Custom Union – Era of white Nivas

After Armenia’s decision on membership to the Customs Union it is important to understand the economic privileges and flaws. The Customs Union implies free trade circulation among the member states. At first sight, this seems like an ideal opportunity for us because our economic and trade relations with the main economic partner Russia will even more accelerate. Our goods will appear in the Russian market in better conditions and the prices of imported goods will even lower due to the absence of customs fees.

However, Russia is not the first trade partner of Armenia. It is the EU. In the first quarter of 2013 the trade circulation between Russia and Armenia amounted to 655 million USD and with EU – 809 million USD, which is 24% higher than with Russia. Moreover, the import and export volumes with the EU are much higher than with Russia. And this is where our problems start. It is very suspicious whether the prices of the imported goods from Russia will decrease having taken into account the monopolized situation of the country and the reality that the factor of price drop almost never affects the consumers. As of the goods imported from third countries, then the customs fees will be high and the prices of these goods will rise in Armenia. At present Armenia is importing commodity goods, which have essential influence on consumption prices and the Russian alternatives don’t exist. After the admission to the Customs Union the custom fees for these goods will drastically go up.

Thus, during the import of sugar to customs fee is levied. According to the Customs Union policies the customs fee will amount to 100 drams per kilo of sugar depending on the international price of sugar and the timeframe of importation. It is known that Armenia mainly imports sugar from Brazil and the fact of monopoly of the sector will no doubt create inflation in the domestic market. The customs fee for meat products is 10%. According to the policies of the Customs Union it will amount to 15-25%. The tea customs fee will reach 19% from the existing 10%. Wheat products are taxed 10% now but after joining the Union we will pay 13-15%. The fees for alcoholic beverages will also increase. In particular, for one liter of beer the tax will be 250 drams instead of the existing 50 drams. For vodka we will pay 750 drams instead of the current 380 drams. The customs fee of textile goods and construction materials mostly imported from China, Turkey the fees will amount to 15-20% instead of the existing 10%. Serious inflation is expected in the pharmaceutical market too, where currently there is no fee. The Customs Unions defines 8-12% customs fees for pharmaceuticals. The mentioned fees will also create a problem for the import of the Iranian gas as we as the petroleum imported from Bulgaria and Rumania. And the biggest present we will receive from the Customs Union when we start to pay clearance fees for imported cars. After joining the Union we will yearn for the current high fees. If now we are paying 30-35% of the price of the imported car soon we will pay 300-500% of the price. Indeed, for a 10-year-old Mercedes worth 5000 dollars we will pay 24,100 USD; for a 10 thousand car we will pay 30,150 USD. So the era of white Nivas is coming back again.

By Mesrop Arakelyan