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.
Livestock transhumance will no longer disturb Tsintskaro Village population in Tetritskaro Municipality. The local Municipal DRR Working Group initiated a new infrastructure project which will solve the problems related to the seasonal transhumance in this particular village.
From the ISET Economist news (http://www.iset.ge/news/?p=3311)
By Eric Livny
(Summary of a debate hosted by ISET as part of SDC-supported Inclusive Growth Dialog series.)
There are many reasons to love the concept of farmer cooperation (and cooperation more generally). To begin with, there is a great aesthetic value in seeing people coming together, sharing resources and helping each other. After all, instinctive collectivism was the basic condition of human existence from time immemorial. But, there are also powerful economic reasons for farmer cooperation.
The Road – a beautifully shot documentary capturing the reality and dichotomies of the people who use the ancient transhumance route; the lifeline of livestock in Georgia
A Memorandum of Understanding has been signed between the Ministry of Regional Development and Infrastructure (MRDI) and the Swiss Development Cooperation project the Mercy Corps Georgia implemented, Alliances Lesser Caucasus Programme (ALCP) in Kvemo Kartli, The aim of the memorandum is to support the ongoing outreach at local government level of practical implementation of the 2010 Georgian Gender Equality Law which will greatly aid in the general development of rural Georgian municipalities.
From the ISET Economist news (http://www.iset.ge/news/?p=3056)
By Tim Stewart
As Georgia embarks on an ambitious program to develop farmer organizations, it is worth considering both the positive and negative lessons from the experience of similar initiatives, both in Georgia and elsewhere in the developing/transition context. The piece by Tim Stewart, originally published on www.springfieldcentre.com, identifies some of the main reasons for the failure of start-up farmer organizations. The challenge for Georgia is to learn from these mistakes in planning and implementation, and ensure improved coordination among the many cooks involved (the newly created Agency for the Development of Agricultural Cooperatives, the Ministry of Agriculture, international donors, NGOs, and farmer associations).
Publishing the following series of stories is an attempt to highlight the ethnic diversity of Kvemo Kartli. We are going to tell you the stories of five women living in various parts of Kvemo Kartli; these women have different lifestyles and represent different cultures, but they still have a lot in common. This is their history in stories. Stories of work, endurance, taboos, restriction, dignity, honesty and womanhood. You will not see figures and percentages here; this is not a quantitative survey. These are stories that allow us to build on those figures and percentages and enable us to develop profiles of Ajarian, Svan, Azeri, Armenian, Greek and local Georgian women’s lives, to understand their complexities and areas of commonality and to reflect this in our work as a programme.
Kvemo Kartli is one of the most ethnically diverse regions of Georgia. Ethnic diversity has developed over centuries and many contrasts and cultural differences have accumulated in this region; the study and management of these contrasts and differences and the development of models for peaceful cohabitation is not an easy task. Cultural, ethnic and language differences can be seen in every detail of life. Differences are present in rural and urban areas, in highlands and lowlands, in methods of doing business. Our objective in recording these stories was to attempt to create a profile of these women, to listen to them and build the picture of their lives, to understand the effects that culture and ethnic origin have on their lives, to see what opportunities they have and how they use or fail to use these opportunities, if they have them at all.
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