EFTA & Georgia: Prospects & Opportunities

September 1, 2017 marked the entry into force of the Free Trade Agreement between Georgia and the European Free Trade Association (EFTA) member states Iceland and Norway, with the ratification procedures for Switzerland and Lichtenstein to follow.

GEORGIA TODAY talked with Alvaro Borghi, Deputy Head of Mission, Swiss Embassy in Georgia, about this landmark agreement and prospects and opportunities arising from it.

“The entry into force of the Free Trade Agreement is regulated bilaterally and it entered into force on September 1st, 2017, for Georgia, Iceland and Norway. Switzerland and Liechtenstein still have to complete their internal ratification procedures,” he told us. “That said, our internal procedures are almost complete since the Swiss Parliament approved the Agreement in September 2017 without opposition. We assume that we’ll be ready to notify completion of our internal requirements early next year, which means the Agreement can enter into force in spring 2018”.

On the opportunities available for Georgia after signing the EFTA agreement, Borghi stated that “a free trade agreement can be considered one of the three ‘pillars’ of the framework conditions which states offer to (private) economic actors. Switzerland and Georgia have already concluded, in the past, agreements covering the two other ‘pillars’, with a convention to avoid double taxation (2010) and an agreement on investment promotion and protection (2014)”.

He tells us that the purpose of signing a free trade agreement in 2016 was to avoid discrimination against economic actors which are active in the Georgian and Swiss markets, notably in comparison with the beneficiaries of the EU-Georgia Deep and Comprehensive Framework Agreement, which was signed two years prior.

“For Georgia, this agreement with EFTA countries is part of a series of numerous free trade agreements signed in the past years, which includes, for instance, the EU and China. It helps to open the Georgian market to the world and to avoid its dependence on a limited set of countries. In practice, it will allow Georgian producers to export their goods under better conditions. And it will probably allow Georgian consumers to benefit from Swiss products at a better price,” Borghi said, adding that, from a broader perspective, the agreement will also serve the development of Georgia, since it is expected to lead to an improvement of the standards according to which Georgian goods are produced.

Asked about the differences between the Georgia-EFTA and the Georgia-EU free trade agreements, Borghi emphasized that the agreement with the EU is a deep and comprehensive framework agreement of which the free trade agreement is one part. The agreement with the EFTA states focuses on free trade issues and does not touch upon Georgian trade-related laws, as the agreement with the EU does.

“One of the main reasons Switzerland was so interested to conclude a free trade agreement with Georgia was to avoid discrimination. We are happy that our economic operators will more or less have the same conditions on the Georgian market as the EU operators, once the agreement enters into force,” he emphasized.

While the EFTA agreement covers diverse sectors from trade in goods and trade in services to protection of intellectual property rights and government procurement, we also wanted to know from which sectors, in his opinion, Georgia could potentially benefit most. “A lot of Georgian exports will receive preferential treatment when the agreement enters into force. Interesting potential exists, for example, in the area of mineral water and nuts. Generally, the FTA provides for predictability and legal certainty which will benefit Georgian economic operators,” he answered, going on to say that Georgia has undertaken commitments which it can actually fulfil, and that’s why there should be no provisions of the agreement which Georgia will struggle to meet.

“Our goal is that, over the next few years, it will lead to an increase in trade volume in terms of goods and services, as well as to an improvement of the quality of exchanged products. We also hope that trading between our two countries will become easier,” he told us. “Though, it will probably take some years before a real trend in this direction can be observed. This is true for all free trade agreements”.

“I would like to stress one key element: the agreement itself merely creates opportunities: it is up to the private sector to take advantage of them! In the meantime, the authorities will continue working to improve the economic framework conditions,” Borghi told us. “For example, negotiations on a Swiss-Georgian agreement on the protection of geographical indications started in August this year”.

We also spoke to a Georgian producer about the advantages and benefits of the EFTA agreement and, more specifically, what entering the European market means from an exporter’s point of view. Iago Bitarishvili, founder and owner of Iago’s Wine, a small, boutique winery in the village of Chardakhi, Kartli, makes organic Qvevri wines and Chacha. He started exporting his wine to the European market in 2006.

“The European market is one of the most comfortable, as it’s extremely stable and so are the partners we have,” Bitarishvili told us. “Free trade agreements bring enormous possibilities to us. Even though we may not yet be able to fully realize these opportunities, we’re slowly establishing ourselves and our places on the European market,” he says.

Iago’s Wines are available in Switzerland, France, Italy, Denmark, Spain, Germany, the UK, Australia, Japan and the US.

“Our wines are niche wines: we export 5,000 bottles a year, primarily distributed in top hotels and wine bars and restaurants in Europe,” he says.

“10 years ago, the major problem was awareness, the Russian market was closed and the local market was not functioning. Georgian wine was barely known beyond the region and we were unable to reach the European market. But slowly everything changed. I think that this sphere is surely developing and moving in the right direction, it just needs more time to reach its full potential,” he concludes.

As Alvaro Borghi said, it is now up to the private sector to fully benefit from the opportunities the EFTA agreement has to offer.

Nino Gugunishvili