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Georgia and the changing EU agricultural and food
market environment Presentation by Prof. Ivan
Samson University Pierre Mendès France Grenoble,
France Seminar How Support Commercial
Agriculture in Georgia? Tbilisi Friday May
20,2005 Support to PCA Implementation Project EU
EuropeAid
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EU markets, a chance for Georgia

• Georgia exports 2004  649 mln (EU with 17.2
  is first partner)
• Georgia imports 2004  1847 mln (EU with 33.4
  is first partner)
• Trade deficit 2004  1198 mln , of which 505
  mln with EU (42)
• EU is already the first market for Georgia

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Agriculture is the first economic sector of
Georgia

• About 20 of GDP
• 50 of the population live or try to live from
  agriculture
• Agriculture represents 2004
• 30 of exports (192 mln )
• 16 of imports (302 mln )
• 9 of the trade deficit (110 mln )

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The importance of EU agrifood markets (1)

• Georgias Export to EU Countries under GSP
  Regime,
• 2003-2004 January- September

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The importance of EU agrifood markets (2)

• Main Export Product to EU under GSP Regime
• 2003 2004
• Agrifood products represent a substantial part
  of Georgia EU exports
• and of the EU preference system

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EU food markets a challenge for Georgia (1)

• The EU exports of Georgia may strongly increase
  thanks to FDI
• The EU exports of agrifood products by Georgia
  may strongly increase
• reflecting Georgia production structure
• and comparative advantages  soils, sun,
  water, knowledge, species
• in a sustainable development approach

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EU food markets a challenge for Georgia (2)

• Agrifood is nowhere a pure market sector
• The challenge is the changing EU agricultural
  environment
• - the new EU Common Agricultural Policy (CAP)
• - the new regulatory environment
• - the changing EU food consumer

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I - The former EU CAP should be changed

• Price guarantees for farmers
• led to overproductions
• benefited to the largest ones
• became increasingly criticised within WTO
• became financially unsustainable 30 bln
  1990, 50 bln 2004 today
• even before EU enlargement

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The principles of the new CAP (starting 2005 in
10 member States)

• A new instrument
• - from price guarantee to products, to income
  guarantee to producers
• - from quantities to qualities and
  competitiveness in the diversifying EU markets
• Promoting the EU model of multifunctional
  agriculture
• Covering also non-market contributions of farmers
  to economy and society through site protection
• Unified payments by exploitation will be
  conditioned to the respect of norms
• - of environment protection
• - of food safety
• - of the well being of animals

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The new CAP instruments 2007-2013

• EFAG (European Fund for Agricultural Guarantee)
  and EAFRD (European Agricultural Fund for Rural
  Development)
• Stabilise the expenses at 55 of EU budget
• Focus the policies
• On the incomes of producers that should follow
  other incomes
• On food and beverage activities, according the
  new demand of consumers
• On integrated rural development today 10 of
  CAP budget, 2013, 25
• Collecting also for 2007-2013 33 bln from
  regional policy budget

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II - New major threats on food safety

• Several crisis hit EU agricultural sector
• - BSE mad cow disease came from deficient
  fodder control (animal cannibalism)
• - dioxin was found in chicken due to deficient
  storage
• - genetically modified organism trouble EU
  public opinion
• - external markets became unsecured (mercury in
  salmon, Asian chickens etc.)

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Led to new requirements for food markets

• Increased regulations of production, storage,
  transport etc.
• 2001 White Book on Food safety
• Creation of an European Food Safety Agency,
  similar to US FDA
• Set of legislations on traceability from the
  farm to the table
• also orientation towards quality of local
  products
• Better information of consumers with unified and
  simplified etiquettes

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III - The changing EU consumers

• Surveys show increased demand of
• - quality connected to local origin of goods
  territorial identity of food is typical of
  European behaviours
• - health most of information on food is
  connected with threats on health, meals are
  becoming medical activities, people dont know
  any more how to eat and have to learn again how
  to eat in the family
• - safety different degrees of risks are now
  connected to different kinds of products, from
  low risks for fruits, vegetables and milk
  products to high risks connected to meat, meat
  products, industry dishes and fast food
• - ethic food should increasingly respect
  environment (bio products, eco-labelling) and
  human rights (labour conditions, economic
  development in equitable trade)

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New approach and new budget for food in EU
households

• The food budget in EU, without beverages, is now
  very low almost the same expenses as for
  health, and twice less than automobile budget
• Due to the new requirements, this budget is
  expected to increase again
• - the EU consumer is ready to pay more for more
  quality, more health, more safety and more ethic
• - and more innovation the EU buyers look for
  always new products, like smaller water bottles,
  black tomatoes, new fruits, new meats of
  kangaroo, ostriches, dears etc.
• Funny illustration of innovative dimension of
  food production
• FFVW Food Fashion Victim of the World, looking
  for new food trends in world capitals, for ex the
  Grande Epicerie of Paris where people look for
  the Gourmand must have of the moment, with
  London fat free candies, Yellow Taxi cookies
  made in New York, chips with Japanese shrimps,
  English lollies with insects and the must of the
  must Acqua Luna, a water bottled during full
  moon nights

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Lessons for Georgia

• The new EU trends in agrifood is a challenge
  Georgia has to tackle with
• Because thanks to its climate Georgian products
  are not only substitutive (wine, water), but also
  complementary with EU products (tea, fruits)
• Because Georgia has to increase added-value food
  production
• Because Georgian products may rather easily fit
  with rural image and quality requirements
• Because the EU new regulations and habits are
  already spreading into Russia, Black Sea
  countries and in Turkey
• Several traditional production may already became
  a hit on EU markets, like Tkemali sauce or the
  orange lemons
• Connection is to made with tourism image and
  landscapes
• Conditions of course are the large scale
  modernisation of production structures and supply
  chains thanks to FDI, as well as the overall
  improvement of investment and business climate
• With 2/3 of world FDI, the EU has the best
  position for providing the capital, know how and
  market access connected to these FDI