On 27 June 2014, Georgia and the EU signed the Association Agreement (AA), including the Deep and Comprehensive Free Trade Agreement (DCFTA), which fully entered into force on 1 July 2016. The goal of the DCFTA is to provide a framework for new trade opportunities, enhance competitiveness in the business sector, and support closer economic integration between Georgia and the EU based on reforms in trade-related fields. The DCFTA moreover regulates trade conditions and eliminates customs duties for the bilateral trade in goods. It has consequently widened the list of export products covered by the Generalized System of Preferences+ (GSP+) and set zero tariffs on all food categories, including products such as wine, berries, and hazelnuts, among other key items (Economic Policy Research Center, 2014).
July 2023 will mark seven years since the implementation of the DCFTA between Georgia and the EU, nevertheless, the projected benefits have not yet materialized. Various studies have explored the reasons why Georgia has failed to fully utilize the potential benefits of the DCFTA. However, most research into this area either focuses on assessing general macro-economic, social, or environmental impacts on the Georgian economy and its separate sectors or on analyzing the general challenges and opportunities associated with DCFTA implementation. The research conducted thus far has never provided an unequivocal answer regarding the rationality behind the lack of expected positive impacts. Effectively, the potential impact of governmental spending on agricultural exports to the EU has not yet been fully analyzed.
This policy note, therefore, investigates the relatively unexplored issue of the impact of public spending on agriculture in relation to its destination markets and the value of agricultural exports. It thereby attempts to ascertain whether trends in public spending influence the value of agricultural exports to the EU. The study furthermore provides an overview of the Georgian agricultural sector, with special emphasis on trade and governmental policies on agriculture. Based on these findings, this review delivers recommendations for capitalizing on the opportunities offered by the DCFTA to further enhance agricultural exports to the EU.