No Effort or Progress on US-Armenia Trade

BY ARA KHACHATOURIAN

As Armenia and the European Union inch closer to a comprehensive free trade agreement, pledges by the Obama Administration to foster expanded U.S.-Armenia trade remain unfulfilled. No meaningful movement in this realm has been made since the new US Ambassador to Armenia John Heffern began his tour more than a year ago, despite his own promises to prioritize bilateral economic relations.

As the European Eastern Partnership summit kicked off in Yerevan Friday, European and Armenian leaders are on track to continue the negotiations on a comprehensive Free Trade Agreement that are expected to conclude by November 2013 when the same summit convenes in Vilnius, Lithuania.

European Commission President Jose Manuel Barosso, ahead of his visit to Armenia Friday, said that the EU-Armenia talks are on track to meet the 2013 deadline.

As the European Eastern Partnership leaders convene in Yerevan, Ambassador Heffern travels to the US and is scheduled to meet with Armenian-American leaders in Los Angeles, San Francisco, Boston and New York.

While Ambassador Heffern is clearly not the Administration’s decision-maker on the Armenian Genocide or the Nagorno Karabakh issues, and can legitimately seek to defer certain complaints regarding the US government’s shortcomings in these areas to those at a higher pay-grade, he is America’s primary representative to Yerevan, and the US’s point-person on the growth of U.S.-Armenia bilateral relations.

As a developing democracy, Armenia certainly has its share of shortcomings in terms of corruption and governance. An array of US reform efforts over the past two decades have 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 seeking to prioritize bilateral economic relationships. Examples include the Trade and Investment Framework Agreement (TIFA) negotiated with the Republic of Georgia in 2007, the Double Tax Treaty with Slovenia that has been in force since 2002, and U.S. Free Trade Agreements with Jordan, Israel, Morocco, Panama, and more than a dozen other countries.

In fact, the Obama Administration has said that the U.S. is considering a Free Trade Agreement with Georgia. Yet Armenia, despite having met Brussels’ economic and governance tests for a full-fledged free trade partnership, is not even being considered by Washington for relatively modest agreements, such as a TIFA or a Double Tax Treaty.

The public record shows that, despite consistent public calls by members of Congress, the Armenian American community, the Republic of Armenia, and the American Chamber of Commerce in Armenia, we have not seen any meaningful action on the part of the U.S. Embassy to put in place relatively easy-to-negotiate trade, tax, and investment agreements with Armenia, including a badly-needed TIFA, a long-over-due Double Tax Treaty, or a Free Trade Agreement. The U.S.-Armenia Economic Task Force, which used to hold meetings twice a year, now only meets once every twelve months.

As recently as October of this year, 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 with 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 said: “there is no basis to consider initiating tax treaty negotiations with Armenia.”

Instead of progress, the Embassy, White House, departments of State, and the Treasury simply talk about process, with predictable results: US-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.

While it is too certainly early to draw complete conclusions regarding his full tenure, the trends are troubling. All the more so because of the public promise that President Obama made to foster Armenia’s development through expanded trade, and Ambassador Heffern’s own commitments, during his confirmation process, to prioritize the growth of U.S.-Armenia economic relations.

Hence, the Armenian-American community must encourage Heffern to take concerted steps to realize the full potential of his office to grow U.S.-Armenia ties.

The good news is that there’s still time to reverse course, and get back on the right track. Ambassador Heffern can and should take advantage of his visits with Armenian American communities this December to announce practical policies that will prioritize U.S.-Armenia economic relations and materially and quantifiably expand bilateral commercial cooperation between our two friendly nations.