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What happens after Georgia Signs the Association Agreement with Europe?

What is the significance of the Association Agreement and what  benefits will it bring  to Georgia?

The prospect of concluding a Deep and Comprehensive Free Trade Agreement (DCFTA) between Georgia and the EU gave fresh impetus to the process of enacting reforms in trade-related spheres. The DCFTA will be one of the integral parts of the future Association Agreement. A goal of the Eastern Partnership is to conclude a DCFTA with each of the partner countries and lay downobligations in relation to it .

Free trade means trade without tariffs and quotas. However there are also so-called non-tariffbarriers, and liftingthese barriers creates common rules of the game for trade relations between partners.  Correspondingly, until the DCFTA agreements, which will do this, are finalized, the Association Agreements will not be concluded.

The EU now requires the Government of Georgia to adopt further legislation and regulations which will bring the quality of goods produced in Georgia closer to European standards. The DCFTA requires that each partner country introduces 80% of the EUnorms (the previous FTA required only 40-60%).

Of the 10 standard trade policy areas (tariff barriers, state procurement, customs administration, investments and services, stable development (environment, social issues), certificate of origin, TBTs, SPS measures, competition policy and intellectual property rights), the last four were singled out as areas where Georgia needed to make progress. Georgia has indeed now taken relevant measures based on these recommendations. These are:

Technical Barriers to Trade (TBTS) – the Georgian government has developed a comprehensive strategy for addressing these which meets EU requirements. An Action Plan has also been developed on Georgia’s own initiative.

Sanitary and Phytosanitary (SPS) Measures –the government has developed a comprehensive strategy and enacted suspended articles of the Law on Food Safety and Quality. From July 1, 2010 it began to apply SPS tests to exported products.

Competition Policy – A new law on this will be developed according to the recommendations of the EU, and work on this is already underway.

Intellectual Property Rights (IPR) – A study has been carried out (by UNDP) concerning this and the Government of Georgia has adopted the new Law on Design which complies with EU Regulations.

According to Deputy Economy Minister Mikheil Janelidze, the private sector will receive assistance from the state to adapt to legislative and institutional changes that will take place in stages.

“The Association Agreement with the EU provides for the liberalization of trade and services. It gives Georgia a phased access to the European market in three of the four components – freedom of goods, services, and capital. And the fourth – freedom of movement , depends on the liberalization of the visa regime, “- the official notes.

Economic case studies have revealed that in the short term implementation of the DCFTA-related requirements will require expenditure by boththe state administration and the private sector, but in the long run the Agreement will bring significant benefit to Georgia. According to experts, after signing the DCFTA Georgia’s GDP will grow by 6.5% and foreign direct  investment will reach USD 11.36 billion by 2020, up from the present USD 2.014.8 billion. According to the joint study conducted by Ecorys (Holland) and Case (Poland) in 2012, a12% increase in exports from Georgia to EU and 7.5% increase in import may be expected after the DCFTA is signed.

What happens if Georgia fails to fulfill its obligations? 

Professor Emzar Jgerenaia explains to “Commersant” that the Association Agreement with the European Union imposes certain duties on the country and  in the case of non-compliance, Europe will suspend financial aid.

He says it will  be the suspension of some programs by Europe and so on. The PM and his team are primarily responsible for the fulfillment of obligations under the Association Agreement.

As for liabilities, transformation of phytosanitary structures , improvement of standardization and technical regulations, quota protection in a certain direction, the existence of product packaging, certain  regulations protection in food safety and so on.

As Jgeranaia says, a transitional process will continue for several years and will include harmonization of  legislation,phytosanitary requirements for food products, business, product creation and standardization.

In his words, the fulfillment of obligations is not dependent on the EU membership. It needs a political decision.