ANCA’s Hamparian Discusses US-Armenia Trade

In a telephone interview this week, Asbarez Editor Ara Khachatourian discussed prospects of expanding US trade with Armenia with Armenian National Committee of America Executive Director Aram Hamparian. Below is the transcript of the interview

ARA KHACHATOURIAN: Bring us up to speed on the state of U.S.-Armenia trade relations, and the ANCA’s efforts in this area.

ARAM HAMPARIAN: The ANCA is committed to transitioning bilateral U.S.-Armenia ties from relations that are today, in large part, aid-based, into a more durable relationship, driven primarily by mutually-beneficial trade and investment.

It probably makes sense to start by putting our bilateral economic ties into a bit of a broader perspective, in terms of the diplomatic given and take that defines relations between America and Armenia.

A.K.: OK, where do things stand in the bigger picture?

A.H.: Yerevan, as is widely known and appreciated in Washington, responded favorably to U.S. requests that it provide troops to Iraq to support U.S. operations, deployed troops to help NATO in Afghanistan, and sent peacekeepers to Kosovo. Armenia has been a constructive partner in the Nagorno Karabakh peace process, and, at great cost, followed Washington’s reckless lead in terms of talks with Turkey.

On the other side of the equation, President Obama broke his pledge to recognize the Armenian Genocide. We have seen his Administration arm-twist Armenia into the pro-Ankara Protocols and then go on to call the Genocide a “historical debate.” Add the deeply flawed nomination of Matt Bryza as Ambassador to Azerbaijan, cuts in aid, reversals on Nagorno Karabakh, and the President’s refusal to keep his personal promise to engage with the leadership of the Armenian American community, and you basically have the opposite of what he promised back in 2008 as a candidate actively seeking to win our community’s votes.

It’s in this context, that we find it so especially troubling that there has been essentially no meaningful or focused efforts, much less results, from the Obama Administration in terms of honoring the President’s promise to foster Armenia’s economic growth through increased trade and investment.

The President’s failure to act is a missed opportunity, one with real human costs, here in America, but, especially, in Armenia. The good export-driven jobs that might have been created could have helped alleviate real hardships for families, in Yerevan, cities like Gyumri and Kapan, and in villages large and small across the country.

A.K.: Where are U.S.-Armenia trade levels today?

A.H.: The U.S.-Armenia bilateral trade level, today, stand at only about $200 million a year. To put this in perspective, the Obama Administration recently proposed, without success, the transfer of two used U.S. guided missile frigates to Turkey, which, together, are valued at roughly $480 million.

The U.S.-Armenia trade level could well be over $1 billion a year, had President Obama, over his first four years in office, honored his pledge to foster Armenia’s economic growth.

A.K.: So, where exactly does President Obama stand in terms of his promise to push U.S.-Armenia trade and investment?

A.H.: Of all the President’s promises on Armenian issues, arguably the easiest one for him to have honored would have been his pledge to promote trade and investment.

Let’s look at where we are. Despite all sorts of public commitments over the years, successive Administrations, including the current one, have failed to show the moral courage to stand up to Turkey’s gag-rule on American recognition of the Armenian Genocide. Democratic and Republican White Houses, under pressure from oil interests, have compromised America’s application of our founding principles of democracy and self-determination to the resolution of Nagorno Karabakh. Our government has, as a result of misguided geopolitical calculations, refused to meaningfully challenge some very brutal efforts by Turkey and Azerbaijan to isolate and undermine the partitioned, landlocked, and blockaded homeland of the Armenians – a people still struggling, after nearly a century, to recover their national viability in the wake of vast, far-reaching, yet still-denied genocidal damage and destruction.

The President would not need to demonstrate any special political will to honor his promise to promote U.S.-Armenia trade. There is little risk here of antagonizing Ankara or alienating Baku. Nor would doing so have required him to deploy new political capital, since increasing trade is already a major part of White House agenda.

All the President needs to do is, in his own words: “help foster Armenia’s growth and development through expanded trade and targeted aid, and by strengthening the commercial, political, military, developmental, and cultural relationships between the U.S. and Armenian governments.” He’s done this with Georgia and with countless other countries, so the basic blue-print is already out there.

The U.S. Ambassador to Armenia, John Heffern, for his part, during his Senate confirmation process, thoughtfully and specifically expressed interest in prioritizing U.S.-Armenia trade and investment. He’s been in office a year now, and we look forward to seeing the practical results soon of his efforts in this direction.

A.K.: What about the aid side of the trade equation? Can U.S. assistance help promote economic ties?

A.H.: The Obama Administration, despite the President’s promises to maintain aid levels to Armenia, has sought reductions in economic assistance. Sources on Capitol Hill report that we can expect the White House, once again, to propose further cuts in the Fiscal Year 2014 foreign aid bill.

So, basically, the President is cutting economic aid to Armenia – including for the very technical programs needed promote and support bilateral commerce – at the same time that he is failing to take any meaningful steps to honor his campaign pledge to foster Armenia’s growth and development.

It’s simply not credible when the White House talks about how U.S.-Armenia ties have never been better, while the Administration is cutting the very programs put in place to strengthen these ties.

A.K.: What’s on the table? What are the practical options out there to increase U.S.-Armenia trade and investment?

A.H.: Members of Congress, the ANCA and the rest of the Armenian American community, the American Chamber of Commerce in Armenia, the government of Armenia, and, most recently, close to two dozen tops U.S. firms operating in Armenia, including Microsoft and FedEx, have called upon the Obama Administration to prioritize U.S.-Armenia commercial ties, by negotiating a badly-needed Trade and Investment Framework Agreement (TIFA) and a long-over-due Double Tax Treaty.

As we have seen worldwide, a TIFA can be a powerful, practical platform to promote trade and investment, and address and resolve barriers to increased commerce.

Among the specific areas a TIFA can help with are: Improving the investment climate, identifying priority areas for growth, and building trade capacity; Addressing regional trade issues, including the special hardships faced by Armenia due to the blockades imposed on its borders by Turkey and Azerbaijan; Streamlining customs systems, and increasing the transparency of governmental processes related to imports and exports; Discussing the effectiveness of current programs in Armenia of the U.S. Export-Import Bank, Overseas Private Investment Corporation, and U.S. Trade and Development Agency; Expanding agricultural trade and investment; Growing the level of trade in services, including banking, insurance, and tourism; Promoting Diasporan trade and investment, with a special focus on expanding Armenian American trade and investment partnerships with Armenia; Improving Armenia’s use of U.S. Generalized System of Preferences benefits; Addressing any outstanding problems in the area of intellectual property rights; and Exploring ways to deepen future U.S.-Armenia trade and investment.

We would, in particular, like to see U.S. trade and investment that is both green and sustainable. While supporting U.S. exporters and other businesses, we are also interested in helping to create long-lasting opportunities for as geographically broad and demographically diverse a segment of Armenia’s population as possible.

You recently reported the unfortunate news that, this past October, the Department of Treasury officially refused Armenia’s offer to start negotiations on a Double Tax Treaty, despite the fact that Yerevan does not consider itself legally a party to the out-dated and inoperative 1973 treaty signed between the U.S. and the now-defunct Soviet Union. Dismissing persuasive arguments that such an accord would facilitate stability, predictability, and transparency, and materially encourage American investors to invest in Armenia, the Administration’s simply said: “there is no basis to consider initiating tax treaty negotiations with Armenia.” This refusal must be revisited.

We have, in recent months, seen greater U.S. public attention to the energy sector in Armenia, including in the nuclear power industry, and would welcome the growth of government-backed American investment in this field. The Overseas Private Investment Corporation and the Export-Import Bank have, to date, underperformed with regard to Armenia, and need to move pro-actively in this area.

A.K.: Does the U.S. have TIFA’s with other countries in Armenia’s neighborhood?

A.H.: The U.S. has long had a TIFA in place with Georgia, among many other countries. Leaders in Tbilisi speak highly about how this accord has facilitated increased commerce with American firms. In fact, President Obama, last year, expressed America’s interest in building upon a TIFA by negotiating a full-blown Free Trade Agreement with Georgia.

A.K.: Since there’s not a TIFA with Armenia, what bilateral dialogue does exist on trade issues?

A.H.: There is the U.S.-Armenia Economic Task Force, which was recently downgraded by Washington from two meetings a year to just one. Trade issues have moved higher on its agenda, but this has historically been an aid-focused platform.

So, now, with the White House pushing for even deeper aid cuts, it’s not clear what resources are left to this group – outside of offering advice – to practically promote trade and investment. At this point, there is no high-level, ongoing institutional platform dedicated solely to the promotion of bilateral U.S.-Armenia trade.

The Task Force is still being managed by the State Department, not as should be the case, by the U.S. Trade Representative or the Commerce Department. As a result, rather than being driven primarily and properly by business and commercial priorities, this process ends up being part of the State Department’s diplomatic dealings with Armenia and the region. As the lack of real results over the past decade has shown, this ends up being bad both for business and for diplomacy.

A.K.: Have any other countries shown more interest in fostering economic ties with Armenia?

A.H.: The European Union, having already invested considerable time and effort in forging strong economic ties with Armenia, has launched official talks toward a Full and Comprehensive Free Trade Agreement with Yerevan. This historic accord is on track to be finalized this year.

It’s certainly not lost on anyone that the European Union is moving forward with a full-scale Free Trade Agreement with Armenia, while the Obama Administration remains unwilling to even start talks on the most modest of bilateral economic agreements.

A.K.: The U.S. Ambassador to Armenia, John Heffern, during his recent visit with Armenian American communities, spoke of internal governance and corruption issues as obstacles to increased U.S.-Armenia trade and commerce. What are your thoughts on this point?

A.H.: We welcome Ambassador Heffern’s concern. For our part, it’s very clear that we should not measure Armenia by any other than our absolute highest standards. And we know that Armenia today, like many developing and even developed countries, has serious shortcomings in terms of governance. All sincere stakeholders in Armenia’s future have some heavy-lifting to do to in building a more fair and prosperous future. But these problems are no excuse for U.S. government foot-dragging and finger-pointing in failing to put in place meaningful programs to promote U.S.-Armenia bilateral trade and investment.

Just about any reasonable reading of the history of U.S. commercial relations abroad shows that poor governance has never prevented American firms from doing business around the world. In fact, we do some of our biggest trade is with some of the world’s worst offenders, from China to Saudi Arabia.

Consider the recent ratings by Transparency International, an NGO partially funded by USAID. Their Corruption Perception Index lists many countries, including Angola, Cambodia, Ukraine, Pakistan, Nepal, and Vietnam, with public sectors viewed as more corrupt than Armenia, but that already have Trade and Investment Framework Agreements in place with the United States. Clearly that is the result of a focused U.S. effort to promote trade with these nations.

Over the past two decades, an array of U.S. reform efforts in Armenia – and no shortage of public and private advice – has been undertaken through both technical aid programs and bilateral dialogue. This engagement, however much needed and appreciated, is no substitute for bilateral accords and the types of focused leadership that the U.S. government prominently and publicly employs when America’s top leaders are serious about prioritizing bilateral economic relationships.

I’ll cite again the TIFA with Georgia, and add that we, as Americans, have a Double Tax Treaty with Slovenia that has been in force since 2002. We have full blown Free Trade Agreements with Jordan, Israel, Morocco, Panama, and more than a dozen other countries. As noted, Brussels is close to finalizing a major trade deal with Armenia, Moscow is already a leading trading partner, but Washington has yet to even get into the starting blocks on serious trade and investment promotion.

As you have have written is Asbarez: “Instead of progress, the Embassy, White House, departments of State, and the Treasury simply talk about process, with predictable results: U.S.-Armenia trade levels are on the decline. According to U.S. government figures from the Census Bureau, while the bilateral U.S.-Armenia trade level in goods was $194.1 million in FY2010 and $183.6 million in FY2011, over the course of Ambassador Heffern’s first twelve months in office, it dropped to $160.7 million, roughly a 12.5 percent decrease, despite a generally improving U.S. economy.” Clearly, we need to reverse course, and quickly.

The good news is that companies like Intel are investing more in Armenia. One of the many IT companies operating in Armenia, PicsArt, just reported that its Android app has been downloaded over 35 million times. Firms such as Microsoft, NASDAQ, and FedEx are calling for U.S. leadership on trade promotion, the Armenian government and American Chamber of Commerce in Armenia are pushing Washington for progress, and the Armenian American community, along with our friends in Congress, are fully committed to seeing real leadership from the White House and our U.S. Embassy to materially increase U.S.-Armenia trade and investment in the coming months and years.

Everyone says they agree on turning this talk into reality, now we need the Obama Administration to act.

The bottom line here is we need to see real effort – and concrete results – from our government in promoting smart trade and sustainable investment. We need action, from Washington and our Embassy in Yerevan, if we are to realize our potential to foster growth, create jobs, offer hope, and pave the way for a brighter future for America and Armenia, and the enduring ties of friendship that have long brought our two nations together.