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Georgia and EU conclude free trade agreement negotiations

July 22, 2013, 21:50 UTC+3

The EU is Georgia's biggest trading partner

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TBILISI, July 22 (Itar-Tass) - Georgia and the European Union have successfully concluded negotiations for a Deep and Comprehensive Free Trade Area (DCFTA), as part of the Association Agreement between them.

The Association Agreement, together with the DCFTA, will provide for the close political association and economic integration of Georgia with the EU.

“We have concluded the last stage of the talks today and agreed all of the remaining questions. Starting today the document will be reviewed by experts and prepared for signing,” Georgian Minister of Economics and Sustainable Development Georgy Kvirikashvili said on my, July 22.

The agreement is to be initialed at the upcoming Eastern Partnership Summit in Vilnius in November, after which “it will take one to a year and a half for it to enter into force,” the minister said.

The agreement not only liberalises tariffs but also removes technical barriers for the export of Georgian products and services to the EU.

“The free trade area agreement with EU countries is very important for Georgia as it opens the EU market with more than 1.5 billion consumers for Georgian products and services,” Kvirikashvili said.

“Georgia, in turn, has to create an attractive business environment and remove all barriers for entrepreneurship. We are working on that now,” the minister said.

The comprehensive FTA, negotiated in just 17 months and seven rounds, will see Georgia gaining better access to the EU market for its goods and services. The FTA also sets a path for further reforms in trade-related policies, such as hygiene standards for agricultural products and the approximation of regulations for industrial products. This will boost access for Georgian goods to the EU market whilst also increasing consumer safety in Georgia. The Agreement is expected to boost the inflow of European direct investment to Georgia thanks to an open, stable and predictable policy-making environment.

An independent study - a Trade Sustainability Impact Assessment ­- carried out for the EU forecasts that the DCFTA will increase Georgia’s exports to the EU by 12 percent and imports from the EU by 7.5 percent. Full implementation of trade-related reforms could increase Georgia’s long-term GDP by +4.3 percent or 292 million euros.

The DCFTA will be included in the Association Agreement and signed as soon as internal EU and Georgia procedures are completed.

In the framework of Eastern Partnership, the EU started negotiations on an Association Agreement with Georgia in July 2010. A deep and comprehensive free trade area will be included in this Agreement, aiming to strengthen the export and investment performance of Georgia and facilitate its progressive integration with the EU economy of 500 million consumers. The EU is Georgia’s biggest trading partner, accounting for 26.6 percent of its total trade (2012).

The negotiations on the DCFTA, which started in February 2012, were launched in Tbilisi by EU Trade Commissioner Karel De Gucht and Georgian Prime Minister Gilauri.

The DCFTA aims to be an ambitious upgrade of current trade relations between the two partners. Currently, these rely on the EU granting Georgia a unilateral preferential access to its market for goods through the Generalised System of Preferences with additional benefits for good governance (GSP+). However, the GSP cannot remove systemic non-tariff barriers to trade with the EU, which are linked, for example, to insufficient animal welfare standards or insufficient competitiveness. Georgia’s trade with the EU is heavily reliant on base metals and other primary commodities. The DCFTA is intended to remedy this lack of diversification through reforms and the expected inflow of EU FDI.

In order to start DCFTA negotiations, Georgia carried out substantial reforms in key trade- and investment-related regulatory areas, notably in the fields of technical regulations, hygiene standards for agricultural products (sanitary and phytosanitary measures), protection of intellectual property rights and competition rules. The EU helped Georgia in this process, including by providing technical assistance under the European Neighbourhood Partnership Instrument and the Comprehensive Institution Building programme, as well as through support from EU Member States.

The Deep and Comprehensive Free Trade Area (DCFTA) is part of the Association Agreement and covers trade in goods. This includes energy, services and traditional flanking measures such as rules of origin, customs and trade facilitation, together with anti-fraud provisions as well as trade defence instruments. These rules aim to ensure that trade is liberalised to the fullest extent possible but provide for necessary precautions to ensure only eligible goods qualify for preferential treatment. A bilateral dispute settlement procedure is envisaged to solve issues in an expeditious manner.

The DCFTA also tackles the ‘comprehensive’ elements of an FTA, designed for Eastern Partnership countries. These include regulatory disciplines that aim to ensure a stable and growth-oriented policy framework that will boost competitiveness. It includes competition and transparency provisions, intellectual property rights, adaptation of domestic law with the EU acquis in the selected services areas and in public procurement.

Furthermore, Georgia strives to bring its legislation closer to that of the EU to modernise its export capacity in agricultural and industrial goods, as well as enhance consumer safety. Of notable concern are sanitary and phytosanitary standards. Georgia aims to create a food safety environment similar to the EU’s, allowing it to export products of animal origin to the EU. Moreover, Georgia will adapt several laws concerning industrial goods, focusing on domestic safety and consumer protection aspects.

The EU is Georgia's biggest trading partner. Bilateral trade in goods amounted to 2.63 billion euros with Georgia in 2012.

Current relations are governed by the Partnership and Cooperation Agreement, in force since July 1999. The future trade area within the Association Agreement will therefore extend significantly beyond the current scope of cooperation.

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