This project is funded by the European Union

1. This projectisfunded by the European Union Introduction on EU Acquis Communautaire, Free Trade Agreements and their implications at national level Mārcis Dzelme, LCCI C1 – part 1 and 2 June 28, 2016, Yerevan + www.east-invest.eu

2. Content • European Neighborhood Policy • Eastern Partnership • EU Acquis Communautaire • Free Trade Agreements • Support instruments • Technical assistance • Financial • Country case study – Armenia • EU – Armenia • PrivateSectorDevelopment www.east-invest.eu

3. European Neighborhood Policy • ENP partners are expected to benefit from closer cooperation with EU, the chance to participate in EU programmes and a stake in the EU’s internal market • EU – Armenia relations are governed by EU-Armenia Partnership and Cooperation Agreement (EIF 1999) that provides for mutually beneficial trade and investment relations www.east-invest.eu

4. ENP Action Plans Belarus Libya Syria Algeria innegotiations www.east-invest.eu

5. ENP Action Plans Association Agendas for partner countries • set out the partner country's agenda for political and economic reforms, with short and medium-term priorities • reflect the country's needs and capacities, as well as its and the EU’s interests Armenia adopted it in 2006 www.east-invest.eu

6. Did you know? ENIisworthover€15 billion 2014-2020 EU ENP Trade worth € 230 billion 2011 3.2 million Schengen visas issued 2012 *European Neighbourhood Instrument – funding through a national programme www.east-invest.eu

7. Content • European Neighborhood Policy • Eastern Partnership • EU Acquis Communautaire • Free Trade Agreements • Support instruments • Technical assistance • Financial • Country case study – Armenia • EU – Armenia • Facilities for SMEs www.east-invest.eu

8. Eastern Partnership launched in 2009, as a joint initiative between: • the EU • EU member states • 6 Eastern European and South Caucasus partner countries: • Armenia • Azerbaijan • Belarus • Georgia • Moldova • Ukraine www.east-invest.eu

9. EaP Summit in Prague, 2009 Establishing bilateral DCFTAs areas could grow into a network of deep and comprehensive free trade areas EaP Summit in Warsaw, 2011 AA with comprehensive reform agendas and, where appropriate, with DCFTAs as an integral part, are the cornerstones of relations under the EaP EaP Summit in Vilnus, 2013 the EU-Republic of Moldova and EU-Georgia AA/DCFTAs have been initialed. …the decision by the Ukrainian Government to suspend temporarily the process of preparations for signature of the AA/DCFTA; announcement by Armenia to join EEU EaP Summit in Riga, 2015 …the provisional application with Ukraine starting on 1 January 2016. …increase in trade between the EU and Georgia and the Republic of Moldova respectively since the application of the DCFTAs. …steps taken in developing differentiated bilateral relations between the EU and each of its partners. DCFTA Facility for SMEs EaP Summit in Brussels, 2017 …still to come www.east-invest.eu

10. EaP - Armenia Completed negotiations on an Association Agreement including DCFTA in July 2013, but it has not been initialed due to intention to join Eurasian Custom Union www.east-invest.eu

11. EU Trade in Goods with EaPCountries Source: Eurostat /2014, in Euro million www.east-invest.eu

12. EU Trade in Goods with EaP Countries Source: Eurostat /2014 www.east-invest.eu

13. Content • European Neighborhood Policy (ENP) • Eastern Partnership • EU Acquis Communautaire • Free Trade Agreements • Support instruments • Technical assistance • Financial • Country case study – Armenia • EU – Armenia • Facilities for SMEs www.east-invest.eu

14. Acquis Communautaire EU acquisis the accumulated legislation, legal acts, and court decisions which constitute the body of European Union law. The term is French:  acquis- "has been acquired or obtained" communautaire- "of the community" www.east-invest.eu

15. Acquis Communautaire(2) Significant amount of legislation, laws plus secondary legislationadopted After adoptioncomes enforcement Changes in the EU acquis will necessitate repeatedchanges in national legislation www.east-invest.eu

16. Acquis Communautaire(3) For the EaP countries adopting DCFTA it has: • Implications for export and non-export companies which are affected by the changes in the national legislation since all SMEs are to comply with EU standards Since Armenia is not part of DCFTA there are no such implications, at the same time tariffs remain, markets on servicesandinvestments arelimited, no access to public procurement and no access to EU internal market etc. www.east-invest.eu

17. Content • European Neighborhood Policy (ENP) • Eastern Partnership • EU Acquis Communautaire • Free Trade Agreements • Support instruments • Technical assistance • Financial • Country case study – Armenia • EU – Armenia • Facilities for SMEs www.east-invest.eu

18. Free Trade Agreements are to: • Open new markets for goods and services • Increase investment opportunities • Make trade cheaper - by eliminating substantially all customs duties • Make trade faster - by facilitating goods' transit through customs and setting common rules on technical and sanitary standards • Make the policy environment more predictable - by taking joint commitments on areas that affect trade such as intellectual property rights, competition rules and the framework for public purchasing decisions www.east-invest.eu

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20. Preferential Trade Agreement* in Place • FTA – latest with South Korea - 2010 • Economic Partnership Agreements (EPAs) are trade and development agreements negotiated between the EU and African, Caribbean and Pacific partners engaged in regional economic integration processes • DCFTA – Ukraine, Georgia, Moldova * A trade pact between countries that reduce tariffs for certain product to the countries who sign the agreement www.east-invest.eu

21. Free Trade Agreements As tariffs are relatively low in world trade today, trade barriers lie behind the customs borders: hence the EU aims to conclude DCFTA that, on top of removing tariffs, also open up markets on services, investment, public procurement and include regulatory issues www.east-invest.eu

22. FreeTradeAgreements - DCFTA • represents a new generation FTA • provides the opportunity to negotiate regulatory and beyond-the-border issues that are not included in traditional FTAs • proposed type of free trade area between the EU, its MS and selected states • part of the 3 most recent association agreements, which were concluded with Republic of Moldova, Georgia, and Ukraine www.east-invest.eu

24. DCFTA legal base • Intention to establish close economic and political cooperation • Creation of paritary bodies for the management of the cooperation, competent to take decisions that bind the contracting parties • Offering Most Favored Nation treatment • Providing for a privileged relationship between the EC and its partner • Since 1995 the clause on the respect of human rights and democratic principles is systematically included and constitutes an essential element of the agreement • In a large number of cases, the association agreement replaces a cooperation agreement thereby intensifying the relations between the partners Art. 217 Treaty on the Functioning of the European Union www.east-invest.eu

25. DCFTA: provisions and obligations • Adoption of commitments from the trade (DCFTA) components likerevising tariffs, application and administration of rules of origin, administration of tariff rate quotas etc. • Legal harmonization and approximation across a broad range of economic, trade and political spheres, that is adoption of selected elements of the EU acquis into national legislation and regulation • Institutional and administrative reform (including enforcement and effective redress) resulting from legal reform and adoption of commitments in both trade and economic spheres such as overall of conformity assessment procedures and Customs cooperation, amongst many others www.east-invest.eu

26. DCFTA elements • Progressive revision of tariff schedules and implementation of a Tariff rate Quota system for selected agricultural products • Phasing out of Customs duties on exports • Dialogue on trade agreements, administrative cooperation and coordination with other countries • Adoption and administrative application of rules of origin • Commitments on trade defense instruments www.east-invest.eu

27. DCFTA elements (2) • Approximation to EU acquis in the trade in services in specific services sectors: Postal and Courier Services; Electronic communications and commerce; Financial Services; international maritime transport • Dialogue on application of WTO compatible Anti-dumping and Countervailing Measures and trade remedies • Gradual approximation of sanitary and phytosanitary and animal welfare legislation and enforcement procedures • Gradual alignment of sectoral and horizontal legislation, institutions and standards regarding Technical Regulations, Standards, and Conformity Assessment, including negotiation of an ACAA www.east-invest.eu

28. DCFTA elements (3) • Reform of customs and trade facilitation of legislation and procedures to ensure effective control and support facilitation of legitimate trade, including provisions on border enforcement of intellectual property rights • Provision for Temporary Presence of natural Persons for Business Purposes in each other’s territory • Complete the liberalization of transactions on the capital and financial account of balance of payments equivalent to the liberalization in the EU prior to the granting of internal market treatment in the area of financial services • Gradual Legislative approximation and institutional reform of key elements of the EU public procurement acquis and development of mechanisms for mutual market access www.east-invest.eu

29. DCFTA elements (4) • Commitments on respect for, as well as dialogue and cooperation in, intellectual property and regarding Geographical Indications • Approximation to the EU acquis, and enforcement, as well as co-operation and co-ordination between competition authorities, as applicable • Reform of national legislation on trade-related energy, as applicable • Commitment on respect for transparency in trade policy making, including openness to stakeholders enquiries about the DCFTA and government-to-government contact points on transparency aspects of the DCFTA implementation • Commitments, including to dialogue, on trade and sustainable development • Establishment of dispute settlement and Mediation mechanisms www.east-invest.eu

30. Implications at national level • The Government and support projects focus on compliance with the Agreements and have not considered the effects on any business or how to engage and inform them • Major issue for implementation - the dynamic nature of the agreement where changes in the EU acquis will require changes in national legislation previously aligned • Challenge - large amount of redundant legislationthat can lead to uncertainty as it often conflicts with the new legislation www.east-invest.eu

31. Implications at national level (2) • The gap between existing national legislation and EUacquis to be adopted is a step change in the legislative environment and the regulation and enforcement of these changes in all areas identified as affecting SMEs • SMEs lack the technical capacity, knowledge and understanding; are ill prepared to plan and change their business accordingly • SMEs do not have the resources www.east-invest.eu

32. Implications at national level (3) The areas of DCFTA that require changes for SMEs, but little or no investment: Money Laundering GMO Provisions Market Access Accounting and Auditing Customs Law Employment Terrorism Financing Public Procurement Company Law Social Policy Fight Against Crime and Corruption Phasing out the use of Certain GIs Corporate Governance Equal Opportunities www.east-invest.eu

33. Market Access for Goods After entry into force of the DCFTA, the import duties on the majority of products traded areeliminated over 10 years time: • Some immediately • Some phased down proportionally over 1,2,3,5,7 to 10 years • Some will be reduced • Some will be eliminated on a fixed quantity of imports; thereafter full duty will apply (tariff rate quotas) This will have an impact on businesses that want to export to EU providing opportunities through improved access and those businesses that import inputs to their production, as they will get access to cheaper inputs ! www.east-invest.eu

34. Customs and Trade Facilitation • Established customs procedures that are proportionate, transparent, predictable, non-discriminatory, impartial and applied uniformly and effectively including introducing a single administrative document for the purpose of customs declarations • Gradual approximation to the Union’s customs code and certain international law All importers & exporters www.east-invest.eu

35. Procurement • When countries approximate their laws to EU rules on public procurement, businesses can compete for government contracts and be treated the same as EU companies within the EU • Approximate national legislation to the relevant EU acquis, accompanied with institutional reform Professional services, Construction, Manufacturers www.east-invest.eu

36. Geographical Indications • Title used to identify a product as originating in the territory of particularly country, region or locality where it’s quality, reputation or other characteristic is linked to it geographical origin • Protection of geographical indications www.east-invest.eu

37. Implications at national level The areas that require significant production process and investments for SMEs: Animal Welfare Sanitary and Phytosanitary Energy Efficiency Conformity Assessment Environmental Protection Technical Regulationsand Standarts Labelling requirements Road Transport www.east-invest.eu

38. Sanitary and Phytosanitary Measures • The rules, regulations and procedure to ensure consumers are being supplied with food that is safe to eat • Gradually approximate sanitary and phytosanitary, animal welfare and other legislative measures Agriculture, Agro processing sector of manufacturing www.east-invest.eu

39. Technical Regulations • Product characteristics or their related processes and production methods, including the applicable administrative provisions – compliance mandatory • Adopting EU standards as national will confer presumption of conformity with these regulations Manufacturers www.east-invest.eu

40. Free Trade Agreements • After Armenia's decision in September 2013 not to sign the AA with the EU, including a DCFTA, Armenia and the EU continue trade dialogue in areas where this is compatible with Armenia’s new obligations to the EEU • On 2 January 2015, Armenia joined the Eurasian Economic Union with Russia, Belarus, Kazakhstan and Kyrgyzstan www.east-invest.eu

41. FreeTradeAgreements • On 12 October 2015 the Foreign Affairs Council authorized the EC and the High Representative to open negotiations on a new, legally binding and overarching agreement with Armenia, and adopted the corresponding negotiating mandate • The official launch of negotiations took place on 7 December 2015. The new agreement will replace the current EU-Armenia Partnership and Cooperation agreement www.east-invest.eu

42. Content: • European Neighborhood Policy (ENP) • Eastern Partnership • EU Acquis Communautaire • Free Trade Agreements • Support instruments • Technical assistance • Financial • Country case study – Armenia • EU – Armenia • Facilities for SMEs www.east-invest.eu

43. Support instruments www.east-invest.eu

44. Technical Assistance Instruments • Policy Advice • Institution building • Business Development Services • Capacity Building For BSO and SMEs www.east-invest.eu

45. Technical Assistance Instruments (2) • Originally created as tools for approximation process of future MS to provide support to meet: • EU norms • EU standards • targeted advice, and • to support for legislative approximation www.east-invest.eu

46. Twinning • EU instrument for institutional cooperation between Public Administrations of EU MS and of beneficiary countries • Designed in 1998 to help candidate countries of the time to acquire the necessary skills and experience to adopt, implement and enforce EU legislation • Beneficiaries include candidate countries and potential candidates to EU membership, as well as countries covered by the ENP: • ENISouth: Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia • ENIEast: Armenia, Azerbaijan, Georgia, Moldova, Ukraine www.east-invest.eu

47. TAIEX • Supports public administrations with regard to the approximation, application and enforcement of EU legislation • Facilitates the sharing of EU best practices • Needs-driven and delivers appropriate tailor-made expertise to address issues at short notice www.east-invest.eu

48. TAIEXtools • Workshops: EU MS experts present specific areas of EU legislation in workshops to a large number of beneficiary officials • Expert missions: EU MS expert(s) are sent to the beneficiary administration to provide in-depth advice on the transposition, implementation or enforcement of a specific part of EU legislation • Study visits: a group of three practitioners from a beneficiary administration take part in a study visit to an EU MS’s administration www.east-invest.eu

49. Financial Instruments • Lending Instruments from IFI like EBRDand EIB • Direct Lending • Microfinance • Securing facilities or credit guarantee Instruments e.g. National Credit Guarantee Funds www.east-invest.eu

50. Financial Instruments (2) • Equity instruments /private equity funds and venture capital funds • Business Angel Instruments • Leasing facilities / financing to purchase assets • Grant Schemes / funding for specific projects; usually do not need to be repaid • Matching grants /about 50% is provided by the firm’s own funds www.east-invest.eu