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Benefits From Free Trade Regime with EU are Miserable

Georgia’s exports to the EU market have grown by only 1% after the country signed the Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU. The Authorities expected the agreement to boost Georgia’s exports and investments inflows, but the results are pitiful, the Rezonansi newspaper reads.

According to GeoStat, the National Statistics Office of Georgia, in January to August 2015 Georgia’s foreign trade turnover with EU countries made up 1.982 billion USD, up 2% year on year, including the exports constituted 413 million USD, up 1% and the imports marked 1.569 billion USD, up 2% year on year. The ratio of EU countries in Georgia’s total foreign trade turnover made up 31%, including the EU ratio in Georgia’s total exports increased by 7% to 28%, but this growth was driven by contraction in Georgia’s exports to the CIS countries, particularly, to the Russian Federation and Ukraine.

More than one year has passed after the EU admitted the Georgian exports to its market. On September 1, 2014 a main part of the Georgia-EU Associated Membership Agreement was enacted, including the Deep and Comprehensive Free Trade (DCFTA) component. This signifies Georgia additionally acquired a market of 28 countries with over 500 million residents. Georgian products satisfying food safety and product security standards (except for Garlic that is limited by tariff quotas) are admitted to the EU Market without customs duties. We should also remember that the DCFTA agreement implies liberalization of trade in goods and services and enables Georgia to freely use three components of the EU internal market’s four opportunities – goods, services and capital.

“After the enactment of the agreement Georgia will become more attractive country for investors and investment inflows to the country will increase, new technologies will be introduced, competitive domestic production will be stimulated and new job places will be created” the Georgian government officials were saying and asserting that association and free trade agreements would increase Georgia’s exports by 12% and GDP would also grow by 4%.

At this stage, only Georgian nuts, greenery and bay leaves have penetrated the EU market. Alcoholic drinks and mineral waters are exported in small volume. For the last 13 months, the DCFTA benefits are confined by only these indicators. Nevertheless, statistician Soso Archvadze positively appraises the trade relations with the EU and asserts the Georgia’s exports would be higher without the current global challenges.

“Georgia has manifestly improved indicators. Naturally, we want the exports to increase by 21%, not by 1%, but everything is comparative. Strengthened USD has affected the EU market too. At the same time, the EU lost many orders after the introduction of sanctions against Russia. EU’s direct losses exceed 100 billion EUR. A joint demand has declined. In this situation a 1% growth is a positive indicator”, Archvadze said and added open doors do not suffice to penetrate the EU market and Georgian enterprises have to activate their efforts.

The Rezonansi