How the Association Agreement will influence prices

The Georgian people, politicians and analysts continue to speculate over how the signing of the Association Agreement (AA) with the EU will influence the price of products in Georgia. It has been stressed that the signing of the agreement will make Georgian products and services more expensive.

There is certain logic in such a view.

The Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU lifts tariff barriers for Georgian products on the EU market. This eventually will increase Georgian export to Europe. The country has already experienced the approach in terms of Russia, when grapes, wine as well as food and vegetables became more expensive. Improving the quality of products is generally followed by the increase in price.

The consumer price increases can be explained by several things. One of the reasons is related to the new regulations targeted at quality-control. The introduction of such regulations will result in higher prices. The companies that produce high-quality items however, will presumably achieve success on the European market. Analysts suggest that the increase in prices will reach 3-5%.

Joining the free trade space will have two stages for Georgia: The first is the process of implementing European standards, services and quality, so that local products comply with European standards.

Long-term prospects are connected with the benefits Georgia should gain from the standards and regulations. However, making practical moves that will produce a profitable environment will require extra investment, and the use of high technology.

If Georgia manages to create high-quality products and subsequently enters the European market, this will be followed by the increase in volume of Georgian products and the country will be able to balance prices.

In the end, Georgia might face a situation where there will be two standards: One will be the products targeted for the local market and another that will be targeted for export to Europe.