THE PRINCIPLES OF NEW CUSTOMS POLICY

By Mate Melia

Because of being used to the things like that, we – Georgians have forgotten about WTO and questions concerning as soon as celebrated the membership in it.

Besides, neither systematic nor programmatic plans for perfecting the integration process of country continued any longer. Moreover, one part of experts and policymakers disliking conditions we’ve entered WTO with and responsibilities we’ve taken upon ourselves have yielded fight for employing the substitutes WTO and world market suggested. On the other side, with an existing trend of globalization and international distribution of labour those strengthen requirements by WTO and finally unite Georgia with world economy, may destruct Georgia in case if integration process is run improperly.
On the background of that, initiative about the new principles of customs tariffs presented to scientists, economists, businesspersons and policymakers on 2nd of March 2001 by the Ministry of Economics, Industry and Trade of Georgia appeared as a thunder on the clear sky, which could be called as new stage in appealing to the fiscal reforms, and the argument to that challenge could be the fact that experts mostly mislead society when bringing the reforms in customs and tax systems down to tariff charges only, ignoring systematic and technological appeal to them. That does not concern the principles and patterns. With this presentation, sets about the new stage of appeal – the principles challenged by strategic plan of country’s economic development with the protection of international responsibilities of Georgia.
Important here are to describe what kind of pattern we’ve chosen in response to concrete presenters and in accordance with subjects, how could the policy of customs tariffs be formed and how could we turn it into the most essential, for activating the domestic production with the concept of protecting local market not obstructing at the same time entrepreneurs to percept this market, and what’s most important: not to become the barrier for export or the domestic production.
Customs tariff policy generally covers five different patterns.
Attempt by Ministry of Economics, Industry and Trade not to go fiscal when discussing customs policy and to prioritize other principles supporting domestic production, employment and operating international indebtedness, is presented in different patterns:
Protectionist pattern means equalization of import and domestic production with competitive prices, which gives an opportunity to encourage productive potential isolating imports. As a result, optimal tariff is balanced by equalizing prices of exports and domestic production.
Preferential pattern is the purpose to provide low prices on concrete groups of goods stipulating also hard social environment. Distribution of revenues in the favour of poor and subsidization of prices with the help of revenues and transfers on the one hand and that of alternative method for distribution of incomes on the other that will finally stimulate production and economy in whole. Consequently, tariff is low.
Open market pattern means the increase of domestic production effectiveness and orientation on exports in firm competition conditions.
Neutral pattern is the moderate tariff that is foreseen for non-administrating and rare group of goods. It could be favourable for both existing and probable local entrepreneurs either.
Fiscal pattern means substitution of an excise and VAT for a customs duty with the end of tax revenue increase in view.
With that appeal, we describe tariff for 22 strategic products included in five groups of basic needs, which finally complete eight prior subgroups.
These basic groups are oil products, cigarette, auto transport, alcoholic beverages and soft industry.
Prior subgroups are the row materials, power industries, production activities, rural products, food manufacturing industry products, industrial products of intermediary target, and consumption commodities.
As the meeting spokesman George Shonia had suggested, for example, corn import could be imposed with customs duty at 5%, flour – 20%, petrol – 6-8% etc, but on the other side, a solid number of participants opposed the project:
Ministry of Finance of Georgia, Deputy Minister, Zurab Soselia: “Most important for us is the fiscal pattern of customs duty and no matter what national intention it has, I’m sure we’ll fail changing it, as State Budget is responsible to concrete spending.
Another – increasing duties on some groups will destroy market instead of protecting it, as it expands smuggling because of well-known reasons. Therefore, we have to be careful with it. To our opinion, project doesn’t fit to the existing in Georgia political and economical reality.”
Fadi Asli, Representative of American Chamber of Trade in Georgia: “It’ll be good if you have the pattern of economic policy you intend to establish with its concrete subjects and directions. That will give an opportunity to build the fiscal principles including customs one.”
Ivan Chkhartishvili, Minister for Economics, Industry and Trade of Georgia: “For regulating the market economy in country, state has no substitute and this regulation has to be carried out right on the level of policy and principles.”
Question of customs policy is one of the most difficult ones in fiscal policy reform, existence of which is basic for employment and production. Thus, most of us see that with existing trends and paces of those, at the end of 2001 and in 2002, economy of Georgia may collapse. Entire world now is doing its best to avoid the crash.
And how abut us? We usually fight against each real initiative in country. Seems like, Ministries in Georgia fight not for lifting economy up, but for blaming faults on each other to avoid unpleasantness. Will that save Georgia?