BUSINESS
Tottering toward EU market
12 May, 2011

Georgia’s top priority is to start negotiations over the free trade agreement with the EU as soon as possible. However, the country still lags behind the assumed obligations that are set as preconditions for the talks with the EU.
Negotiations over the free trade agreement with the EU will start in the nearest future, Giorgi Kalandadze, Head of Parliamentary Foreign Relations Committee, said on May 3, 2011 after meeting between Davit Bakradze, Chairman of Georgian Parliament, and Arnaud Danjean, MP

of EU parliament.
However, the prospect of signing the Deep and Comprehensive Free Trade Agreement (DCFTA) between Georgia and the EU seems not as near as the government describes.  No talks are supposed to start unless Georgia  fulfills all requirements [focused on harmonization regulatory frameworks with that of the EU ] posed by the EU as preconditions for starting this talk  in four key areas including Technical Barriers to Trade (TBTs), Sanitary and Phytosanitary (SPS) Measures, Intellectual Property Rights (IPR), and Competition.
According to Georgian government, by the end of 2010 significant progress was  achieved in all areas, including the above-mentioned four key areas.
But according to the research of Georgian independent economic analysts [on Implementation of European Neighborhood Policy Action Plan (ENP AP) in Trade and Some Related Areas in 2010 supported by Eurasia Partnership Foundation  and aired early this year], Georgian government lags behind the timetables and reforms are far from perfection.
In the area of Technical Barriers to Trade, the EU’s key recommendation to Georgia was to adopt and start implementing a Governmental Programme of adoption of technical regulations. Works were made on the food safety side but no progress was made in domestic institutional system for technical regulation, standardization, and accreditation. Ultimately, the EU found progress not satisfactory. 
In the area of Sanitary and Phytosanitary Measures the EU key requirement was enforcement of suspended articles of the Law on Food Safety and Quality, adopted in 2005.  The questioned paragraphs were supposed to become active starting 2010, however only articles regulating inspection and traceability of export-oriented companies were put in force. The other suspended articles became effective from January 1st, 2011 but in preferential regime-2011 is a grace year to enable enterprises to get prepared for the comprehensive enactment scheduled in 2012.
In the field of Intellectual Property Rights achievements are much ahead of other key demands, Irakli Gvaladze, Head of Geopatent, Georgian intellectual property protection body, told GJ. But the fight against piracy is still Achilles heel. Moreover, the EC is especially concerned about the poor enforcement of legislation in the field of intellectual property rights, which is expressed by the low number of corresponding court cases.
In the field of Competition Policy government had to restore anti-trust structure through giving independence to the Agency for Free Trade and Competition (AFTC) together with its full investigative powers, both in the area of antitrust and state aid. Moreover, adoption and rapid enforcement of a general competition law based on antitrust regulation is crucial. Government implemented only formal sides of the recommendation: the AFTC was transformed into an independent public law entity but its head is appointed by Prime Minister. According to Merab Kakulia, an economic analyst contributing to the Report, this legislative change does not enhance the administrative and financial independence of the Agency.
One of the malfunctioning issues is investment climate. A liberal trade regime is an important attribute of Georgia’s investment climate. Nevertheless, the negotiations on DCFTA failed to start in 2010 due to a rather critical approach of the EC to the progress achieved by Georgia to this end.
A significant feature of any investment climate is the respect and protection of property rights and achieving significant improvement in this area was one of the key EC demands.  In 2010 the situation did not change much in this respect – both local and foreign citizens have noted that the court system is not reliable when it comes to property rights protection. 
Georgia tried to restore trust by consolidating the tax and customs legislation and at first blush, made key provisions easier to comprehend. However the tax code is still undergoing changes and seems discriminating small business.

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