Reasonable customs policy is very significant for political and economic independence of any country.
According to the Georgian customs code, the main purposes of customs policy are economic safety and sovereignty of Georgia, encouragement of economic development of Georgia and external economic relations of Georgia, protection of internal market, implementation of other tasks of internal and external economic policy of Georgia. As it seems, among purposes of customs policy priority is attached to the problem of economic sovereignty and economic safety that has, unfortunately, not been studied properly either theoretically or methodologically. The mentioned problem is particularly important for economically weakly developed and transition economy countries including Georgia the economic potential of which is still weak. Therefore, protection and strengthening of its economic sovereignty and safety is one of the most difficult and numerous problems in the modern stage.
The purpose of this article is analysis and generalisation of methodological basics of existing ties between economic safety-sovereignty and customs policy of the country as well as development of some recommendations and suggestions in this direction. With this purpose, it would be, first of all, advisable to make analysis and generalisation of the essence and theoretical-methodological basics of main indicators, tasks and essence of economic safety and sovereignty.
It is noteworthy that problems of economic safety and sovereignty of Georgia has not been given due attention by economic programme documents of authorities. Though one and five-year indication plans systematically provide for the improvement of external economic ties, recommendations and suggestions about the legalisation of shade economy, still they do not cover numerous and interdependent problems of country’s economic sovereignty and safety.
As the world experience shows, economic safety represents a guarantee of independence, stable and efficient development of countries. This implies that economy represents a vitally important sphere for social, state and personal activities. Therefore, the notion of national safety will be an empty word without its stability and strength in case of danger (threat) both inside and outside the country. Therefore, economic safety belongs to important national priorities. It is noteworthy that in the present stage there is no unanimous opinion with regards to the category of economic safety. Traditionally, it is considered as a characteristic feature of economic system that determines its capability, provides normal life conditions, accelerates economic growth rates and consistently realises national state interests. The mentioned definition is so general and superficial that it does not give even a vague idea of economic safety. The matter is that the mentioned definition completely ignores category of threat characteristic of any state (both inside and outside its territory). As the purpose of our research is the sphere of interrelations between customs policy and economic safety, attention will be, principally, focused on the external threat of economic safety with the latter being connected with import policy.
Three components should be singled out in the content of economic safety category. First of all, it is function of economic independence. It does not, certainly, have absolute nature, as in the background of international distribution of labour and world economic globalisation neither strong nor weak states manage to build economy independently. In these conditions, economic independence that should be achieved within the frames of economic safety implies the ability of state to control its own economic resources, achieve a good level of production efficiency and quality for ensuring competitiveness and realisation of goods and services in the world market. At the same time, economic independence means economic freedom. The latter means that state takes and realises decisions without external intrusion. It is noteworthy that of late years weakly developed countries have been compelled to obey completely and unconditionally the so-called recommendations and advice of international financial institutions and economically strong countries. In this situation there is the danger of limitation (loss) of economic independence and freedom, which eventually leads to the weakening and loss of economic and political independence. The second important component of economic safety is stable development of national economy, which implies protection of any property categories, creation of safe conditions and warrants for enterprise and limitation of destabilised factors and conditions (crimes and shade economy). The third condition that should be satisfied within the frames of economic safety implies the ability of economy to ensure self-development and progress, create favourable environment for investments and innovations, and improve professional, educational and cultural level.
Proceeding from the above-mentioned, we can conclude that economic safety means protection of economic system from the influence of exogenous (external) and endogenous (internal) factors as well as implementation of such economic policy that would ensure independence, stability and strength of national economy.
Country’s economic safety level is determined via the system of particular quantitative indicators that makes it possible to send timely signal ? information to the authorities about the possible danger (threat) so that they could take decisions to avoid the danger. At the same time, limit value, but not indicators are important in economic safety implying their quantitative characteristics. Weakening of economic safety and formation of negative trends begins outside their limits.
The system of economic safety indicators has not yet been developed thoroughly though its main indicators are still distinct. Growth rates and scales of shade economy, employment level, difference between rich and poor layers of society, and inflation rates are, mainly, used for characterising internal (endogenous) danger and threat. Approach of the mentioned economic events towards the permissible limit value endangers social-economic stability whereas ascent up to the permissible limit value means social instability and favourable conditions for social conflicts, i.e. the shaking of economic safety basics.
From the viewpoint of external (exogenous) factors, such indicators as volume (level) of national debt, ratio of foreign investments in the total investment volume, extent of dependence of strategic resources on foreign countries, dependence of national economy on scientific and technological progress and potential, the exposure level of country’s economic borders and their protection (smuggling) and, what is more important, improvement level of external economic policy play the role of economic safety indicators.
We should note that achievement and preservation of country’s economic safety is the most difficult problem. It is especially difficult for transition economy and weakly developed countries. The matter is that economic safety is achieved only if qualitative characteristics of indicator systems are within the permissible limits. However, their balancing is very difficult as one of qualitative characteristics achieves limit value at the expense of other ones or vice versa. For instance, reduction of inflation to the permissible limit value should not lead to the increase of employment level beyond limit value; exposure of country’s economic borders should not lead to the decrease of home production competitiveness below permissible limit value, etc.
Thus, we can conclude that national economy beyond the levels of indicator limits loses competitiveness of domestic and external markets and dynamic self-development ability. It becomes object of expansion of foreign and transnational monopolies.
In the modern stage of development with there being fast globalisation process in world economy, large transnational companies that establish world economic order and dictate their own terms for gaining superprofits, pose a significant threat for economic safety of some countries and especially, weakly-developed ones.
Customs policy is particularly important for diminishing external threat of economic safety. The latter is organic part of state external economic policy. In its turn, external economic policy covers measures aimed at integration of the economy of given country in the world market and protection of domestic market from foreign import.
The essence of customs policy is, first of all, seen in customs-tariff legislature, establishment of customs ties and conclusion of customs conventions, creation of free economic zones, etc. Customs policy is determined by Georgian constitution, customs and tax code, law on customs tariffs and dues, and the rule of determining customs value. At the same time, formation of country’s customs policy is much influenced by the agreement of Georgian government on WTO accession.
We can say that nowadays Georgia does not have distinct customs policy. The current customs code and other customs laws do not promote the efficiency of country’s external economic ties and realisation of measures aimed at the most important principle of customs policy – achievement of trade advantages. Georgian customs law and customs policy do not yet manage to legalise non-registered trade, to draw comparisons with partner countries
Specular comparison with partner countries is not done properly, trade preferential system is not applied on the appropriate level, there is no system of complex measures against import of falsified production, there is no system of export development, financial support, decrediting of export operations and insurance.
In the modern stage of transformation, Georgian customs policy should be realised in such a way as to, for one thing, develop a new model of customs tariffs for the development of external trade and, for another thing, to strengthen economic safety of country. The latter requires differential structure of customs tariffs aimed at promoting the development of traditional branches of national economy and protecting them from import. This can be achieved by detalisation of product combination in accordance with international standards and WTO norms. Special significance is attached to the further improvement of tariff preferential system. It is difficult to establish order in the import of goods and services without tariff system of national goods.
One of the main directions of customs policy is classification of product combination into separate groups and implementation of special policy with regards to each of the group. A group of goods that do not need to be imported to Georgia should be singled out among other ones. For instance, this group includes such products as wine, tea, mineral water, etc. There should be a special tariff system for this group with the purpose of discouraging import of such goods from other countries thereby promoting the development and competitiveness of home industry. The second group of product combination should include goods that are not produced in Georgia such as f.e. cars, fuel oil, radio, TV, computer equipment, etc. In this case, customs tariff rates should make for free import of the mentioned group into Georgian market.
Special attention should also be given to group of goods that are produced in Georgia, but are imported here for meeting demands. The mentioned group might include oil and mineral oil, medicine, electricity, wheat, etc. In this case, balancing customs tariff rates, on the one hand, aiming at encouragement of import and on the other one, at the promotion of national industry competitiveness with import production is of great importance. Unfortunately, import of the third group poses a serious threat for economic safety of Georgia. The matter is that due to non-protection of borders illegal import of the mentioned group to domestic market makes it possible to realise goods at cheap prices as a result of which it becomes impossible to sell national production. This, eventually, leads to the weakening of country’s economic safety.
One of the most important directions of customs policy is establishment of protective system and practical realisation. This implies anti-dumping, compensation and special duties as well as import quota. Unification of excise on import and local excise goods is particularly important within the frames of customs policy.
Ties between customs policy and economic safety gradually grow and become more and more complex. This is stipulated by the distinct growth trend of external trade turnover. For instance, in 1994 external trade turnover of Georgia was 420 million dollars including export – 151 million and import – 269 million while the negative trade balance was 117 million US dollars. In 2002 balance of trade turnover increased 2,5 times to 1045 million US dollars of which export was 720,0 million dollars. Negative trade balance was 395,0 million US dollars.
According to the Y2002 data, of the total volume of Georgian exports 13,7% falls at the share of aircraft, 9,7% at ferrous metal waste, 8,8% at semi and non-processed gold, 8,1% at natural grapes wine, 4,7% at mineral water, 3,9% at sugar, 3,8% at copper concentrate, 3,4% at nitrogenous fertilisers, 2,5% at spare parts of aircraft, and 3,7% at the rest production.
As far as economic safety is concerned, here special importance is attached to the structure of imports. The import structure of Georgia has looked as follows for the last two years:
The analysis of Georgian exports and imports reveals that numerous factors and conditions affect economic safety in this sphere. The danger is also caused by the fact that certain products are exported from Georgia at a cheap price though Georgia would gain greater profit from their processing and realisation in its territory. These are f.e. ferrous metal wastes. The country’s safety is also endangered by the fact that leading role in the structure of imports is held by strategically important production that is vital for the functioning of country (energetic, foodstuffs). Increasing demand for this production reveals that problem of country’s economic safety becomes more and more acute.
Import growth has always concealed some danger, moreover, for Georgia where borders are not protected well. This causes illegal penetration of low-quality and harmful production into Georgia territory, which puts problem of imported commodity certification on the agenda. Because of the lack of costly customs laboratories and large-scale illegal trade, a great number of falsified production penetrate into our market, which, certainly, makes a negative effect on the preservation and strengthening of economic safety.
From the viewpoint of economic safety, the structure of foreign investments should be analysed and studied more deeply. The matter is that very often foreign investments of material and commodity form are low-quality, ecologically dirty and amortised. Thus, customs policy should make for flexible and preferential system for the attraction of foreign investments.
Another direction of customs policy is improvement of customs control. The latter is closely connected with economic safety of country, as currency safety is a significant component of economic safety. According to the present customs code and other laws of Georgia, import of hand-to-hand currency is not limited in Georgia. This causes circulation of money outside banks, increase of dollarisation ratio in the country and eventually danger to economic safety. In order to improve this situation, it is important to make amendments to relevant laws so that currency operations, forms and methods would contribute to economic safety.
One of the principal basics of customs policy was accession of Georgia to WTO. However, accession was performed very quickly without the strengthening of economic potential and structural “reorganisation” in the country. However, proceeding from the above-mentioned, minimisation of expected negative consequences and strengthening of its positive effect should be promoted by the optimisation of customs policy.
? WTO should increase transition preferential period with regards to Georgia;
? Significant decrease of import products combination is not permitted;
? With the purpose of limiting unfavourable import in the country, it is necessary to use technical standards, antidumping and compensation dues;
? It is important to pass from unified tariff rates to differential system;
? It is necessary to make amendments to the legislative framework in order to limit import of morally and physically amortised equipment and technology as well as to prohibit realisation of low-quality and ecologically harmful production at dumping prices.
Protection and strengthening of economic safety of Georgia is a complex process that requires much time. It is necessary to develop appropriate conventions, programmes and prognosis and to realise them in stages. The mentioned documents should define customs policy as one of the most important indicators of economic safety.