Georgia wants free trade agreement with the EU

By Andrew Beatty

Date: 23/03/06

Georgia wants the EU to take the first steps to create a free trade area, as the country continues its drive for deeper ties with the EU.

Senior Georgian officials last week pressed the EU to work towards a free trade agreement, which they hope will boost economic growth and develop closer ties between Brussels and Tbilisi.

Speaking after the second round of negotiations on an EU-Georgia action plan, Deputy Foreign Minister Valeri Chechelashvili acknowledged a free trade area would not be formed immediately, but he insisted it was the right policy to pursue.

Chechelashvili said he had pressed his EU counterparts to include a reference to the free trade area in the action plan, which at the earliest will be completed at a third round of talks in May.

But European Commission officials were sceptical and said many of the benefits Georgia would enjoy under a free trade deal were already covered by preferential trade status with the EU.

Officials also said that without an improvement in food and other safety standards, which act as technical barriers to trade, Georgian products would still not reach their export potential.

The Commission is also concerned that such a move would set a precedent for other countries which are part of its neighbourhood policy, particularly Georgia's neighbours Azerbaijan and Armenia which are also negotiating action plans.

Armenia has already raised the possibility of developing a free trade agreement despite being outside the EU's 'generalised system of preferences'.

EU officials said Armenia would first have to sign up to International Labour Organisation conventions in order to join the system.

Georgia's government has said it will unilaterally lift tariff barriers for all countries in 2008.

Commission officials are counselling Tbilisi against such a move, saying it could have a severe impact on Georgia's economy without reciprocal moves by other countries.

But Chechelashvili cites Estonia's slashing of tariff barriers in the early 1990s as a "tremendous success" which Georgia can emulate.

"It was a matter for long deliberations in the Georgian government and we are now very committed to this policy," he explained, playing down the possible impact on Georgian producers.

"I don't think, for example, that Stella Artois will compete with Georgian beer makers in the Georgian market, the main competition is coming from the Russian beer producers and Ukrainian producers. I think our economy from this point of view will not suffer," said Chechelashvili, adding that "one clear advantage would be that trade will be legalised, as there will be no incentive for smugglers because there will be no tariff barriers".

"What we are now asking the EU is if, how and when the European Commission is ready to reciprocate this regime with Georgia," he said.

One area earmarked by the Georgian government for potential growth is wine exports, worth around EUR 68 million in 2005, with 60-65% going to Russia and Ukraine.

According to Georgian statistics only 3% of wine exports in 2005 went to the EU, less than 0.01% of total wine consumed in the Union.

Article reports that at the time of the second round of negotiations on an EU-Georgia Action Plan the Government of Georgia expressed the wish to work towards a free trade agreement with the European Union.

• Primary Source

European Commission: European Neighbourhood Policy: Georgia http://ec.europa.eu/comm/world/enp/partners/enp_georgia_en.htm

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