Workshop on potential impacts of the EU-Armenia Deep and Comprehensive FTA

Public Radio of Armenia

Workshop on potential impacts of the EU-Armenia Deep and Comprehensive FTA

16 April 2013

A workshop on potential impacts of the proposed EU-Armenia Deep and Comprehensive Free Trade Area will be held in Yerevan on April 17. The workshop aims to ensure a better understanding by national representatives, business associations, social partners and civil society of the Trade SIA process and to promote an interactive dialogue between the different players.

The workshop is held in the same week as the 5th round of DCFTA negotiations between the EU and Armenia, which take place in Yerevan on April 16 and 17. While these negotiations take place behind closed doors, the TSIA workshop provides an opportunity for key non-state stakeholders and the wider public to let their voices be heard in the process.

During the workshop the Ecorys-CASE consortium will present the findings from the first phase of the study, which concerned the quantitative analysis of macro-economic and sector level impacts (e.g. expected impacts in terms of national income, employment and trade).

Invited guest speakers will subsequently provide their views on potential effects of the DCFTA at specific sector level, and in the, social and environmental spheres.

The preliminary findings of the study suggest that the DCFTA should bring positive and significant effects for Armenian national income with GDP increasing 2.3 percent in the long run (5-10 years). The expected DCFTA effects on Armenian exports are significant, with a projected 15.2 percent increase in exports and an 8.2 percent increase in imports in the long run, leading to an improvement in Armenia’s trade balance. Wages are expected to increase with 2.6 percent on average, while consumer prices slightly decrease, leading to a quite substantial increase in disposable income.

However, less affluent households are expected to benefit slightly less from the DCFTA, compared to the relatively rich strata of population. This is largely due to differences in income and expenditure patterns. More specifically, although average prices go down, food prices are expected to increase slightly, and poorer strata of the population spend a larger share of their income on food products. Thus a slight increase in inequality may occur.

The DCFTA will bring a combination of positive and negative environmental effects and the overall impact is difficult to predict – it should be kept in mind that especially in the social and environmental spheres, many other factors are at play as well with a potentially much greater impact.

At sector level, the DCFTA is expected to have positive effects for those sectors that have a competitive advantage, while sectors with a competitive disadvantage may face some reductions in output and employment. The study team has selected a number of sectors which are expected to see substantial impacts for further analysis in the last phase of the study. These include primary metals, textiles and clothing and brandy making. Labour mobility is considered as well, as it is seen as an important factor in easing the (necessary) transition of workers between sectors, from rural to urban areas and from the informal to the formal sectors.

While the overall impacts of the DCFTA are thus expected to be positive for Armenia, there may be winners and losers and considering these various groups and how short term losses may be reduced or cushioned is an important objective of the final phase of this study, for which the inputs of the actual stakeholders are considered crucial.