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European Commissioner for Enlargement and European Neighbourhood Policy
EU-Georgia: About myths and true benefits of Association Agreement
Tbilisi, Georgia, 4 March 2014
Ladies and Gentlemen,
This is an exciting year for relations between the European Union and Georgia. After initialling our Association Agreement (AA) and Deep and Comprehensive Free Trade Area (DCFTA) at the Vilnius Summit last November, we are now moving ahead at full speed to finalise the technical work so that we can sign the agreement already in the summer, and begin working on its implementation.
Let me begin by saying what this agreement is not. This agreement is not a short cut to full employment, higher wages, or instant economic success. Over time, I do believe that it will contribute to a significantly more prosperous Georgia, but this will not happen overnight, and anyone who expects this is likely to be disappointed.
Now let me turn to what this agreement is:
First, it is far more than a set of rules and regulations; it represents much more than a trade agreement. It will introduce reforms that will progressively bring Georgia to resemble the Member States of the European Union - economically, socially, and politically;
Second, it will embed core European values of mutual respect, tolerance, and the rule of law into Georgian public life;
Third, it will bring predictability and consistency to public life, not only in the rules and regulations which govern economic activity, but also in the services and rights which citizens can expect from their government; and
Fourth, in due course, it will deliver a higher quality of life to all Georgians.
In short, this agreement is an investment in the future. The best investments take time to mature. Shrewd investors are patient, riding out short term fluctuations, knowing that their hard work will pay off in the long run.
Over recent weeks we have all watched the unfolding events in Ukraine with enormous concern. One thing is clear: the Euromaidan demonstrators were not fighting for an improved trading relationship with the European Union. They were fighting for a different way of life, one where they were free of corruption, one where the citizens come first. They knew that the Association Agreement / DCFTA with the European Union, which was to have been signed at Vilnius could help deliver this; and this is why they reacted so angrily when their leaders changed their mind and broke their promise to deliver this agreement.
In recent years, Georgia has done a great deal to tackle corruption, to establish democratic institutions, and to embed the rule of law. I do not wish to suggest for a second that you need the Association Agreement and DCFTA in order to be able to do this; much of this has already been done by successive, democratically-elected governments in your country. But what the agreement can do is to consolidate the reforms achieved and make them irreversible. This, I believe, is why the Georgian government has taken ownership of this process and worked so hard to get us to this stage. I congratulate and thank them for their foresight and dedication.
I would like to spend the rest of my talk in tackling some of the myths and misconceptions about this agreement. The agreement has its critics, and we cannot be complacent or take the people's consent for granted. We have an important job to do to inform citizens about this agreement. Without full information, it is natural that misunderstandings can appear.
So let me tackle some of the myths surrounding the Association Agreement head on:
It will mean that Georgia is flooded by imports from the European Union.
Not true. Firstly, the Agreement is reciprocal. This means that there are opportunities for Georgian businesses in the European Union market just as there are opportunities for European Union companies in the Georgian market. Secondly, European Union products are already widely accepted in the Georgian market. Over the years, tariffs have been all but abolished; this means the impact of tariff liberalisation will be very limited. In any event, the transitional period will protect the Georgian economy from sudden changes. During this transitional period, Georgia retains the possibility of temporary safeguard mechanisms. At the same time, Georgia will not be passive and powerless during the implementation of the Agreement. We will have mechanisms in place to give us time to adjust and to introduce reforms as needed.
The Agreement will destroy whole sectors of the Georgian economy.
Not at all! In fact, the Agreement gives Georgia's economy an opportunity to catch up with the European Union in terms of competitiveness, and therefore to expand the benefits of the new, balanced terms of trade with the European Union, the largest single market in the world.
The most sensitive sectors will have generous transitional periods which will give time for the necessary adaptation. For example, the modernisation of public procurement rules will take eight years, as will the introduction of technical regulations on construction products. It is in all our interests to secure the smooth transformation of Georgia's economy.
We only need to look at recent history to see how integration with the EU can benefit an economy. Take the examples of Ukraine and Poland. In 1990, the Polish and Ukrainian GDP per capita were largely identical. Five years later, spurred on by ambitious economic reforms supported by the EU-Poland Association Agreement, the Polish figure was almost four times higher than that of Ukraine. During the same period, total foreign investment into Ukraine fell by 42 per cent, while it rose by 66 per cent in Poland.
Another myth: there are no opportunities for Georgian businesses in European Union markets.
This is wrong. Let's not forget that the European Union is the largest single market in the world, with 500 million consumers – that's about 100 times larger than Georgia's population. For Georgia to be able to sell its products easily and effectively in this market, its safety and health standards must be aligned with those of the European Union. The DCFTA will enable Georgia to go through this process, and give Georgian products open access to a market valued at EUR 15,000 billion per year.
The figures speak for themselves. The European Union's GDP measured in purchasing power parity reached EUR 11.34 trillion in 2011 so it is no surprise that independent studies indicate that a DCFTA could lead to a doubling of exports from Eastern Partnership countries to the European Union from the current figure of approximately EUR 35 billion to over EUR 70 billion.
The Agreement will only benefit large agricultural and industrial manufacturers.
Not true. While there will be huge and immediate opportunities for large producers, the alignment of Georgia's laws - for example, on food safety - with those of the European Union will mean that all businesses will gradually apply these rules. Indeed, this process is already underway. This will ultimately help small and medium sized producers be competitive in the larger European market.
Moreover, the DCFTA also covers other areas - such as access to the European Union services markets.
In addition, harmonisation in public procurement will provide opportunities for Georgian companies to participate directly in public tenders for works, supplies and services at the European Union, national, and regional levels – a market worth almost EUR 2,000 billion per year.
The DCFTA will entail costs that Georgia cannot afford without proper compensation.
Not true. Let's be clear: we are talking about investments, not costs. As with any investment, investments in the DCFTA will yield a return. This return - in terms of prosperity - will be huge for Georgia, and it will also be rapid. We know this from the example of the early 90s and the Association Agreements which we signed with the ten countries who would go on to join the EU in 2004:
From 1990 to 1996, their GDP per capita increased by 57%;
investments per capita increased by 61%; and
exports per capita increased by 65%.
But in any case, the European Union is already and has for some time now been sharing the cost of Georgia's DCFTA-related reforms and legal approximation. We will continue to support Georgia in this process and I can say that it will be with more substantive financial assistance in the current financial framework than it was under the previous one.
Signing the Association Agreement will mean that Georgia chooses Brussels instead of Moscow.
No. Those who try to reduce Georgia’s choice to such a simplistic narrative are playing into the hands of those who are looking for a confrontation. There is a choice here, yes... but it is not a choice between rivalling empires. It is a choice between political cultures. The concept we offer is one of accountability, the rule of law, a functioning judiciary; a state which works in the interests of all its citizens, not just an enriched elite. In short, good governance.
Let there be no mistake: the AA/DCFTA is not conceived at Russia's expense. On the contrary, Russia will also benefit greatly from the integration of the Eastern Partnership countries into the wider European economy. Our vision is that these AA/ DCFTAs should contribute in the longer term to the eventual creation of a common economic space from Atlantic to Pacific, from Lisbon to Vladivostok, based on the World Trade Organization's (WTO) rules
Finally, let me tackle one more myth about the Association Agreement: this is not an attempt by western countries to impose foreign values on Georgia. Georgians who cherish Georgian traditional values have nothing to fear from us! For example, I have heard it said that the Association Agreement would force Georgia to allow same-sex marriages. There is nothing at all in the Agreement that would force Georgia to adopt any such legislation. Same-sex marriage is not even a requirement of European Union membership or European Union law as it is a matter for national legislation.
What we do ask for is the introduction of strong anti-discrimination legislation – this is a requirement under the Visa Liberalisation Action Plan. Anti-discrimination legislation is important to protect the rights of all Georgians. It is not a way to impose an alternative lifestyle on anyone; nor does it undermine traditional Georgian values. What it does do is guarantee the right of individuals to fair and equal treatment regardless of their race, religion, gender, or sexual orientation.
Allow me to me illustrate my point. Let's take the example of an educated woman in her early thirties, with excellent qualifications, great skills, and solid experience. What if she were to lose her job because her employer decides that he wants a man, even if that man is less qualified and less skilled than the woman? What if the employer says that he cannot risk employing a woman who may become pregnant? Anti-discrimination will give this woman a guarantee against this kind of unfair discrimination; this is better for her, for the business, for the Georgian economy, and for Georgian society as a whole.
I am delighted to discuss these important issues with you, representatives of civil society. It is impossible to overestimate civil society's role in the transformation of the economy and deepening of democracy - and in realising the tangible benefits this can bring. And by democracy, I don't simply refer to elections; I mean a comprehensive system of checks and balances, which ensures that citizens' fundamental economic and social rights are effectively enforced and respected.
This is an exciting time for Georgia. We are living through a period of change, and I firmly believe that this change will be for the better. There will be challenges along the way, some of them expected; others will come as a surprise. We should be prepared for these challenges, and the European Union will stand by Georgia. Ultimately, though, Georgia is taking on these new responsibilities and new challenges for itself, in the interests of its own citizens and in the hope of a better future.
Thank you for your attention.
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