After a Soviet-dominated 20th Century, Georgia is trying hard to make the 21st a European one. By signing the Association Agreement in 2014, the South Caucasus country has significantly deepened its integration into the EU. What are the benefits and challenges for Georgia? And how can potential risks be mitigated?
An Interview with Kakha Gogolashvili and Sonja Schiffers
The Association Agreement with the European Union entered into force in July 2016, and aims to “deepen political and economic relations between Georgia and the EU, and to gradually integrate Georgia into the EU Internal Market – the largest single market in the world.” Although 77 percent of Georgians are in favor of EU membership, the 752 pages long complex document does not offer a membership perspective. It does, however, offer a wide range of opportunities for cooperation with the EU and supports domestic reforms in Georgia.
Polis member Sonja Schiffers spoke to Kakha Gogolashvili, Director of the EU Studies Center at the Georgian Foundation for Strategic and International Studies, about the chances and challenges of European association.
Kakha, you have been a fervent supporter of Georgia’s EU association process since the early 1990s. Why?
Georgia pursues two main goals in its efforts towards European integration. The first is to acquire long-term, sustainable security. The second is economic prosperity, welfare and the well-being of the population. Since 1992, the EU has always been close to Georgia as a friend and as a partner, contributing to the development of Georgia’s independence and statehood, humanitarian aid, technical, economic and political support. Becoming a member of the EU means a little bit more. Georgia, given its insecure regional political environment, would obtain much higher national security if admitted to the club. That’s the first aspect why EU membership is very important for Georgia. The second aspect is the sustainability of Georgia’s transformation and building a European, democratic state with stable institutions, legislation, and a country able to provide all necessary services to its citizens. A country that has a membership perspective is tightly connected to the EU and strongly monitored, and it is directed towards a democratic, effective and prosperous statehood. This is the second biggest reason for us to move towards the EU.
What is the state of implementation of the Association Agreement (AA) and the Deep and Comprehensive Free Trade Area (DCFTA)? What are the major challenges?
Basically, the implementation of the AA goes as planned. Setting up a new regime of cooperation between Georgia and the EU in trade, foreign and security policy, sectoral cooperation and so on. And it lays down necessary domestic reforms in Georgia. There are several reform areas where there are deadlines and they are easier to monitor. Georgia adopts legislations according to these deadlines, which goes without delay. But the implementation of legislations and its supervision is not always satisfactory. That could be said about the energy sector, about food safety or phytosanitary standards. According to the agenda, judicial reforms did go well. But people are still not satisfied with it. While bribery and corruption are practically eliminated, the independence of judges is under question. Transparency in law enforcement is problematic as well. Decentralisation and local democratic participation are not going well either. Thus, more reforms are necessary.
One of the major aspects of the DCFTA was the elimination of customs duties. This was done immediately in 2014. There are some exceptions but they do not significantly damage Georgia’s abilities to trade on the EU market. Another important aspect is regulating the access of foodstuffs to the Georgian market and the other way around. This is a very complicated field of activity. In the field of sanitary and phytosanitary standards Georgia was given a list of around 100 EU directives to be transposed into Georgian law. An undertaking that takes 12 years in total. With regards to animal origin products there are even bigger problems. The EU has very strict regulations here. It is difficult for Georgian products to obtain the right to be exported to the EU. Because you need a lot of experts to confirm the company being in line with EU directives, which requires quite a big amount of money. For the moment, only fish from the Black Sea, sheep wool and bee honey are allowed into the EU. Georgian milk is not admitted yet. We have to establish real control over the industry first. And then the EU will recognise that we produce safe milk and they will allow imports from Georgia. Besides, we have to regulate our market not only for products meant for export but for all products on our market, as the EU wants products without proper safety standards restricted in Georgia. The EU is a strongly consumer-oriented economy and has an interest in opening up a market that is equally consumer-oriented. Otherwise there won’t be fair competition for EU goods.
We also have to work on the competitiveness of our own goods, if we want the DCFTA to be as effective as possible. We can say that theoretically the EU market opened after the DCFTA was applied. Still, so many things have to be done for it to open de facto. Georgian exports to the EU increased, but there is no wide diversification in terms of goods.
Do you see any risks for the Georgian economy due to the DCFTA? Are there certain fears among the population?
The Georgian people fear that they will not be able to sell their own products and that EU products will dominate the market. They fear that they will not be able to produce according to European standards. That traditional goods like cheese will no longer be allowed to be sold on the Georgian market. That it will become very expensive to produce a Khachapuri that corresponds to European standards. They fear bankruptcy of Georgian producers, small retailers and a concentration around European businesses. But the advantage of the DCFTA is that Georgia will become a safer and healthier country. The environment becomes cleaner. The standard of living will become higher. Progress doesn’t happen without cost. But fortunately, people won’t die anymore because of low production standards. So the government’s task is to ensure a smooth transition towards a European type of economy.
How does the Government try to mitigate risks, so that everybody benefits from EU association?
There are several governmental programs that support small and medium-sized enterprise development. They are making efforts to develop, for instance, farming cooperatives. The European Investment Bank and the European Bank for Reconstruction and Development have programs and credit lines in order to support companies that want to switch to European standards. There is money ready for it. But Georgian companies have to work on themselves too. The government develops policy papers that analyse the gap between EU and Georgian legislations, and the presumable impact of legal approximation to EU laws. But our approach to the association process is rather ad hoc. They do one-year implementation plans, even though the process should be based on a long-term program. They lack even medium-term programs for five or 10 years.
Which recommendations do you have for the EU to make the Georgia-EU association process successful?
I would suggest to share more experiences. Surely, there is the twinning program to support public administration. There are business-to-business forums, and the EBRD finances business-to-business projects. However, opportunities for businesses to cooperate and increase their knowledge are limited. The transmission of technologies, know-how, business partnerships and joint ventures, and investments should be better promoted. The close monitoring of reforms is as important. But we understand that the EU’s resources to help are limited too. It’s not like that we demand something and they have to do it.
Kakha, you also initiated the project „DCFTA Awareness Raising Trainings for Journalists and Civil Society Organisations“. What exactly do you do?
We have been doing this for years. The trainings are not only attended by NGO representatives and journalists, but also by businessmen and local government officials. We try to transfer as much knowledge about concrete chapters of the DCFTA as possible. We also involve experts on food safety, energy, transport, competition, government procurement, intellectual property rights, sustainable development, etc. Our main goal is to empower local NGOs to participate in monitoring, so that they can serve as a local source of information.
The Polis Blog serves as a platform at the disposal of Polis180’s members. Published comments express solely the authors’ opinions and shall not be confounded with the opinions of the editors or of Polis180. Image: Sonja Schiffers.