EU free trade prospects challenge Georgia
10 April, 2014
EU free trade prospects challenge Georgia
Georgia has started preparing for the upcoming unfettered trade with the EU scheduled to be endorsed this coming June. The past week was full of events initiated by the government and focused on the discussion of prospects and challenges that Georgia may encounter as a result of free trade with a well-developed huge market with much higher purchase power, industry and export potential. The Georgian authorities expect a very positive effect in the long-term although it admits that difficulties will
come on the way initially.
An international conference “Economic integration with the EU-Perspective and Opportunities” followed by a business forum was held on 27-28 March to discuss challenges and necessary reforms related with the Deep and Comprehensive Trade Agreement (DCFTA) between Georgia and the EU.
As a matter of fact, since 2008 when talks on the DCFTA started, Georgia has completed some key requirements to harmonize its customs, food safety, and competition legislation with EU standards. However, it still lags behind the par regarding food safety, producing standards and consumer rights protection that may create setbacks for the Georgian export to the picky EU market. On the other hand, Georgian entrepreneurs and some economic analysts fear that the inflowing EU import may kill local production which will hardly be competitive with the EU product.
According to Giorgi Kvirikashvili, Minister of Economic and Sustainable Development of Georgia, free trade with the EU is a huge opportunity as far as investors will be enabled to produce more products in Georgia, which by nature is a small market, and export them to the EU.
Giorgi Abashishvili, an economic analyst, shares his optimism. He points out the research of Ecorys and CASE (Councils for Advancement and Support for Education), conducted in 2012, that predicts a 1.7% and 4.3% of GDP growth in Georgia in a short-term and long-term prospects respectively after DCFTA becomes operational. Also, Georgian export is forecasted to grow with 12% while the import only with 7.5%.
“Stability and high purchase power is minimum two more additional lures to this huge market embracing 500 million people that will attract investors in Georgia. Besides, DCFTA will enable Georgia to develop its human capital and enhance technological knowledge,” Abashishvili elaborated. “DCFTA is a stimulus to Georgian entrepreneurs to produce high standard products and services that will hit any market once prices are competitive. DFCTA is also a challenge for local competition development.”
Lia Eliava, a financial market analyst, expects tangible benefits only in 10-15 years after Georgia will harmonize its market rules with the EU and willy-nilly will adopt higher standards, but in the near future she predicts a downturn in local entrepreneurship because Georgian business will not be able to compete with EU peers both at the local market and oversees.
“The secret is that the EU helped its new member-states by investments and cheap finances to re-equip their industry by art-of-the-state technology to enhance their producing standards and quality, whereas the EU is not expected to do this in Georgia being just a trade partner. This means we have to find our own financial resources for that which increases producing costs. In the meantime, the EU high quality goods will flow in here at reasonable prices and how will our entrepreneurs compete with that? ”Eliava wonders. She is afraid that Georgia may duplicate the Baltic countries scenario where after EU integration local production sunk and now around 60% of Lithuania’s agriculture export for instance goes to Russia in fact. To avoid the same fate, Eliava recommends the Georgian authorities to adopt trade protection mechanisms that are allowed by the World Trade Organization.

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