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.
Armenians have been living in Kvemo Kartli for centuries. According to the 2002 census 31,777 out of 497,530 Kvemo Kartli residents were Armenians. The number of Armenians is highest in Tsalka where 11,484 Armenians live, out of a total population of 20977. The advent of Armenians in Georgia was related to the movement of people during the Arab, Turk-Seljuk, Mongolian, Turkmen, Kizilbash, Ottoman Turk and other invasions. Several major settlements of Armenians took place in 1828-1829, during the Russian-Turkish war
Azerbaijanis living in Kvemo Kartli are Turkic-speaking people representing the legacy of the conquerors that came to this area at different times. in the 1926 Census they were referred to as Azerbaijanis. The Azeri population that settled in Kartli is comprised of two streams of migrants: 1. The Turkish-speaking population that was resettled between 15th-18th centuries; they went through the heaviest psychological and physical stress before they adapted to the new place. 2. Migrants who moved from one place to another to improve living conditions having adapted to the new environment. Currently the Azeri population in Georgia numbers 224,606. They mainly reside in Bolnisi, Dmanisi, Gardabani and Marneuli districts, mostly in district centers apart from in Dmanisi muniiciaplity where there are many Azeri villages. Some live in Tetritskaro and Tsalka districts.
In 1980’s the planned settlement of a large groups of eco-migrant Ajarians and Svanetians started in Tetritskaro and Tsalka municipalities. There were several streams of eco-migration up to 2003. The advent of these incomers has left its mark on Kvemo Kartli. It became richer from an ethnic, religious and language standpoint, however it also gave rise to new problems and challenges for new and old residents alike in seeking to adapt to the new cultural diversity.
The first settlement of Svans into Kvemo Kartli took place in 1987. This is when the Svans from landslide-affected Chviberi (higher Svaneti) were resettled in Dmanisi, in the houses built under a government programme. Svans started to introduce their style of life in Kvemo Kartli and establish strong communities in Kvemo Kartli.
In 2011 Alliances KK facilitated establishment of DRR Municipal Working Groups in Dmanisi, Tsalka and Tetritskaro municipalities. These groups remain to be the main point for planning and implementing of prevention measures to reduce livestock related disaster risks.
