Trade Sustainability Impact

Assessment (TSIA) in support of

negotiations of DCFTA between the EU

and the Republic of Armenia

European Commission, DG Trade

Brussels, 12 December 2012

Ecorys – CASE consortium

Presentation on draft Inception Report

Trade Sustainability Impact Assessment (TSIA) in support of negotiations

of DCFTA between the EU and the Republic of Armenia

By:

Nora Plaisier, Wojciech Paczynski,

Jurgen Vermeulen, Eoin O’Melia

Agenda

1. Approach and conceptual framework

2. Methodological developments

3. Consultation plan and stakeholders

4. Preliminary Screening on Key Sustainability Issues

5. Planning

6. Questions and contact info

1. Approach and conceptual framework

General approach to the study based on three phases:

2. Sectoral Trade SIA analysis

• Scenario analysis and CGE modelling

• Additional quantitative and qualitative analyses

• Screening and scoping analysis

0. Inception

1. Overall analysis of the sustainability impacts

• In-depth analysis of selected sectors and horizontal issues

• Causal Chain Analysis (CCA)

• Literature review, Partial Equilibrium modelling, interviews

3. Policy recommendations and flanking measures

• Causal Chain Analysis

• Consultation and dissemination (throughout all phases)

• Final report

1. Approach and conceptual framework

A general approach based on three phases

Phase Methodology - Pillar

0 Inception

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1 Overall analysis

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2 Sectoral Trade SIA analysis

Secto

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3 Policy recommendations and

flanking measures

1. Approach and conceptual framework

1. Screening and scoping

2. Scenario analysis & CGE

3. Add’l quantitative & qualitative analysis

› Social (quantitative & qualitative)

› Human rights (qualitative)

› Environmental (quantitative &

qualitative)

4. In-depth analysis

› Sectoral analysis

› Horizontal issues

5. Causal Chain Analysis

6. Consultation and dissemination

2. Methodology

CGE modelling specification

› Adjusted actual projection to 2010, based on 2007 (GTAP 8.0) data

1. EU-27 4. Moldova 7. Ukraine 10. ROW

2. Armenia 5. Russia 8. Iran

3. Georgia 6. Turkey 9. China

1. Country selection

2. Base year

2. Methodology

3. Sector specifications

Nr. Sector content (TSIA Adapted)

1 Grains and crops

2 Veg, fruit, nuts, oil seeds

3 Other crops

4 Animal products

5 Forestry products

6 Fish products

7 Energy

8 Other minerals

9 Livestock and Meat Products

10 Vegetable oils and fats

11 Dairy products

12 Sugar

13 Other processed food

14 Beverages and tobacco products

15 Textiles and clothing

16 Wood, paper, publishing

17 Petrochemicals

18 Chemicals, rubber, plastics

19 Ceramics, cement, etc.

20 Primary metals

21 Fabricated metals

22 Motor vehicles

23 Other transport

Nr. Sector content (TSIA Adapted)

24 Electronics, computers

25 Other machinery and equipment

26 Other manufacturing

27 Utilities

28 Construction

29 Trade

30 Other transport

31 Water transport

32 Air transport

33 Communication

34 Finance and insurance

35 Business and ICT

36 Personal and recreational services

37 Public and other services

2. Methodology

CGE modelling specification

Scenarios

• One liberalisation scenario, based on:

› Anticipated changes in tariff lines;

› Services-related regulatory approximation;

› Other types of regulatory approximation (e.g. SPS, TBT).

2. Methodology

Outputs of overall analysis

Theme Indicator

1. Aggregate results

a) Wages (skilled and unskilled)

b) GDP

c) Total exports

d) Total imports

e) National income

f) Terms of trade

2. Sector results

a) Bilateral exports

b) Output

c) Value added

d) Employment (skilled and unskilled)

3. Environment variables

a) Emissions

b) Agricultural

c) Land use

4. Social variables

a) Unskilled wage changes

b) Labour displacement

c) Measure of inequality

2. Methodology

Social and environmental effects – additional analysis

• Objective:

to obtain more detailed, disaggregated information on potential effects in

these 2 spheres

• Approach:

• A combination of quantitative and qualitative analysis

• Quantitative analysis:

• Building on CGE results;

• Combining them with new data sources and techniques.

2. Methodology

Quantifying social impact

• DCFTA likely to affect relative prices (e.g. of food) – modelled in CGE. Effects

split into:

› Consumption effect: prices of households’ consumption basket will be

affected: especially important for the poor (~50% of their consumption

basket)

› Income / wage effect: income determined by changing sectoral wages

and – e.g. for food producers – also sectoral prices: especially

relevant in rural areas

• Simulation taking 2010 household budget survey for Armenia as a baseline

• Outcome of analysis: distribution of welfare effects of the DCFTA

› poverty indicators (incidence, gap/depth, severity)

› inequality indicators (Gini, decile ratio)

› Identification of vulnerable groups (regional, gender differences,

household types, etc.)

2. Methodology

Quantification of environmental impacts

• Inputs:

› CGE results: sectoral outputs & CO2 emissions

› air pollution intensity per sector (for Armenia)

› data / methodology for estimating externalities from environmental burden

• Outcomes

› Pollution change (% & tonnes): SO2, NOx and particulate matter in Armenia

› decomposition: scale & composition effects (policy-relevant)

› computed values (in EUR) of external costs (welfare changes due to effects

on human health, ecosystems, materials)

2. Methodology

Qualitative analysis:

› Social aspects

› Decent work agenda, interaction with ILO core labour standards, equality

› Environmental aspects

› Land, water and other pollution, biodiversity, etc.

› Human rights issues

› Broad range of issues, following Walker (2009), looking e.g. at

complementarity between trade law and human rights law, role of DCFTA in

growth and resources for HR, competitive pressure and HR risks

• Extensive literature review

• Critical interpretation of CGE and other simulation results at the sectoral level

• Selective analysis of reporting schemes under relevant international conventions

• Consultations with stakeholders

3. Consultations and stakeholders

Consultation activities

Activities Detail

1 Electronic consultation and documentation Continuously

http://tsia.ecorys.com/armenia/

2 Public meetings EU 12 December 2012

24 June 2013

3 Workshops in Armenia 15-19 April 2013 (exact dates t.b.d.)

4 Attendance of other relevant conferences, workshops etc.

5 Personal interviews with individual representatives of civil

society and stakeholders

Continuously

3. Consultations and stakeholders

Website / Email / Feedback form

• Websites:

tsia.ecorys.com/armenia

• Email:

tsiaarmenia@ecorys.com

• Feedback form

4. Identification of key issues

Screening and scoping

• Aim: to identify key sustainability issues DCFTA; for further in-depth analysis

• Selection criteria applied in screening and scoping exercise:

Number Criterion

Criterion 1 Initial importance for economy (GDP, employment, trade shares)

Criterion 2 Economic impact from DCFTA

Criterion 3 Social / environmental importance and impact / Human rights

Criterion 4 Stakeholder issues of special importance

Criterion 5

Strategic importance of sector/issue in the negotiations

4. Identification of key issues

Criterion 1. Initial importance for economy

• Utilities and gas distribution

› 12th export sector to the EU (2.1% of total)

› 4th largest sector in Armenia’s GDP (8.3 %)

› 4th largest unskilled labour employer (7 %)

› 3rd largest skilled labour employer (10.9 %)

• Trade

› 6th largest export sector to EU (4.3% of total)

› 3rd largest sector in Armenia’s GDP (8.8%)

› 5th largest unskilled labour employer (6.5%)

› 7th largest skilled labour employer (4 %)

• Primary metals

› 1st largest export sector to EU (39% of total)

› 17th sector in Armenia GDP (1.1%)

› 15th largest unskilled labour employer (1.5%)

› 12th largest skilled labour employer (0.9%)

• Construction

› 11th largest export sector to EU (2.3% of total)

› 1st largest sector in Armenia GDP (34%)

› 2nd largest skilled labour employer (14%)

› 1st largest unskilled labour employer (24%)

4. Identification of key issues

Criterion 2. Impact (economic) from the DCFTA

• Based on outcomes of Phase 1: mainly CGE outcomes + additional analysis

4. Identification of key issues

Criterion 3. Social / Environmental importance / Human rights impact

• Based on CGE outcomes and additional quantitative and qualitative analysis

Criterion 4. Stakeholder issues of special importance

• You!

• Based on inputs received from the Civil society, our local partners and existing

literature and documentation

» Implementation issues regarding TBT, SPS and IPRs

» Implementation issues regarding environmental / social / human rights

topics

» For example, think of heavy use of agricultural chemicals (pesticides)

4. Identification of key issues

Criterion 5. Strategic importance of sector in the negotiations

» Kick of meeting suggestions form the SC:

SPS, mining (especially important for the environmental and social

analysis), dairy, tourism and sugar.

» ......other suggestions

5. Planning

Activity Leaders Deadline

Kick-off meeting EC and Ecorys 8 November 2012

Draft Inception Report Ecorys 3 December 2012

Online publication of draft Inception Report 10 days before CSD Ecorys 7 December 2012

Civil Society Dialogue EC and Ecorys 12 December 2012 afternoon

2nd draft inception report (final version) Ecorys 10 January 2013

1st Draft Interim Technical Report Ecorys 1 March 2013

Online publication of draft Interim Technical Report Ecorys 6 March 2012

TSIA workshop Yerevan Ecorys 15-19 April 2013

1st Draft Final Report Ecorys 6 June 2013

Send draft inception report to Civil Society and/or summary 10 days before CSD EC and Ecorys 14 June 2013

Civil Society Dialogue EC and Ecorys 24 June 2013 afternoon

2nd Draft Final report (Final version) Ecorys 15 July 2013

Questions & Discussion

Contact us through:

W: tsia.ecorys.com/armenia

E: tsiaarmenia@ecorys.com

T: +31-104538781