On the Record: U.S.-Armenia TIFA Talk

Nanore Barsoumian On February 15, 2011
For Armenia, pursuing trade and investment agreements is tantamount to weaving a net of vital lifelines that link it to regional and global economies, despite its hostile neighbors. Such agreements may also encourage technology and innovation flows, as well as lower unemployment, elevate living standards and, in general, create more opportunities for its citizens.
Almost immediately after its independence, Armenia signed three trade-related agreements with the U.S., going into force in 1996. They were the Agreement on Trade Relations, an Investment Incentive Agreement, and a treaty on Reciprocal Encouragement and Protection of Investment (otherwise known as the Bilateral Investment Treaty, or BIT).
The two countries have not signed a bilateral taxation treaty, and Armenia’s Law on Foreign Investment dictates all investment-related procedures. Currently around 70 U.S.-owned firms do business in Armenia, including Dell, Microsoft, and IBM, according to the U.S. State Department.
In 2010, Armenia’s total exports netted 846 million USD. In 2009, the total was 698 million USD, 9.6 percent of which was to the U.S., according to the latest available CIA Factbook data. Other major export partners include Germany (16.47 percent), Russia (15.45 percent), and Bulgaria (8.6 percent).
There’s much room for improving and expanding U.S.-Armenia economic cooperation, and many argue that a Trade and Investment Framework Agreement (TIFA) is a necessary step in that direction.
A TIFA was established with Georgia in 2007, and both the Armenian government and Armenian American entities have expressed their support for a similar U.S.-Armenia agreement, viewing it as a means of realizing Armenia’s full economic potential and of strengthening bilateral trade.
Benefits of TIFA
TIFAs set the basis for stronger economic ties between the U.S. and the other party to the agreement, facilitating and encouraging discussions and cooperation. TIFA Councils are formed and normally meet at least once a year at top government levels.
Proponents of a U.S.-Armenia agreement list the manifold benefits of a TIFA, which can be instrumental in stabilizing and strengthening developing markets. They say the agreement would support small American businesses and that Armenia’s geopolitics—marked by a blockade from Turkey and hostilities from Azerbaijan—necessitates strong bilateral agreements to build up the country’s trade and investment capacities.
Furthermore, the fruits of such an agreement would arguably trickle down to the rural segments of the country, as one area of interest would entail the expansion of agricultural trade and investment.
Armenia supports TIFA
In an interview with Yerkir Media, Dr. Varos Simonyan, the head of the Armenian Ministry of Economy’s EU and international economic affairs department, expressed the government’s support of a TIFA. Simonyan also noted his intention to bring up the matter during the Nov. 15 meeting of the U.S.-Armenia Joint Economic Task Force (USATF) in Yerevan.
The Armenian Embassy echoed Simonyan’s position in their statement to the Armenian Weekly. “The views expressed by Dr. Varos Simonyan on TIFA in his interview [with Yerkir Media] are those of the Government of Armenia, including the Embassy of Armenia to the United States,” wrote Srbuhi Poghosyan, the assistant to Ambassador Tatoul Markarian.
‘Tangible benefits to both US and Armenia’
In a Jan. 18 written statement, David Atanessian, the president of the American Chamber of Commerce in Armenia, which is an affiliate of the U.S. Chamber of Commerce, called on the U.S. and Armenia governments to sign a TIFA.
“Considering [the] low level of U.S. direct investments in Armenia in the past decade ($250 million from 1988-2009, source-statistical yearbook of Armenia 2010), it is our view that TIFA would bring tangible benefits to both the U.S. and Armenia through focusing on achieving specific trade and investment goals,” Atanessian told the Armenian Weekly.
A TIFA would broaden the basis for the two countries to meet and discuss ways in which trade relations and investment could improve and expand, he said. “As you may know TIFA may establish U.S.-Armenia Council, which may serve as an effective forum to discuss and identify additional opportunities for expanding bilateral trade and investments, discuss existing impediments to bilateral trade and investment such as specific taxation and custom administration issues, issues of discriminatory treatment and protectionism, issues related to protection of intellectual property rights in Armenia, etc.,” he added.
USTR cautious
The U.S. Trade representative’s office, commenting on the outcome of the USATF meeting, said there are obstacles preventing a U.S.-Armenia TIFA, but that solutions do exist: “We continue to identify specific obstacles…as well as effective, targeted solutions…”
“The Nov. 15 session of the U.S.-Armenia Task Force (USATF) in Yerevan afforded both governments the opportunity for constructive discussion on our trade and investment goals. Within the USATF format, including the ongoing working groups reporting to the USATF, we continue to identify specific obstacles to increased bilateral trade, as well as effective, targeted solutions to remove those obstacles,” a USTR spokeswoman told the Armenian Weekly.
In a statement to the Weekly, the office of U.S. Ambassador to Armenia Maria Yovanovitch echoed USTR’s position.
The Armenian Weekly also sought comments from U.S. deputy assistant secretary of state Tina Kaidanow. “At this time we don’t have any comment on this issue,” said an aide from her office.
Three Congressmen from New Jersey have spoken in favor of a U.S.-Armenia TIFA. In separate letters, Representatives Robert Andrews (D), Rodney Frelinghuysen (R), and Leonard Lance (R) urged USTR’s ambassador, Ronald Kirk, to support such an agreement.
In a Sept. 7, 2010 letter, Rep. Andrews argued that a TIFA would “build upon our current economic dialogue with Armenia and establish a broader reach than the U.S.-Armenia Joint Economic Task Force.”
Chicken and egg dilemma?
The Armenian government is ready and willing to move forward with a TIFA. After all, TIFAs “provide strategic frameworks and principles for dialogue on trade and investment issues between the United States and the other parties to the TIFA”—as defined by USTR. The Armenian side hopes to overcome any obstacles and effectively apply solutions within the TIFA framework and through dialogue, while the U.S. would like to remove obstacles first to clear the path for a TIFA. To an observer, this may look like the chicken and egg dilemma.
ANCA: ‘Show some vision’
The Armenian National Committee of America (ANCA) has pushed hard for the adoption of a U.S.-Armenia TIFA by contacting and meeting with officials in the Obama Administration and State Department, as well as with Members of Congress.
The ANCA believes a U.S.-Armenia TIFA would be instrumental in revitalizing and increasing the effectiveness of existing agreements and programs, including ones under the U.S. Export-Import Bank (Ex-Im Bank) which, as the official export credit agency of the U.S., assists in financing U.S. goods and services to international (and mostly developing) markets.
“It’s long past time for the Obama Administration, which entered office on a promise of expanding trade with Armenia, to put in place a TIFA. This accord will build upon America’s strong bilateral ties with Armenia, reinforce the enduring bonds between the American and Armenian peoples, and—in a very material way—help create badly needed jobs in Armenia,” said ANCA Executive Director Aram Hamparian in an email to the Weekly.
Hamparian said that during the course of the last four administrations, U.S.-Armenia economic relations have been marked by the State Department’s “foot-dragging and excuse-making.” He called on the U.S. government, and especially the U.S. trade representative, to “show some vision and grow the U.S.-Armenia relationship beyond the donor-recipient dynamic of the past two decades.”
TIFAs: negotiations, disappointments, and successes
If the U.S. decides to pursue a TIFA with Armenia, negotiations will have to be held to reach mutually acceptable terms. Bangladesh recently turned down a TIFA with the U.S., about six years after beginning negotiations. Meanwhile, the U.S. and Taiwan have had a hard time carrying out TIFA talks.
The U.S. would like Taiwan to change its policy banning the chemical ractopamine, a drug that promotes leanness in meat, used as feed additive by some U.S. farmers. Taiwan fears the health risks that may be associated with the chemical. U.S. officials hope Taiwan will adopt a policy allowing trace amounts of the chemical, maintaining that it is safe and consumed in 25 countries. U.S. beef is banned in Japan and many European countries. TIFA talks between the two countries have been interrupted twice over the beef business.
Nevertheless, over 40 TIFAs have already been concluded, and it remains to be seen whether the U.S. is interested in negotiating one with Armenia. As noted earlier, some argue that it must, that the time is ripe, and that a TIFA is needed more than some of the other deals Washington chooses to pursue with Armenia.
Hamparian expressed that frustration in the following statement to the Weekly: “Our State Department, rather than engaging in yet another round of relentless and counter-productive pressure on Armenia to accept one-sided agreements like the Madrid Principles or the protocols, should be supporting the negotiation of a TIFA, a Double Tax Treaty, and an eventual U.S.-Armenia Free Trade Agreement.”

A.B.