DCFTA (Deep and Comprehensive Free Trade Agreement) with EU
The Association Agreement (“AA”) with EU was signed and ratified in 2014, including Deep and Comprehensive Free Trade Agreement (“DCFTA”). The Deep and Comprehensive Free Trade Areas (DCFTA) are three free trade areas established between the European Union, and Georgia, Moldova and Ukraine respectively. The DCFTAs are part of each country's EU Association Agreement. They allow Georgia, Moldova and Ukraine access to the European Single Market in selected sectors and grant EU investors in those sectors the same regulatory environment in the associated country as in the EU. The agreements with Georgia have been ratified and officially entered into force in July 2016.
As regard to trade in goods, the DCFTA regulates the conditions and the elimination of customs duties for bilateral trade in goods. According to the Agreement, neither Party can adopt or maintain customs or similar duties for export of goods. Import of products adheres to the following conditions:
Import into Georgia (Obligation)
At the time when the Agreement enters into force, all customs duties levied on imported products originating in the EU shall be eliminated.
Import into the European Union (Benefit)
At the time when the Agreement enters into force, all customs duties levied on imported goods originating in Georgia shall be eliminated (excluding garlic, which will be subject to annual duty free tariff rate quotas).
As regard to trade remedies the Agreement regulates the terms of global safeguard, anti-dumping, subsidies and countervailing measures use in trading. In case of using protective measures in trading, the parties will utilize relevant agreements from the World Trade Organization (WTO).
The Agreement defines that in cases of dumping import, exceeded and subsidized, the parties retain the right to implement protective measures as outlined under the relevant WTO agreements.
The Agreement also ensures maximum transparency in trade remedies; additionally, the DCFTA dispute settlement part does not extend to the articles in this chapter.
The part of the Agreement which relates to the Technical Barriers to Trade, Standardization, Metrology, Accreditation and Conformity Assessment, considers the approximation of Georgian standards, technical regulation, metrology, market surveillance, accreditation and conformity assessment systems with relevant EU systems, which entails both legislative and institutional approximation.
At this stage, Georgia has adopted 6 European Directives. The remaining 15 directives will be approximated gradually, within eight years after the entry into force of the Agreement, and each of them will be subject to a transitional period in order to give local businesses sufficient time to meet the new norms.
The Agreement covers measures related to products falling under sanitary and phytosanitary arrangements, as well as the arrangements for protecting the health of people, animals and plants:
- Ensuring full transparency of trade-related sanitary and phytosanitary measures;
- Approximating Georgian legislation with relevant EU legislation;
- Recognizing the health status of animals and plants, and implementing the principles of regionalization;
- Deepening the partnership between Georgia and the EU in implementing sanitary and phytosanitary measures.
The Agreement also facilitates the development of the same standard and approach to animal welfare in Georgia and the European Union.
The Agreement deals with transparency in cooperation and procedures regarding customs.
Georgian customs regulations will be approximated with European progress regulations. Close cooperation will be established between Georgia and the EU, to support the simplification of import/export procedures.
The legislative approximation process will enable the private sector to minimize expenses for import/export of goods due to different legal obligations in Georgia and the EU. It is notable that the Georgian documentations and guarantee will be valid across the EU (as well as Switzerland, Norway, and Turkey) and transporters will not be obliged to obtain repeat guarantees or to prepare additional documents for customs in transit countries. This will be another saving for entrepreneurs and exporters, operating in Georgia and will positively affect the competitiveness of Georgian products.
The purpose of approximating legislation in protection of intellectual property rights is to facilitate favourable conditions for both local individuals holding intellectual rights, as well those who consume them. Minimalizing copyright infringement and import of falsified products will ensure the accessibility of high quality products and improve consumer rights protection, while contributing to the competitiveness and attracting investments.
The Agreement defines the conditions for establishment of enterprises and cross-border supply of services, their treatment standards, as well as the general terms for operating electronic commerce. It includes provisions according to which the Parties have to use National Treatment and Most Favored Nation Treatment for establishment and for cross-border supply of the services.
The Agreement defines general exceptions covering the protection of public order, security, health and cultural heritage. The Agreement also regulates entry and temporary stay of different natural persons for business purposes.
Through the given Agreement, the parties committed to ensure free movement of capital, including profit repatriation and direct investments. The Agreement also covers protective measures in cases of free movement of capital threatening the balance of payments in the country. The Parties also agree to use EU rules for free movement of capital.
The agreement envisages a gradual opening of the public procurement market, bilaterally. The agreement covers public procurements within the monetary limits set in the agreement, (minimum of EUR 130,000).
The Agreement also considers the approximation requirements of the Georgian public procurement legislation to the relevant EU acquis, in particular approximation with four main directives concerning to:
- The Procedure of coordination of revealing the winner for signing on to the public service contract, providing work and delivery of goods.
- The coordination of procurement procedures made by organizations working in the field of water, energy, transportation and postal service sectors;
- The coordination of administrative procedures related to regulatory activities related to delivery of goods and the management of disputes concerning to public contracts.
- The coordination of the administrative processes of regulatory activities, regarding to use the EU rules on procurement concerning the water, energy, transport and telecommunications sectors.
The Agreement defines the parties’ commitments of adequate and effective implementation of international agreements in the field of intellectual property, signed by Georgia and EU, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Moreover, the Agreement requirements fill in and additionally specify the rights and commitments of the Parties in the TRIPS agreement.
The Parties also reinforce their commitments to effectively implement the international agreements administered by World Intellectual Property Organization (WIPO), to which both Parties are parties.
The agreement defines the obligatory standards related to intellectual property rights to be met by all the intellectual property categories provided in the articles of the Agreement, such as copyrights and related rights, trademarks, geographical indications (on this issue an agreement is already signed with the EU, which entered into force in 2012), design, patents, the norms related to data protection, obtaining authorization for medicinal products and plant protection products, and others.
The Agreement also regulates the procedural norms related to the enforcement of intellectual property rights and determines the competencies of judicial authorities and measures that they can implement.
The Agreement also deals with customs cooperation and exchange of information in regard to intellectual property rights. The commitment on approximation to the EU legislation regarding customs is included in the chapter of customs and relevant attachment.
The Agreement provisions contain commitments from parties to adopt legislation regulating competition, and the necessary executive body.
The Agreement does not limit the parties, per the local legislation, to form or maintain state monopolies, state enterprises and entrust enterprises with special or exclusive rights.
Disputes related to the agreement provisions do not fall under the dispute settlement mechanism provided in the Agreement.
Implementing EU approximated Georgian legislation will enable Georgia to develop a free, competitive and EU-compatible market.
The chapter related to the Trade-Related Energy Provisions details commitments to ensure both free trade of energy resources, as well as free transit between parties.
Trade of energy resources differs from other fields in that it includes transfer of energy through a predefined infrastructure of transport from providers to its destination, hence falling under a monopoly. Free transit is a mandatory condition for safe energy transport.
In order to ensure transparency in energy transfer (transit), non-discrimination, and access as a service for energy transfer (transit) to all interested parties under competitive conditions, the Agreement obligates the parties to:
- Protect and ensure free transit of energy products on their territories;
- Adopt all necessary measures for avoiding any and all kinds of unlawful appropriation of energy products in process of transit;
- Bolster the role of the independent regulation entity which ensures facilitation of transparent tariff methodologies in order to ensure regulation for aforementioned monopoly driven work.
- The aforementioned will assist the growth of service quality on the competitive market and, subsequently, the safety of this service for agreeing Parties.
Georgia has a large hydro generation potential, and its development requires investments and new export market openings, where energy produced in Georgia will be sold, further developing trade. For this reason, the Government of Georgia initiated the construction of the Black Sea Energy Transit Line, enabling the country to join in the unified energy system and supply EU member states with electric energy. As a result, the Deep and Comprehensive Free Trade Area agreement between Georgia and the European Union, one of the primary goals of which is to contribute in free energy resource trade between the parties, will play a significant role in fulfilling this aim. Adopting and executing this commitment towards the EU will serve as a guarantee for European investors to initiate projects on our market and assist in encouraging investment in the energy sector.
It is worth noting that Georgia is an important and trustworthy transit country in the region, accommodating such projects like the Baku–Tbilisi–Ceyhan pipeline, the Baku–Tbilisi–Erzurum Pipeline, etc. These projects turn Georgia into a connective bridge between the Caspian region and western states, as well as being one of the most prominent transit countries related to the development of the Southern Energy Corridor, which falls within the strategic energy safety interests of both Georgia and the EU.
The DCFTA will be an additional pillar of support bolstering similar projects and investments in Georgia.
The Agreement ensures the transparency of trade-related regulation systems by way of legislative and normative acts and public accessibility to their projects. Additionally, it facilitates an efficient communication mechanism between the Parties.
Additionally, the provisions of the Agreement ensure the existence of legal, administrative and arbitration organs, which will enable appeals towards taken actions.
The primary benefit of the Agreement is ensuring a transparent and predictable legal and regulatory system in the country.
The goal of the Agreement is to develop international trade in a way that ensures fulfilment of primary tasks towards sustainable development. The basic principles and rights of labour will need to be upheld in order to ensure decent work conditions.
Labour standards cover all employments and decent work condition guarantees. Additionally, as per the International Labour Organization (ILO) Declaration, the legislation must reflect the primary standards, including:
- The freedom of association and recognition of the right to collective bargaining;
- Elimination of all forms of forced labour;
- Abolition of child labour;
- Abolition of all forms discrimination in respect of employment and labour.
According to the primary principles of sustainable development (economic growth, social development and environmental protection), advances in trade or internal investment must not be at the expense of local labour or environmental legislation.
Implementation of European and international principles will assist Georgia’s sustainable development.
The Agreement regulates dispute settlements. Specifically, the dispute settlement agreement provisions in this Agreement regulate disputes related to trade or trade matter explanation/usage in the frame of the Agreement. A special dispute settlement mechanism is implemented for such goals, which is analogous to an existing dispute settlement mechanism within the WTO in terms of structure and stages.
The Agreement covers assessment mechanisms for legislative approximation between Georgia and the EU, as well as exchange of information pertaining to the process. On the basis of legislative approximation assessment, EU will enable market liberalization, granting additional benefits to Georgia.
You can find the agreement on the following link: text of the agreement