From the ISET Economist news (http://www.iset.ge/news/?s=survival&lang=en)
By Nino Mosiashvili
The conclusion of the Association Agreement (AA) with the European Union was euphorically acclaimed by Georgian media as well as political and economic decision makers. Part of the AA is the Deep and Comprehensive Free Trade Agreement (DCFTA). The DCFTA is intended to liberalize trade between Georgia and the EU by lowering tariffs and reducing non-tariff barriers. For agriculture, the most relevant changes relate to food safety (bacterial contaminants, pesticides, inspection, and labeling) as well as animal and plant health (phytosanitation). For the manufacturing sector, the removal of so-called “technical barriers to trade” is similarly important, with the goal being to prevent the usage of technical standards as a means to protect domestic markets from foreign competition. “If regulations are set arbitrarily, they could be used as an excuse for protectionism”, states the World Trade Organization on its homepage.
It is clear that all these agreements require unilateral adjustment of Georgian regulations to European standards. Georgia is economically too small to impose its preferences on Europe. This is stated quite frankly in the AA, when it says that it aims to “support the efforts of Georgia to develop its economic potential via international cooperation, also through the approximation of its legislation to that of the European Union”.
Whether these unilateral adjustments are beneficial for Georgia is not generally clear. European regulations do not necessarily reflect “best international practice”. In democracies, laws and regulations come about through the lobbying efforts of political interest groups much more than through rational planning. In the future, internal political decisions made in the European Union will be relevant for Georgia much more than they were previously, and it will be more difficult to pursue policies tailored to the specific situation of Georgia.
Yet Georgia hopes that the convergence to European standards will make it easier for Georgian firms to access the European market. Most critical in this respect is Georgian agriculture, as it is the sector employing the bulk of the Georgian labor force, while it is at the same time dramatically lagging behind European productivity levels. In 2013, Georgia’s agriculture accounted for only 9.3% of the Georgian gross domestic product but employed about half of the labor force. Thus, one of the benchmarks for evaluating the usefulness of the DCFTA will be its impact on Georgian agriculture.
THROWN INTO THE WATER – WILL IT SWIM?
The impacts of the DCFTA for Georgia were assessed in a report with the lengthy title Trade Sustainability Impact Assessment in support of negotiations of a DCFTA between the EU and Georgia and the Republic of Moldova. It was written by a consortium consisting of the Dutch consulting company Ecorys and the The Center for Social and Economic Research (CASE), a Warsaw-based think tank. On a broad level, the report estimates that due to trade liberalization with the EU the national income of Georgia will increase by 291.9 million euro in the long run, corresponding to a GDP growth of 4.3%. This goes along with an increase in Georgian exports and imports by 12% and 7.5%, respectively, leading to an improvement of the Georgian trade balance. But what about agriculture?
According to the study, the DCFTA will have different effects on different agricultural products, and the overall picture is very ambivalent. The output of some product categories will increase, namely vegetable oils and fats (+6.7%), vegetables, fruits, nuts, and oilseeds(+3.4%), and animal products (+3.1%), while for many other products, the output is expected to shrink, e.g. livestock and meat products (-14.8%), other processed foods (-8.8%),beverages and tobacco (-4.0%), sugar (-2.4%), and other crops (-2.0%). The report attributes the increases to reductions of EU tariffs on Georgian exports and the decreases to the reduction of Georgian tariffs on goods imported from the EU. These numbers, if they say something about the true developments, suggest that parts of Georgia’s agricultural sector will get under severe pressure due to increased competition with European producers.
ECONOMIC DARWINISM
What are the implications for Georgian agricultural policy? Some of the producers will benefit from the integration into the European market, as they can stand the pressure and even expand in this highly competitive environment. Other producers are likely to run into essentially insoluble problems. One particularly beneficial category in this respect is vegetables, fruits, nuts, and oilseeds, because some of the products in that category (e.g. hazelnuts) are labor intensive and serve niche markets. This implies that more people can be employed in the production of these goods, making the transformation to a modern, efficient agriculture less painful, and it means that competition is lower and margins are higher. If policy recognizes these advantages, producers in that category might become “national champions”.
Currently, vegetables, fruits and nuts are in Georgia primarily produced by small and medium sized farmers. Due to lack of greenhouses the production is seasonal. Yet farms can be consolidated and technical equipment can be upgraded. In the end, it will be relevant that Georgia has fundamental advantages in the production of goods in that category, namely clean soils, little usage of chemicals, a relatively large amount of available land for cultivation, and a long tradition in vegetable and fruit production.
Moreover, about half of Georgia’s current export of vegetables, fruits, and nuts already goes to the EU, which means that Georgian producers already have “a foot in the door”. Currently, the exports almost entirely consist of hazelnuts (there are no tariffs, as hazelnuts are already covered by the GSP+ regime, and hazelnuts easily satisfy sanitary and phyto-sanitary standards). Thus, while the DCFTA may not change Georgia’s hazelnuts export to the EU significantly, there may be other niche products in this category, like berries and other kinds of nuts, which may benefit from the DCFTA, for example through adjustments of Georgian regulations regarding product packaging.
It will be important that policy will subscribe to what one might call “Economic Darwinism” – do not try to keep those producers alive that are incapable of surviving, but instead create good circumstances for those that have a future in Georgia.
The ALCP facilitated the Georgian Beekeepers Union (GBU) in development of the honey promotion video, depicting the story of Georgia as a land of the oldest honey discovered and unique biodiversity to support awareness raising and promote export potential of Georgian honey and Jara. The video was shared with different stakeholders and social networks.
The Ministry of Foreign Affairs shared it with their internal networks of embassies in Georgia and foreign countries and it was uploaded in a Georgian production section. The video is on Facebook of the Embassy of Switzerland in Georgia. The Georgian National Tourism Agency; The Department of Tourism and Resorts of Ajara; the Ministry of Environmental Protection and Agriculture; and The Agency of Protected Areas are sharing it with their network.
It has reached the highest views on the popular Facebook platforms Marketer.ge and Georgian Wine. To date the video has 185,000 views and 6,000 shares. The majority of the viewers are emphasizing on interesting story mentioned in the video they did not know before and are sharing it for further promotion.
The products with 'Georgian Milk Mark' are now available in the supermarkets of Georgia.
The 'Georgian Milk Mark' is officially registered and serves to distinguish dairy products made from natural milk.
The documentary Jara is now available for sale on amazon.
Jara is a fairy tale journey through one year in the mountains of Ajara. A story of the shifting boundary between human habitat and wild nature, portrays everyday lives in the changing seasons. The wooden jara in the forest and the bees living within it are the fixed point in the story.
The film was named as the best feature film at the Wolves Independent International Film Festival2018 in Lithuania, and won the Golden Green Award 2018 at the Deauville Green Awards International Film Festival in France for the best production in the category of Sustainable Agriculture; the cameramen of the movie received an award from International Festival of TV and Movie Cameramen the Golden Eye 2018 for Best TV Camera Work.
The main backer of Jara is the Swiss Agency for Development and Cooperation (SDC) through the Mercy Corps Georgia implemented Alliances Lesser Caucasus Programme.
Jara honey, collected from the local beekeepers in Ajara, has been officially branded and packaged for the first time. It is now ready to enter the international markets.
On 8th of November, 2018, the Government of Georgia adopted regulation #525, which forbids registration of the vet drugs containing prohibited antibiotics, like, chloramphenicol, metronidazole, dimetridazole, ronidazole, nitrofuran (including furazolidone) which are widely used in beekeeping. The regulation entered into force on 1st of January, 2019 and was nationally covered by the media outlets. The regulation was proposed by the Veterinary Department of the NFA, after this constraint was raised at the first Honey Sector Advisory Committee on 22nd of June, 2018, which brought together honey stakeholders to discuss tackling the high levels of antibiotic residues in honey which are limiting the development of the honey sector.
An article about Veterinary Surveillance Points (VSP) has been published in a quarterly bulletin of OIE – the World Organization for Animal Health. The article covers topics on the tradition of livestock seasonal movement in Georgia, the necessity of establishing VSPs and the importance of the points in animal health control throughout the country. The author of the publication is the Head of the Veterinary Department of the National Food Agency and the OIE Delegate of Georgia - Lasha Avaliani.
Please follow the link: Oiebulletin/veterinary-surveillance-points
