement with the European Union which would provide zero tariff import of various goods from Armenia. However, this opportunity was foregone due to political pressure by Russia. In several circumstances, the European Union was improving its political and economic position by extending its relationship with the Eastern European countries, such as Deep and Comprehensive Free Trade Areas between European Union and Ukraine, Georgia and Moldova. Consequently, the regional dominance by Russia decreased, hence the logical step for Russia would be to influence other countries that the European Union has not yet established a close relationship, for example, Armenia. Armenia is considered to have a key political location considering the neighbours, namely, Iran, Turkey, Azerbaijan and Georgia. Hence, keeping having an ally in the south in this case Armenia will improve the geopolitical stance of Russia. Therefore, it is reasonable for Russia to keep Armenia by her side. One of the possible methods is to engage in a close economic relationship which is the reason Russia wanted Armenia to join the Eurasian Economic Union as by joining the Eurasian Economic Union most of the economic policy including external trade will be decided by the Eurasian Economic Union. For example, the Armenian energy and communication sector is mostly owned by Russian companies. Around 80% of the natural gas used in Armenia is imported from Russia, Gazprom possesses gas dispersion network and Russia provides fuel to the Metsamor nuclear plant. The energy sector is not integrated into the Eurasian Economic Union and in theory should not be a problem for the new EU-Armenia agreement. However, natural gas remains problematic because of the agreement between Russia and Armenia that was signed after rejecting the Association Agreement by Armenia in 2013. The deal was done in favour of joining the Eurasian Economic Union where the deal would allow Gazprom to operate as a monopoly in the Armenian pipelines which would last until 2043 and

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will not allow Armenia to modify the laws until the agreement expires. Based on the “asset- for-debt” agreement signed among Armenia and Russia between 2002 and 2003, apart from the energy sector, nuclear power plant, Russia also took gained the control over the railway network of Armenia and has been conquering big shares in the sector of mining.29

Armenia faces high numbers of labour migration into Russia, thus, the republic heavily relies on remittances from migrant workers in Russia. Armenia being a post-Soviet Republic, Russian Federation is a favourable destination for Armenian migrants in terms of both geographical location and language accessibility. According to data provided by the World Bank, labour force migration from Armenia has reached 1,409,757 in 2017, most currently working within the premises of the Russian Federation.30 The opportunity to work legally in Russia is a crucial factor for Armenians and is a big factor to be part of EEU. Thus, Russia proves to be Armenia’s most important partner.31

The role that Russia plays in the security of Armenia, as a landlocked country currently in a state of war, the traditional links with Russia, as a reference to having the same background as a Post-Soviet Republic, and the trade and economic relation due to the geographical locations of both countries, also Russia's role in the conflict of Nagorno-Karabakh with Azerbaijan for mediation talks, and of course the big Armenian community in Russia, all indicate that the crucial factor of the relation between the countries is security. The Republic of Armenia is highly dependent on Russia as the superpower in many aspects guarantees the security for the Republic of Armenia.

Among multiple military agreements between Armenia and Russia are common training, the opportunity for Armenian soldiers to study in Russian military academies, a big number of Russian troops in Armenia; mainly for the border control. The Russian-Armenian agreement signed in March 1995 confirmed the Russian control over the 102nd military basis in the city of Gyumri, which is the second largest city in Armenia. In 2010, the contract according to which

29 Giragosian R, “The Eurasian Union: A View from Armenia” (Center for Security Studies)

<http://www.css.ethz.ch/content/dam/ethz/special-interest/gess/cis/center-for-securities-studies/pdfs/CAD-51-52-11-13.pdf> accessed June 27, 2018, p 11

30 “Labor Force, Total” (The World Bank) <https://data.worldbank.org/indicator/SL.TLF.TOTL.IN?locations=AM> accessed June 14, 2018

31 Tarr D, “The Eurasian Economic Union among Russia, Belarus, Kazakhstan, Armenia and the Kyrgyz Republic: Can It Succeed Where Its Predecessor Failed?” (Social Science Research Network August 31, 2015)

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Russia has the right to use the Gyumri military base was extended until 2044. Approximately 8000 Russian soldiers are serving in Armenia currently, most belonging to the border control.

Former Armenian President, Serzh Sargsyan, who previously served as a Minister of Defence, claimed how Armenian army is created by following the example of the Russian army and adopting the same cultural aspects as Russians. Being a member of the Collective Security Treaty Organization (CSTO), which is the alternative of the North Atlantic Treaty Organization (NATO) in the post-Soviet countries, has a big significance for Armenia. Russia will have to defend Armenia as a member of CSTO, in the case was in Nagorno-Karabakh break out again. Armenia especially favours the privilege of getting military equipment, imported from Russia, as a CSTO member state.

The main justification for the accession of Armenia to the EEU was the security concerns and the CSTO membership. The Former President Serzh Sargsyan, upon the accession into EEU, announced that it would be “impossible and ineffective to isolate yourself from a corresponding economic space”.32

As stated earlier, Armenia previously had to reject signing the Association Agreement with European Union despite all the advantages it could provide, such as greater foreign direct investment and technology transfer, as the country greatly values Russia's support for the ongoing war in Nagorno-Karabakh region. It is reported that Russia has threatened to stop supporting the security on the Nagorno-Karabakh in case Armenia changes the decision to be a member of EEU.33

Russia has gradually expanded its power in Armenia, making the Republic over-dependent on Russia. Despite the fact that having good relations with Russia is beneficial, the one-sided dependence has become increasingly obvious.34 Consequently, even though the Russian institutional dominance in Armenia is not headed by the treaty between Armenia and the Eurasian Economic Union, it is clear that via bilateral agreements Russia pressures Armenia to side with her.

32 Makarychev A, “Russia’s Role in the South Caucasus - Possible Implications of Armenia’s Accession to the Eurasian Economic Union for Regional Security ”(May 2015)

<http://dspace.ut.ee/bitstream/handle/10062/46939/Forst_Christopher_2015.pdf> accessed June 13, 2018

33 Tarr D, “The Eurasian Economic Union among Russia, Belarus, Kazakhstan, Armenia and the Kyrgyz Republic: Can It Succeed Where Its Predecessor Failed?” (Social Science Research Network August 31, 2015)

<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2185517> accessed June 21, 2018, p 19 34 Giragosian R, “The Eurasian Union: A View from Armenia” (Center for Security Studies)

<http://www.css.ethz.ch/content/dam/ethz/special-interest/gess/cis/center-for-securities-studies/pdfs/CAD-51-52-11-13.pdf> accessed June 27, 2018

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World Trade Organisation membership and Belarus

World Trade Organization (WTO) is the entity that regulates the worlds’ international trade. It is the only global international organization that deals with rules of trade, regulating the international trade between governments. The objective of WTO is to help exporters, importers, producers of various goods and services maintain their businesses, regulate and legalize world trade. The international organization was established in 1995 under the Marrakesh Agreement.35

The complex and lengthy agreements of WTO deal with areas such as agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards and product safety, food sanitation regulations, intellectual property, and so on. However, certain principles unite all the documents and agreements on all areas covered. Those principles are promoting trade without discrimination, through giving all members equal rights, lowering trade barriers, promoting freer trade though gradual negotiations. Some of the principles are predictability through binding decisions and transparency. This means, guaranteeing not to raise or lower a trade barrier, giving businesses a more precise view of their future opportunities. Other privileges of being a member in WTO is that WTO promotes fair competition and encourages development and economic reform.

Functions of WTO is being a legal entity to act as an adviser as well as the regulatory body. In order to control the international trading environment, they guide the member countries in multilateral trade, handle dispute settlements with approval rules and procedures. They regularly scrutinize the national trading policies of member countries, implement multilateral trade agreements and legal instruments approved at Uruguay Round, and also participate in global policy-making by seeking help from international monitory funds such as IMF and World Bank.

Newly acceded Eurasian Economic Union member states, Armenia and Kyrgyzstan have been WTO members since 2003 and 1998, respectively. Their accession to the Eurasian 35 “WTO | What Is the WTO? - Who We Are” (World Trade Organization)

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Economic Union has triggered similar issues concerning tariff differences of their WTO tariff bindings with the Eurasian Economic Union common customs tariff. As a result, these countries also agreed on temporary derogations (ie, lower tariffs) from the Eurasian Economic Union common customs tariff for certain goods imported for internal consumption. Such tariff derogations from the Eurasian Economic Union are only temporary; both new Eurasian Economic Union member states have considered entering into their respective tariff renegotiations in the WTO with the affected WTO members.

Since the independence in 1995, Armenia attempted developing its commercial and economic legislation. Policies implemented are based on liberal principles among which are decreasing technical barriers to trade, implementing low customs tariffs, minimizing non-tariff measures of control, eliminating export quota systems and export duties and so on.36 The legislation developed already corresponded to international norms, which made the process of joining WTO smoother. On February 5, 2003, Armenia officially became the 145th member of the WTO. The bilateral and multilateral negotiations with WTO member countries that lasted more than 10 years had ended in 2002.37 Bilateral negotiations included subjects of trade in commodities and services, multilateral negotiations aimed at harmonizing the commercial and economic legislative basis of the Republic of Armenia with the correspondence of the WTO norms. After multiple meetings and negotiations, several legislative changes in a number of fields were carried out. Among changes were custom code, intellectual property, technical barriers to trade, the law on excise tax, and law on value-added tax.

Being a member of WTO gives certain advantages to the country. WTO supports the achievement of sustainable development objectives. It has both economic and political significance. From the political point of the view Republic of Armenia, as a small country, has a need for assistance to be integrated into the world economy. Despite the fact that Armenia was already developing a legislation corresponding to international norms as an independent country, becoming part of WTO had a major significance, especially considering the fact that the geographic location of the country is defined as landlocked, meaning it does not have access to sea and has open border with Georgia and Iran only. It was believed that the investments from outside will increase in number, however, the main source of outer investments has always been 36 "Technical Barriers to Trade" (World Trade Organization)

<https://www.wto.org/english/tratop_e/tbt_e/tbt_e.htm> accessed May 30, 2018

37 “WTO Accession and Sustainable Development: Armenia” (World Trade Organization) <http://trade.ecoaccord.org/english/countries/armenia.htm> accessed June 1, 2018

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from the diaspora. In 2009, as the crisis hit, the investments lessened, however, in the recent years the trend of investments is rising. It is still questionable whether it has a connection with being a member of WTO.

Being a member of WTO brings opportunities to access foreign markets for the procurement of goods, services and construction services more easily, which is a real benefit for Armenia. The process of trade is more regulated as a member of WTO, and more transparent within the internal market. Joining WTO was a big step to improve political and legal commitment to good governance principles.

Belarus is one of the countries that is not a member of WTO. As WTO makes the trade easier between countries, due to precise regulations and laws, it is important to understand how the trade between Armenia and Belarus proceeds outside of WTO. The key factor here is the fact that both the Republic of Belarus and the Republic of Armenia are members of Eurasian Economic Union. WTO accession negotiations for Belarus formally started in 1993 but were suspended for decades until the accession process was resumed on 24 January 2017. Belarus has been invited to submit written replies to members' questions, an updated Legislative Action Plan, copies of relevant draft and adopted legislation, and additional documentation such as updated information on domestic support to agriculture, state-trading enterprises and subsidies.38 The target is for Belarus to liberalise the economy and reduce dependence on state-owned firms. Dependency on the state-owned firms may represent a threat towards concluding trade agreements for the members of the Eurasian Economic Union which are further discussed in the Analyses section. No deadlines for completion of negotiations were announced.39

The Republic of Belarus utilizes three types of trade regime to regulate trade and economic relations with other countries, which are Free Trade Regime, Most Favoured Nation Regime and Preferential Regime. The first regime is the free trade regime, which is also the most effective form of international economic integration. This trade regime is performed between the states who have an active trade, economic and political cooperation. The Free Trade Agreement gives for the abolishment of customs tariffs and quantitative confinements in respective agreement. Highly sensitive products are excluded from the free trade regime. The Republic of 38 “WORLD TRADE ORGANIZATION” (WTO | What is the WTO? - Who we are)

<https://www.wto.org/english/news_e/news17_e/acc_blr_24jan17_e.htm> accessed July 11, 2018

39 “The Eurasian Economic Union - Trade & Customs – Getting The Deal Through – GTDT” (Getting The Deal Through) <https://gettingthedealthrough.com/area/51/article/29132/eurasian-economic-union/> accessed July 8, 2018

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Belarus has signed the bilateral agreement with a number of countries among which are; Armenia, Azerbaijan, Kyrgyzstan, Tajikistan, Kazakhstan, Moldova, Russia, Uzbekistan, Turkmenistan, Ukraine, Serbia.

Belarus is also a Member of the CIS Agreement on Free Trade Area signed on April 15, 1994. According to the agreement, the free trade regime applies to trade with Georgia due to close relations. The CIS Treaty on Free Trade Area signed on October 18, 2011, was accepted by Armenia, Belarus, Kyrgyzstan, Kazakhstan, Moldova, Russia, Tajikistan and Ukraine.

The effective execution of the Eurasian financial integration invigorates outside nations to coordinate with Belarus and the Eurasian Financial Union as a whole. In understanding with Article 35 of the Eurasian Economic Union Settlement marked on May 29, 2014, the free exchange administration with the third party is set up on the premise of a universal settlement of the Union with this third party.

The second Regime is the Most Favored Nation Regime, which requires non-discriminatory treatment of trade partners in the field of economic, trade and other relations. The MFN is worked out on a complementary premise through the conclusion of multilateral and two-sided treaties. In the exchange with outside nations, Eurasian Economic Union Part States apply customs rates which are set up by the Common Customs Tariffs of the Eurasian Economic Union.

The third Regime is Preferential Regime of System of Preferences. Here, particular treatment is given by the economically developed countries unilaterally and envelops exchange inclinations to developing the countries with underdeveloped economies on the standards of all-inclusiveness, non-discrimination and non-reciprocity. A bound together framework of tariff preferences of the Eurasian Economic Union is meant to advance the economic development of less developed countries. According to Article 45 of Agreement on Eurasian Economic Union, the Eurasian Economic Commission indicated a list of users entitled to the unified system of tariff preferences of the Eurasian Economic Union and a list of goods originating from developing countries and less developed economies in regard of which the import to the customs territory of the Members of the Customs Union provides.

On May 29, 2015, after three years of discussion a Free Trade Agreement between the Eurasian Financial Union and its Member States, on the one hand, and the Communist Republic of Vietnam, on the other hand, was signed. The Agreement entered into force on October 5, 2016,

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It gives for a critical diminishment of obligations on nearly all key positions of Belarusian trades to Vietnam. At the same time, the Agreement gives for a productive level of showcase assurance for Belarusian producers. Currently, the Eurasian Economic Union Members are negotiating the free trade agreements with Singapore, Israel, Egypt, unification of trade regime with Serbia, as well as an interim agreement leading to the formation of the FTA with Iran.

Members of the European Free Trade Agreement, which are Norway, Switzerland, Iceland and Liechtenstein, and also New Zealand, express interest to enter into the trade regime with Eurasian Economic Union. From 2010 to 2014, 11 rounds of consultations have been conducted with EFTA and New Zealand. More than 40 countries expressed interest in developing cooperation with the Eurasian Economic Union.

As these countries are planning to join the Eurasian Economic Union and assuming there is a free trade agreement concluded between the Eurasian Economic Union and other countries then it might be legally possible to import these products to Armenia and then to export to the European Union. For example, as there is a border between Iran and Armenia this type of import and export might be quite beneficial.

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Analyses

Product movement from the European Union to the Eurasian Economic Union

As stated Armenia being part of the Eurasian Economic Union is currently in the transitional period. Consequently, the products that are listed in the transition period have a differentiated import tariff percentage compared to other Eurasian Economic Union countries. Therefore, it is possible to move a product from the European Union to Armenia based on the tariffs in Armenia and then transport the products to other Eurasian Economic Union member countries without tariffs as there is a free movement of goods and services in the Eurasian Economic Union. This provides an advantage for the European businesses as instead of directly importing to Eurasian Economic Union member countries, they can first import to Armenia and then transport to other member states such as Russia or Kazakhstan.

For example, in Annex 4, in the case of edible meat, under the EAEU Commodity Nomenclature of Foreign Economic Activity, with code 0207 41 800 9, namely, live animals; products of animal origin, meat and edible meat offal poultry of fresh, chilled or frozen ducks divided into parts, fresh or chilled plucked and gutted, without head and feet, without neck, heart, liver and muscular stomach, presented as "63% ducks", or represented in some other trimming it is stated that in 2015 the import customs rate is at 10 percent.40 However, it will grow to 14 per cent in 2017, to 18 per cent in 2018, to 22 per cent in 2019, to 25 per cent in 2020 and 50 per cent in 2021. From 2022 onwards the Common Customs Tariff of the EAEU will apply. Consequently, the tariff on products gradually rises until 2022 after which one tariff will apply to all member states.

Another example is passenger cars. The following passenger car types that meet the given criteria, namely, with the EAEU Commodity Nomenclature of Foreign Economic Activity code 8703 23 191 0, vehicles, other than railway or tramway rolling stock, and parts and accessories thereof, automobiles and other motor vehicles intended primarily for the transport of persons 40 “Информация По Товарному Коду 0207 41 800 9” (Альта-Софт)

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including cargo-passenger vans and racing cars, vehicles with only a spark-ignition internal combustion engine with reciprocating piston motion other piston, vehicles with an internal combustion engine with spark ignition with reciprocating piston motion, with an engine displacement of more than 1500 cm cubed, but not more than 3000 cm cubed and with a cylinder of more than 1500 cm cubed but not more than 1800 cm cubed, have the following import tariffs.41 For this category of products, there is a constant tariff of 10 per cent from 2015 up until 2020 after which the Common Customs Tariff rate will apply. Evidently, it could be implied that as seen in Annex 4 there is a list of products that are between the transitional periods as shown in the first example. However, there are products tariffs of which are already governed by the Common Custom Tariffs as seen in the second example. Therefore, as the transitional period is the only advantage available for the European exporters, the given opportunity can be used to optimise tariffs to be paid.

Product movement from the Eurasian Economic Union to the European Union

In the case of movement of goods from the Eurasian Economic Union to the European Union, the scenario is somewhat different as there are several agreements and conditions need to be met in order to optimise the movement of products. The aspects that matter in this case are the membership of Armenia in the Eurasian Economic Union, the participation of Armenia in Generalised Scheme of Preferences Plus, rules of origin for the products originating in Armenia, certification process and product standardization. For products to benefit from Generalised Scheme of Preferences Plus system the products need to be originating from Armenia. As stated for a product to originate in Armenia, at least 51 per cent of the price of the given products must be processed or modified in Armenia. This is the only scenario that products can be exported to the European Union under zero tariff. Accordingly, even though there is a free movement of goods between the Eurasian Economic Union members the goods imported into Armenia from other Eurasian Economic Union member states can only be exported to the European Union if the certificate is provided that the product is origination in Armenia. Consequently, in order to meet the rule of origin requirement, the product imported from the Eurasian Economic member state 41 “Информация По Товарному Коду 8703 23 191 0” (Альта-Софт)

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country should be sufficiently processed that it meets the condition where the 51 per cent of the price of the product is modified in Armenia. In the meantime, several issues arise as meeting the 51 per cent requirement is complicated in a number of products.

Taking the previous example of fresh, chilled or frozen ducks divided into parts, it is possible to import the ducks from Armenia to the European Union. The product code is 0207418000.42 Exporters of this particular product do not benefit from the Generalised Scheme of Preferences Plus as it does not fall under the list of products that benefit zero per cent tariff. Furthermore, for this product it should be wholly obtained in Armenia, meaning, these goods are wholly produced in the given country without any materials supplied from another country.43 Consequently, in this case, the ducks must be grown in Armenia exclusively, therefore, they cannot be grown in another Eurasian Economic Union and then transported to Armenia packaged and exported to a European Union country.

For this product to be qualified to be imported into the European Union, the product requirements must be met. The following product requirements must be met in order to access the European market: control of contaminants in foodstuffs, control of pesticide residues in plant and animal products intended for human consumption, control of residues of veterinary medicines in animals and animal products for human consumption, health control of Genetically Modified (GM) food and novel food, health control of products of animal origin for human consumption, traceability, compliance and responsibility in food and feed, labelling of foodstuffs, labelling of meat products, marketing standards for poultry meat, voluntary - products from organic production.44 The given requirements are aimed at protecting both the environment and the consumers. Consequently, if one is willing to export the given type of ducks to the European Union, these ducks must be wholly obtained in Armenia, hence cannot be imported from another member state from the Eurasian Economic Union as well as meet the product-specific standards set by the European Union.

Taking the second example into consideration, namely, the used road vehicles designed for the transport of persons with spark ignition internal combustion reciprocating piston engines 42 “My Export” (Trade - European Commission April 5, 2017) <http://trade.ec.europa.eu/tradehelp/myexport#? product=0207418000&partner=AM&reporter=DE> accessed July 8, 2018

43 “Basic Rules” (Trade - European Commission August 18, 2017) <http://trade.ec.europa.eu/tradehelp/basic-rules> accessed July 9, 2018

44 “My Export” (Trade - European Commission April 5, 2017) <http://trade.ec.europa.eu/tradehelp/myexport#? product=0207418000&partner=AM&reporter=NL#node_4985&tab=2> accessed July 9, 2018

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with cylinder capacity between 1500 cm cubed to 3000 cm cubed with a product code 87 03 239000 there are advantages that Generalised Scheme of Preferences Plus provides. In this case, as Armenia is part of the Scheme it benefits from 0 per cent tariff. However, for this specific type of vehicles, the value of the materials used in the production of the car does not exceed 50 per cent the ex-work price of the product.45 Consequently, assuming the materials are imported to Armenia without tariffs from another Eurasian Economic Union member state and then manufactured in Armenia where more than half of the price of the product is the cost of manufacturing this product can be exported to the European Union under 0 percent tariff compared to 10 percent tariff from any other country in that is not part of Generalised Scheme of Preference Plus.

For this product as well, there are also product-specific requirements, namely, ozone-depleting products are prohibited, marketing of products containing fluorinated greenhouse gases and technical standards for motor vehicles. Hence, even though Armenia has an advantage of importing passenger vehicles with 0 per cent tariff, there are non-tariff barriers to trade in terms of product requirements.46 These requirements may complicate the process of import as the standards in the European Union, Armenia and Eurasian Economic Union are now different.

The European Standards might represent a complication when the products are produced in Armenia as these products that are planned to be exported to the European Union should be the standards of the receiving state. In particular, in the area of electrical engineering, the standards set by the standardization committees are high. Consequently, the built of the products must meet the requirements set. For example, if a business wants to export digital video recorder, with a product code: 85 21 900020, without a hard disk drive, with to without a DVD-RW drive, with either motion detection or capability of motion detection through IP connectivity via LAN connector meeting the standards for this product is more complicated.47 First of all, similar to the previous products, for this product as well, there is a requirement for the product to be manufactured in Armenia, specifically, the materials used in the product should not exceed 50 per cent of the ex-works price of the product.

45 “My Export” (Trade - European Commission April 5, 2017) <http://trade.ec.europa.eu/tradehelp/myexport#? product=8703239000&partner=AM&reporter=DE&tab=100> accessed July 9, 2018

46 “Non-Tariff Barriers: Red Tape, Etc” (World Trade Organization)

<https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm9_e.htm> accessed July 3, 2018

47 “My Export” (Trade - European Commission April 5, 2017) <http://trade.ec.europa.eu/tradehelp/myexport#? product=8521900020&partner=AM&reporter=NL#node_4985&tab=100> accessed July 3, 2018

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Product-specific requirements

For each of these products, there are strict standards set in terms of product requirements. These product-specific requirements are as follows: general product safety, marketing requirements for electrical and electronic equipment, technical standards for civil aircrafts, technical standards for electromagnetic compatibility, technical standards for low voltage electrical equipment, eco-design requirements for simple set-top boxes and eco-eco-design requirements for standby and off mode, and networked standby, electric power consumption of electrical and electronic household and office equipment.48

To understand whether it is possible to manufacture the above-mentioned digital video recorder and the complexity of achieving the required standards one needs to look at the requirements. In terms of general product safety, the General Product Safety Directive states three provisions that need to be followed, namely, general safety requirement, additional manufacturer and distributor obligations and market surveillance.49 The importers are obliged to meet the product safety standards as the responsibility relies on them. A product is safe when the use of the product does not represent any risk to the consumer and ensures highest possible protection while considering the following four aspects: the characteristic, instruction and packaging of the product, the way it will impact other products if this product will be used with others, the presentation of the product in terms of how it looks including labelling and warning signs and the age of people when the elderly or children consume the product. The safety standards are set by CENELEC with the following reference to the standard EN 60065:2002 which was later replaced by NEN-EN-IEC 62368-1.5051 Moreover, there are additional requirements in terms of manufacturer and distributor obligations. First of all the producers must inform the consumers about possible risks in consumption of the product as well as take relevant measures to avoid similar risks by, for instance, removing the product from the market or 48 “My Export” (Trade - European Commission April 5, 2017) <http://trade.ec.europa.eu/tradehelp/myexport#? product=8521900020&partner=AM&reporter=NL#node_35987&tab=2> accessed July 3, 2018

49 Directive 2001/95/EC of the European Parliament and the Council of 3 December 2001 on general product safety OJ L 11/4, art 1

50 Commission communication in the framework of the implementation of the Directive 2001/95/EC of the European Parliament and of the Council on general product safety, C 267/7

51 “Norm NEN-EN-IEC 62368-1:2014 En” (Stichting Nederland Normalisatie Instituut) <https://www.nen.nl/NEN-Shop/Norm/NENENIEC-6236812014-en.htm> accessed July 2, 2018

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recalling to fix the issue. Nonetheless, there are authorities take charge of inspecting the market and ensuring that the product is safely implemented, otherwise, the authority will contact the member state to remove the risk accordingly. Furthermore, the product must comply with the standards set by standardization committees such as CENELEC and ETSI. These standards are used to harmonise technical specifications between the member states, hence, if products are manufactured by following these standards they are assumed to be complying with the requirements. The standards of the European Union and Armenia differ considering Armenia is aiming to increase its standards to the level of the Eurasian Economic Union, such as in the area of sanitary and phytosanitary requirements.52 Even though the standards of the Eurasian Economic Union are higher, they are not at the level of the European Union and they are recently getting shaped.53 Consequently, the products are planned to be manufactured in Armenia with materials from the Eurasian Economic Union member countries should meet high standards set by the European Union. Hence, an issue arises about how efficiently Armenian companies can produce by meeting the high standards set by the European Union.

Rules of origin

One of the requirements for importing products to the European Union is that the products must be sufficiently modified in Armenia. This way the products can be “Made in Armenia” in other words, the origin of the product will be in Armenia. To go through this process exporters need to obtain a certificate from the Chamber of Commerce and Industry of the Republic of Armenia that the product is originating in Armenia.54 However, if in theory obtaining the certificate might seem simple, in practice the several issues may arise. The process of obtaining the certificate might as well be costly. Businesses that want to export have to show proof of origin of the products certified by a specially created division ArmExpertiza. Armexpertisa must take samples of the manufactured products and analyze them. However, this process is confusing 52 “Armenia - Trade Barriers” (International Trade Administration) <https://www.export.gov/article?id=Armenia-trade-barriers> accessed July 1, 2018

53 Russell M, “Eurasian Economic Union: The Rocky Road to Integration” (European Parliament Think Tank) <http://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_BRI(2017)599432> accessed July 2, 2018, p 4

54 “Certification” (Chamber of Commerce and Industry of the Republic of Armenia) <http://armcci.am/? page_id=3823&lang=en> accessed July 11, 2018

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