EU And Georgia Conclude Free Trade Talks

The European Union and Georgia successfully concluded negotiations for a Deep and Comprehensive Free Trade Area (DCFTA) on July 22, 2013, as part of the Association Agreement between them. The Association Agreement, together with the DCFTA, will provide for the close political association and economic integration of Georgia with the EU.

The comprehensive FTA, negotiated in just 17 months and seven rounds, will see Georgia gaining better access to the EU market for its goods and services. The FTA also sets a path for further reforms in trade-related policies, such as hygiene standards for agricultural products and the approximation of regulations for industrial products. This will boost access for Georgian goods to the EU market whilst also increasing consumer safety in Georgia. The Agreement is expected to boost the inflow of European direct investment to Georgia thanks to an open, stable and predictable policy-making environment.

An independent study, a Trade Sustainability Impact Assessment carried out for the EU, forecasts that the DCFTA will increase Georgia’s exports to the EU by 12 percent and imports from the EU by 7.5 percent. Full implementation of trade-related reforms could increase Georgia’s long-term GDP by 4.3 percent or EUR292m.

The DCFTA aims to be an ambitious upgrade of current trade relations between the two partners. Currently, these rely on the EU granting Georgia a unilateral preferential access to its market for goods through the Generalized System of Preferences with additional benefits for good governance (GSP+). However, the GSP cannot remove systemic non-tariff barriers to trade with the EU, which are linked, for example, to insufficient animal welfare standards or insufficient competitiveness. Georgia’s trade with the EU is heavily reliant on base metals and other primary commodities. The DCFTA is intended to remedy this lack of diversification through reforms and the expected inflow of EU FDI.

The EU is Georgia's biggest trading partner. Bilateral trade in goods amounted to EUR2.63bn with Georgia in 2012.

Current relations are governed by the Partnership and Cooperation Agreement, in force since July 1999. The future trade area within the Association Agreement will therefore extend significantly beyond the current scope of cooperation.

July 24, 2013

Source: Tax News