Awaiting free trade regime

Maka Ghaniashvili

Georgia is not even ready to start negotiations

Georgia’s integration with the West, especially NATO and EU membership issues are of first-priority for our country. However, NATO and EU membership is postponed for indefinite time. At the same time, Europe doesn’t intend to fully lose Georgia as an important strategic ally and partner. Therefore, in order to diminish Russia’s influence EU issued special program for Georgia and several eastern European countries. This gives a special status of associated member. The way to this goal has been paved by means of some specific MAP of EU – Eastern partnership agreement. Direction of Eastern Partnership agreement is expressed in so called thematic platforms which cover issues such as energy, human rights, supremacy of law, migration etc. The agreement that was concluded between EU and six countries (Georgia, Armenia, Azerbaijan, Belorussia, Ukraine and Moldova) presupposes deep economic relations between the mentioned countries.
Georgia is enjoying benefits of GSP+ (Generalized System of Preferences) that implies tariff preferences for Georgian export at EU market. In the future, EU plans to offer agreement on deep and comprehensive free trade. Here, the comprehensive means broad spectrum trade or it is not limited to separate groups of goods and services. While the word deep implies reduction of non-tariff barriers and harmonization of the regulating of trade related fields.
However, Georgia has to undergo long path to this aim. It appeared that Georgia is not even ready to start negotiations, nothing to say about free trade agreement. What necessary requirement has to fulfill Georgia so that EU to start negotiations with our country?
We interviewed director of GEPLAC Georgian-European consulting centre – Kakha Gogolashvili.
E.G. – Mr. Kakha, at what stage is the negotiation concerning free trade agreement? It is known that negotiations should have started in May.
K.G. – It’s true that negotiations were planned to start in May, but they haven’t been started yet. Consultations are in the process concerning how far Georgia is ready to pass onto the stage of intense negotiations. This implies harmonization of Georgian legislation and regulating institutions with the principles that are required to start negotiations. How far Georgian government and its structures are ready for this is playing important role here. How to lead negotiations is not the enquiry. Deep knowledge of the current situation in your country is needed here. One should be aware of differences between principles and law of EU and Georgia. As government must have a clear idea of how far it is possible to take some obligation and actually fulfil it on time.
E.G. – When the negotiations might be started?
K.G. – It is hard to say, as it is not decided yet whether they will be started soon or not. Assessment and consulting process is not completed yet. So it is hard to forecast. EU has strictly decided to conclude such agreement, but it has also strictly said that agreement will be concluded only at the time when Georgia will be ready.
E.G. – What are the main requirements that Georgia has to comply with in order to start negotiations?
K.G. – During its visit, EU mission to Georgia examined and gave its opinion concerning these fields. Georgia should take into consideration their directions and remarks. We should improve the situation in order to start negotiations. Some progress should be made in legislation and at institutional level. Technical regulations are considered as the most important field. Georgia should construct a system that ensures consumers’ safety. It is necessary to establish technical regulations for industrial goods. We should establish well developed system of standards that will be harmonized with European one; Competition should be regulated as there were some remarks from European Union on this matter. Some institution regulating competition should be established.
Another important field is the protection of intellectual property. We have quite a good situation in legislation, but state needs some active structures and institution that will carry out implementation of these laws. There should be no lack of specialists in the courts, in order to ensure that disputes on intellectual property will be solved at a corresponding level. Police should have the right to inquire and investigate intellectual property. There should be relevant services at the customs houses that will actively protect intellectual property. It is necessary to have well developed statistics either. There should be quite a number of institutions that ensure implementation of the laws.
European Union is attaching considerable significance to sanitary and phyto sanitary. I mean safety of food stuffs. There are lots of things to do, especially establishment of sanitary and phyto sanitary control. Both, quality and safety of imported goods and of local production should be checked.
E.G. – I suppose there are some remarks concerning labour code also?
K.G. – Of course, labour code influences this sooner or later. However, at the current stage there is no strict emphasis made on this. The issue is mentioned in the conditions, but at initial stage the abovementioned four fields are of big importance and due regard should be given to them by the government. However, until the end of the negotiations, it is quite important to harmonize Georgian labour code with the requirements of International Labour Organization.
E.G. – I understand that it is a little early to talk about this. But still, what benefits will free trade agreement bring for Georgia?
K.G. – This will be very comprehensive free trade agreement. New possibilities in export will open up for Georgia. It will be much easier to export any kind of product in Europe. It is well known that tariffs are not the main barriers for export. European Union has quite low tariffs. On the contrary, non-tariff technical barriers are huge obstacles for product export. Technical barriers are established because standards and legislative environment of one country differs from another and thus product’s market entry becomes quite complicated. Technical regulations are meant here. However, if Georgia harmonizes technical regulations with EU ones, it becomes possible to conclude agreement on mutual recognition of quality conformance evaluation systems. This means that certificates issued in one country is automatically recognized by European Union. Achievement of this goal is very important.
E.G. – Is similar agreement signed with other participant countries of Eastern Partnership?
K.G. – Eastern Partnership implies development of not only bilateral relations, but also closer relations and integration of these countries with each other and thus their Europeanization in the end. First of all, this means establishment of market and economic institutions harmonized with European one. Development of one neighboring economic space is very important. There are two ways. First, it might be so that economic space within these countries (For instance, Georgia, Moldova and Ukraine) develops earlier. Legislative base of these countries will be harmonized, technical barriers for trade will be abolished and afterwards this economic space will join European one. However, there is a second way too. Maybe these countries get closer to European market separately. It should be noted that despite the fact that there is a lot of work to do, the idea is not a fantasy and its achievement is quite possible for Georgia.
E.G. – Has Georgia signed some similar agreement with the rest five countries?
K.G. – Yes, for instance trade agreements were concluded with Moldova and Ukraine, within the frame work of GUAM. Separate agreement was signed with Armenia and with some other CIS countries. However, none of these agreements had worked actually. These were not comprehensive agreements. Only tariff barriers were abolished. There are no strong technical regulations between our countries. Besides this, Georgia recognized standards of many countries, including CIS and OECD member country standards. This means that Armenian product can easily enter Georgian market if it has corresponding certificate. However, this doesn’t mean that we have harmonized systems. Simply control system is on low level in these countries.
K.G. – Ukraine is concluding free trade agreement with European Union. This means that the control will be at very high levels there. Therefore, entering Ukrainian market might become as impossible as European one.
Georgia is leaving CIS market and consequently it is abolishing those bilateral agreements that were signed within the framework of this space. Naturally Georgia is looking for new market space and new economic relations. Therefore, quite a lot of things depend on how far Georgia manages to reach the conditions that EU requires from us and that are necessary to enter free trade regime. This is essential for the development of Georgian economy.