Armenia – Turkey trade relations

Do Georgia’s Association Agreement with the EU and Armenia’s agreement with Russia-led Eurasia Economic Union have implication for the trade between Armenia and Turkey?

Since 2011, CBDN has been working towards promoting business contacts and cooperation between business communities in Armenia and Turkey. As the border between these two countries is closed and the trade route is via Georgia, discussions on what different economic orientations in the South Caucasus (i.e. Georgia and Armenia) would mean for the trade, though informal, between Armenia and Turkey, increased among business circles. Moreover, many civil society experts saw Armenia’s orientation towards EEU as a further setback to the prospects of normalization with Turkey. Many hoped that negotiations with the EU could open doors for improving Armenia-Turkey relations (i.e. in the case of Turkey’s accession to the EU).

Because there are no legal agreements on trade and bilateral road transport between Armenia and Turkey, and trade takes place via Georgia, we conducted a desk review to understand implications of different economic frameworks, which resulted in the findings outlined below:

Trade relations between Georgian and Turkey are directed towards liberal foreign trade policy, and thus trade liberalization and joint management of customs checkpoints more than ever directed towards EU regulations. Trade relations between Georgia and Turkey take place within the Free Trade Agreement signed on 21 November 2007 in Tbilisi and entered into force on 1 November 2008. The FTA eliminated tariff and non-tariff barriers for trade between these countries. As Turkish trucks and goods that aim to enter Armenia’s market initially declare destination as Georgia, they should not face major issues at the Customs.

Trade relations between Georgia and Armenia take place within Free Trade Agreement signed between these countries, which is outside the framework of the DCFTA and EEU. Between Armenia and Georgia, there are about eighty international treaties and agreements, which cover virtually the entire spectrum of relations. The main legal document between the two countries is Treaty on “Friendship, Cooperation and Mutual Security”, signed in October 2001. Trade relations take place within FTA signed on 14 Aug 1995, which took effect on 11 Nov 1998. In October 2014, after Armenia’s decision to join EEU, it was agreed that Georgia – Armenia FTA will remain in effect – making it one of the examples on how two countries in different economic unions can cooperate. Since the prime ministers of both countries were expressing willingness to further develop and strengthen bilateral ties, there is also an opportunity for both Armenia and Georgia to gain economic benefits from other’s choice of international alliance. While Georgia can access Russian market through Armenia’s EEU, Armenia can in turn access European market through Georgia’s DCFTA with the EU.

Armenia’s EEU membership and Georgia’s DCFTA negotiations with the EU do not hinder or have negative implications for the trade between Armenia and Turkey. First of all, Turkish trucks declare Georgia as their destination country, and at the Georgian customs change the destination to Armenia. Secondly, most of the goods from Turkey are being sold via Georgian companies in Armenia. The details of the structure of the trade is mentioned in the report produced by TEPAV, UMBA and TABDC, which is available here.

General information about the state of the trade between Armenia and Turkey:

Even under the conditions of the closed border, (informal) trade between Armenia and Turkey constituted at least 25% of the total trade turnover of Armenia. At the same time, it should be noted that the volume of trade between Armenia and Turkey is comparable with the volume of trade between Armenia and Iran, which functions under a free trade and open border regime. For instance, in 2013, imports from Iran to Armenia amounted to 144 million dollars, and from Turkey 143 million dollars. Moreover, in 2014 a significant growth was observed in Armenian – Turkish trade turnover, which constitute 10.2 per cent growth compared to 2013 (total of 233.8 million dollars). It is also interesting to see Turkey mentioned among the top four countries together with Russia and Georgia that exports products to Armenia.

Turkish goods in the Armenian market:

  1. Fruits and vegetables grown in greenhouse, which are sold mainly in the winter. Other food products of Turkish origin are presented in extremely small quantities, and for the most part are not represented at all.
  2. Wide range of industrial products (industrial raw materials, machinery and components, construction materials, plastics and rubber products, household goods, etc.) including brands of Western firms produced in Turkey under license.

Öztürkler Holding is one of the first Turkish companies to start investing in the Armenian economy in the construction business. This project will present a good case study to further understand technicalities of the cooperation and opportunities for economic collaboration and investment.

 

References:

Foreign trade of the Republic of Armenia with non CIS countries by Commodity groups for 2014: http://www.armstat.am/file/article/ft_2nish_2015_11.pdf

Georgia-Turkey Free Trade Agreement: https://aric.adb.org/fta/georgia-turkey-free-trade-agreement

Georgian-Turkish Free Trade Agreement 2008: Implications Two Years After, Black Sea Trust for Regional Cooperation, available at: http://www.ei-lat.ge/images/stories/Documents/Georgian-Turkish_Free_Trade_Agreement_2008_-_Implications_Two_Years_After.pdf

Impediments to Direct Trade between Turkey and Armenia, TEPAV, UMBA, TABDC, available at: http://umba.am/pics/direct_trade_report.pdf

Ministry of Economy and Sustainable Development of Georgia, Foreign Trade: http://www.economy.ge/en/economic-review/trade

Research on the Socio-Economic Impact of the Turkey-Armenia Border, Hrank Dink Foundation, available at: http://hrantdink.org/picture_library/SinirArastirma/ResearchontheSocio-EconomicImpactoftheTurkey-ArmeniaBorder.pdf

Republic of Turkey Ministry of Foreign Affairs, Relations Between Turkey and Georgia: http://www.mfa.gov.tr/relations-between-turkey-and-georgia.en.mfa

Republic of Turkey Ministry of Foreign Affairs, Relations Between Turkey and Armenia: http://www.mfa.gov.tr/relations-between-turkey-and-armenia.en.mfa