EU-GEORGIA ASSOCIATION AGREEMENT

The Association Agreement (AA) aims to deepen political and economic relations between Georgia and the EU, and to gradually integrate Georgia into the EU Internal Market. This includes the setting up of a Deep and Comprehensive Free Trade Area (DCFTA), which is a core part of the Agreement.

The AA is a concrete way to activate the potential of EU-Georgian relations, focusing on support to core reforms, on economic recovery and growth, governance and sector cooperation.

The AA constitutes a reform agenda for Georgia, based around a comprehensive programme of Georgia’s approximation of its legislation to EU norms, around which all partners of Georgia can align themselves and focus their assistance. EU assistance to Georgia is linked with the reform agenda.

The EU-Georgia Association Agreement provides a long-term foundation for future EU-Georgia relations without excluding any possible future developments in line with the Treaty on European Union.

Key elements:

The Agreement represents a concrete way to exploit the dynamics in EU-Georgia relations, focusing on support to core reforms, on economic recovery and growth, governance and sector cooperation in areas such as, for example, energy, transport, environment protection, industrial and small and medium enterprise cooperation, social development and protection, equal rights, consumer protection, education, training and youth as well as cultural cooperation.

1. Values and Principles: common values, namely democracy, respect for human rights and fundamental freedoms as well as the rule of law, a market economy and sustainable development;
2. Enhanced cooperation in foreign and security policy, with the focus on regional issues, weapons of mass destruction (WMD), non-proliferation and disarmament, conflict prevention, and crisis management;
3. Offering not only improved trade and investment opportunities but also assistance in trade-related reforms with the aim to contribute to economic recovery and growth and to better integration of the Georgian economy with the world markets;
4. Justice, Freedom and Security, covering the rule of law and respect for human rights and fundamental freedoms, protection of personal data, cooperation on migration, the fight against money laundering and terrorism, illicit drugs, and the fight against organised crime and corruption;
5. Enhanced cooperation in some 28 key sector policy areas, including in the fields of economic dialogue; management of public finances and financial control; taxation; statistics; transport; energy cooperation; environment; climate action; industrial and enterprise policy and mining; company law, accounting and auditing and corporate governance; financial services; cooperation in the field of information society; tourism; agriculture and rural development; fisheries and maritime governance; cooperation in research, technolog­ical development and demonstration; consumer policy; employment, social policy and equal opportunities; public health; education, training and youth; cooperation in the cultural field; cooperation in the audiovisual and media fields; cooperation in the field of sport and physical activity; civil society cooperation; regional development, cross-border and regional level cooperation; civil protection based on gradual approximation with the EU acquis and also – where relevant – with international norms and standards.

 Recommendations

1. It is up to the Government of Georgia, as well as up to the major stakeholders such as private business representatives to ensure that that the AA and DCFTA brings maximum possible benefit to Georgia in political and economic terms.
2. It is essential for Georgia to involve the business community in the DCFTA implementation process in order to maximize the benefits of the agreement and minimize the unintended compliance costs. As such, it is up to the country to decide how to structure the process of government-to-business coordination in the implementation phase of the DCFTA. It is absolutely essential that the implementation process is guided by the country’s development vision as an open, liberal economy based on free-market principles that aim to integrate with the EU internal market. Correct management and guidance of the process, as well as the inclusive involvement of the business sector is crucial for this process to run smoothly.
3. The DCFTA should serve the broader goal of the country’s economic development. Implementation of the obligations resulting from the DCFTA should not happen at the cost of other, bigger objectives of Georgia’s development and its economic and social priorities. The free-trade agreement with the EU should rather contribute to the achievement of the latter as much as possible.
4. The DCFTA has the potential to yield positive results only if and when coupled with sound economic and regulatory policies. Although it is true that the agreement contains extensive obligations and a reform agenda, Georgia should continue its reform policies aimed at liberalization and diversification parallel to the DCFTA agenda and independently of it. It would be naïve to believe that only the DCFTA, even if properly implemented, will generate growth, investment and employment. The DCFTA might help trade and economic growth in the medium to long-term, but it might have an adverse effect if not coupled with continued liberal and anti-corruption reforms.
5. The DCFTA is likely to generate positive economic effects in the long-term. The short and medium-term impact of the DCFTA on the Georgian economy will be associated with regulatory costs. This understanding should be shared and analyzed by the government, as well as by the business community.
6. Georgia should strongly take into account local development challenges and specificities when implementing the DCFTA obligations. It would be counterproductive and highly risky to transpose EU acquis in Georgian legislation without studying and analyzing the relevant experience of EU Member States. As a rule, there are various ways of approximating a country’s legislation with that of the EU. The responsible authorities should be committed to identify the best suitable option for Georgia, rather than ‘blindly’ copying and pasting either EU regulations or any Member State’s legislation. Whereas many areas are regulated in rather general terms on the EU level, they are specified in Member States’ legislation. Therefore it is essential to study the legislation as well as the implementation practice of EU Member State economies that are comparable to Georgia.
7. Georgia should look at regulatory reforms from a business point of view. The objective of the process should not be to increase regulation and compliance costs per se, but to make realistic commitments, which can be implemented by the Georgian business community. Specific commitments resulting from the DCFTA should be discussed with the business community to determine to what extent specific sectors are ready to adapt and where the challenges are. If required, transition periods should be envisaged by the legislation. In sensitive areas, gradual implementation should be applied.
8. It is essential not to over perform when fulfilling the obligations and not to use the latter to serve the government’s own political agenda. Typically, there is a risk of justifying particular reforms through the need to fulfill obligations resulting from the EU integration process through the DCFTA. It is crucial that the government handles the DCFTA in a responsible and transparent way, not making it a hostage to its own political agenda.
9. The DCFTA implementation process should be accompanied by an intensive dialogue between the government and business community. There is no universal recipe on how to structure such relationships. Every country should design the process based on its own requirements. In the Georgian case, it is essential that there is an intensive communication channel between the government and the business community – whether they are formalized or informal, is up to the parties. A two-layered approach, combining both formal and non-formal communication components, would be the best option for Georgia, as it will further ensure the inclusiveness and transparency of the process. The latter will also facilitate the adaptation process of businesses to the new regulations, which are derived from the obligations of the Agreement between Georgia and the EU.
10. The DCFTA implementation process requires a champion within the government, i.e. a responsible person or agency that guides the process and approaches it from the point of view of the private sector. It is essential that there is a team of business-minded individuals in the civil service, who are in charge of the coordination of the implementation of the economic package of the AA/DCFTA along with the related political mandate.