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.
On March 16th, 2018 the Alliances Caucasus Programme (www.alcp.ge) funded by the Swiss Agency for Development and Cooperation SDC and implemented by Mercy Corps in Georgia, hosted eighteen Swiss Ambassadors and Mission Directors of Development Cooperation of Switzerland from Azerbaijan, Moldova, Ukraine, Tajikistan, Kyrgyzstan, Kazakhstan as well as representatives of the Federal Department of Foreign Affairs’ headquarters in Bern. The visit was part of a regional seminar hosted by the Swiss Ambassador to Georgia and Head of Mission Olivier Burki, Regional Director of the Swiss Cooperation Office in Georgia.
'This forum is the first steps where women economic empowerment starts from. The Ajara Chamber of Commerce and Industry (ACCI) is ready to support women entrepreneurs and startups. Through the Women’s Room of ACCI we will help them in preparing Business Plans, liaising new business contacts and follow up their way of achieving success in businesses’ - Tamaz Shavadze, Chairman of ACCI.
The National Women Business Forum for 300 participants including 180 women entrepreneurs from all regions of Georgia as well as public, private and civil sector organizations concerned with women’s entrepreneurship was held in Batumi on International Women’s Day, March 8, 2018.
Management of Animal Movement Route (AMR) and Bio Security Points (BSPs) were the main topics discussed at the ALCP’s 9th Advisory Committee meeting on January 31st, 2018.
The Minister of Agriculture highlighted the importance of AMR and its Bio Security Points, their importance in underpinning animal healthcare and livestock export and the need for continued efforts to ensure progress in his opening speech.
‘Despite the positive dynamics there are still challenges and the governmental, non-governmental and private sectors should consolidate to overcome them’ - stated Mr. Davitashvili.
Existing gaps in management as well as the positive impact of BSPs were highlighted at the meeting. A short film: What shepherds think about the BSP’s available at ALCP/Videos allowed shepherds views to be presented in full.
All participants debated responsibility for managing the AMR and its infrastructure. Land overlaps, lack of resting areas, watering points at the Route, issues of concern for decades - were also discussed.
‘I think inclusion of self-governments in provision of BSPs’ operation is quite possible, local residents can be hired there and I’m ready to discuss this issue with the heads of local municipalities of Kvemo Kartli” - Grigol Nemsadze - The State Representative-Governor of KK Region.
As a result of this meeting the Regional Government of Kvemo Kartli and the Ministry of Economy have agreed to work together for final resolution of contested land on the route. Existing infrastructural gaps at BSP’s will be also solved in time for spring season, stated the Head of the NFA. With regards to BSP’s management and its future ownership the issue is clearly on the table for further facilitation and discussion with all interested parties to find the best solution and develop pertinent strategy going forward.
On December 5th the National Geographic Magazine Georgia presented its latest edition which features an article on Jara honey, at the National Museum of Georgia. About hundred guests tasted Jara honey and watched a special screening of the Jara movie, which had originally inspired the Georgian National Geographic to do the Georgian bee and honey story.
‘We were thinking about doing an article on Georgian Bees and honey, but we were not certain what direction to choose. One day, I got a call from Nika Tsiklauri, who invited me to the Jara premiere and while watching this truly fairytale, – I discovered the storyline we had been looking for’. – Natia Khuluzauri, Editor in Chief of the National Geographic Magazine Georgia.
The movie Director, Nika Tsiklauri, did a photo session of the Jara hives in Ajara. The magazine story writer, Irakli Pipia, enthusiastically worked on the topic and in addition came across documentation that showed that the Caucasian Gray Bees had been exported to the USA from Georgia atthe end of the 19th century.
‘This was a discovery none of us expected. Who knew that the Caucasian Bee had travelled so far? So, both authors, Nika and Irakli, did a great job and we have this beautiful elaborated story covering practically all aspects related to the Caucasian Gray Bee and honey they make’ – says Natia.
The event opened an exhibition of photos, Jara hives and beekeeping artifacts from Ajara. The Ajarian Beekeepers Business Association gave attendees a unique opportunity to taste recently harvested Jara wild honey from its members and personally explore traditional Jara hives and beekeeping handicrafts.
Photo Source: The National Geographic Georgia
A new Bio Security Point (BSP) has been opened by the Minister of Agriculture of Georgia on in Kakheti, Telavi municipality. It is the fifth point now open on the
Animal Movement Route along with the BSP’s in Marneuli, Rustavi, Dedoplistskaro and Signagi municipalities and the third point built by the government in addition to the two points built under the ALCP as part of the activities agreed between the government and the project.
‘We are conducting complex works for supporting sheep and cattle sector development and one of the most important components of this work are identification ®istration of official Animal Movement Route and a proper management of it. We now have five BSP and this helps us to manage the movement of the livestock and their health control’ Mr. Davitashvili stated.
Georgia and the Georgian honey were successfully and widely promoted at the 45th Apimondia Congress in Istanbul, Turkey, by the Ajarian Beekeeping Business Association (ABBA). The Jara honey along with Chestnut and Acacia honey were the most popular among the honey importers from all over the world. Markets for Georgian honey seems diverse based on the high interest from countries such as France, Germany, Kuwait, Iran, Turkey and India among others. More to be found in the TV slot prepared by Ajara TV
