WRITTEN QUESTION E-1908/01

by Bartho Pronk (PPE-DE) to the Commission

(28 June 2001)

Subject: Trade relations with Armenia

On 22 April 1996 in Luxembourg, the Partnership Agreement between Armenia and the European Union and its Member States was concluded. The European Parliament delivered a favourable opinion on 28 January 1997 (recommendation by rapporteur La Malfa).

I should like to ask a number of questions to monitor implementation of that agreement in practice:

1. Can the Commission inform me of how trade between the European Union and its Member States on the one hand and the Republic of Armenia on the other has developed since the said partnership agreement was concluded? Can the Commission inform me more specifically on how exports of Armenian agricultural products to the European Union have developed?

2. Article 1 of the agreement states one of its objectives as being to promote trade and investment and harmonious economic relations between the Parties and so to foster their sustainable economic development. To what extent does the Commission consider that the stated objective has been achieved? If the objective has been achieved, is the Commission prepared to move on to a subsequent step? If the objective has not been achieved, to what extent is the Commission prepared to step up investment in order nevertheless to achieve that objective?

3. The contracting parties have accorded each other the status of most favoured trading partner. Does Armenia comply with that commitment in relation to the European Union and its Member States? Has the commitment to treat the European Union Member States at least equally with the former Soviet states been complied with in the interim? Does the Commission agree that it would be appropriate for the European Union to adopt more practical trade-promoting measures in favour of Armenia?

4. Are there any plans to adjust the existing contractual relations between Armenia and the European Union and its Member States?

5. To what extent is the Commission prepared - within the framework of a development relationship - to boost and support private initiatives that will help to increase trade between the two parties?

Answer given by Mr Patten on behalf of the Commission

(3 September 2001)

Bilateral trade between the Community and Armenia increased regularly since the Partnership and Cooperation Agreement (PCA) entered into force two years ago. Trade progressed

from 226 million in 1998 to 264 million in 1999 (+ 17 %) and 368 million in 2000 (+ 40 % compared to 1999). This produced a regular trade surplus for the Community ( 113 million in 2000), however bilateral trade represented only 0,01 % of Community global foreign trade. Community exports rose to 241 million in 2000, mainly manufactured goods (16 %), and agriculture products (15 %, amounting to 36 million), whereas Community imports amounted to 127 million, essentially iron and steel (5,8 %), textile products (2,2 %) and agriculture products (2.2 %).

Community imports of agricultural products from Armenia remained modest over the period: 2 million in 1997, 1 million in 1998, 1 million in 1999, 3 million in 2000. This can be attributed in part to the current difficulties of Armenian agriculture, as drought in 2000 entailed the loss of one third of the grain crop and the performance of the agricultural sector stagnated.

The current structure of bilateral trade could be improved if Armenia would manage to diversify its export potential. This entails restructuring agriculture as well as industry and fostering foreign investment in the country. The Commission is helping Armenia to reform its legal and regulatory framework, in particular through the Tacis Armenia-Union Policy and Legal Advice Centre, which has produced substantial work related to eventual accession of Armenia to the World Trade Organisation (WTO) and which is concentrating more and more on Community/Armenia legislative approximation.

The Cooperation Committee that monitors PCA implementation highlighted trade issues and the business climate among 24 points for further work. The Cooperation Committee meeting of 15 June 2001 has taken stock of Armenia's progress in amending its trade and investment legislation, however weak enforcement remains the central, unresolved issue. Community investors still face considerable problems such as legal and administrative barriers, illegal competition, unreliable banking system, discriminative government acts, corruption. Legal uncertainty remains with regard to the protection of investments and relevant provisions related to taxation and customs regulations.

The Commission has also encouraged Armenia to pursue further legislative approximation in the field of intellectual property rights, as this is essential to attracting foreign investment. According to the PCA, Armenia is committed by the end of the year 2002 to providing a level of protection similar to that provided by the Community and to accede to a number of international conventions.

In addition, the Commission is ready to support other trade promoting measures such as the business forum that Armenia intends to organise next year. As regards the integration of Armenia internationally, the progress of negotiations for Armenia's accession to the WTO currently near completion is a very positive development.

The Commission has no indication regarding most favoured nations (MFN) incompatible measures in Armenian trade. Regarding special trade preferences given to other Independent States, the Commission was informed that they are no longer applicable.

There are currently no plans to modify existing contractual relations between Armenia and the Union.