Research Reports

The Impact of SPSQ measures on the Trade Flow between Georgia and CAREC Countries (Azerbaijan, China, and Kazakhstan)
Friday, 28 February, 2020

Since the Uruguay Round of the World Trade Organization (WTO), which introduced agriculture to the GATT (General Agreement on Tariffs and Trade) negotiation table, there has been increasing policy interest and academic debate on food safety regulations and their effect on the agri-food trade. During the Uruguay Round, WTO members negotiated the Sanitary and Phytosanitary Standards (SPSs) in the “SPS Agreement” and the Technical Barriers to Trade (TBT) agreements, which share common principles and rules with all member countries (Mayeda, 2004). The SPS agreement is a collection of standards, guidelines, and codes of practice, and builds on the Codex Alimentarius, or “Food Code”, to ensure that food is safe and can be traded (Joint FAO/WHO Codex Alimentarius Commission, 2007). Food safety standards are perceived as non-tariff measures (NFM) as alternatives to tariffs, and they serve as a policy instrument that can affect trade flows (Santeramo & Lamonaca, 2018).

Many studies (Santeramo & Lamonaca, 2018; Shawn et al., 2015; Atici, 2013; Song & Chen, 2010; Henson & Jaffee, 2006) estimate the impact of food safety regulations on agricultural trade, and they often find controversial results. Some authors (Kareem et al., 2015; Shawn et al., 2015; Song & Chen,, 2010) discuss “standards as barriers” and argue that food safety standards have an adverse effect on trade, as firms have to comply with regulations that increase their costs. Furthermore, the negative effects are more prominent in developing countries than in developed countries (Keiichiro et al., 2015). Whereas other studies (Cardamone, 2011) support the “standards as catalysts” view and claim that food safety regulations have positive effects on agri-food trade due to the demand-enhancing effect of standards. The meta-analysis of literature exploring the effects of non-tariff measures, including food safety regulations on agricultural trade, reveals that variability in trade effects may reflect distinctions within countries’ food safety regulations and standards, as well as levels of economic development (Santeramo & Lamonaca, 2018).

The foremost goal of this study is to analyze the potential impact of Georgia’s trade regulations and standards on the country’s agricultural trade with CAREC countries. The study determines the extent of harmonization, as perceived by exporters, with respect to the major SPSs and Quality (SPSQ) measures Georgia has implemented since signing the Association Agreement with the EU. The increased stringency on SPSQ standards might affect Georgia’s trade not only with the EU but also with the CAREC region in the coming years. Therefore, study results will contribute to supporting regional integration and market connectivity within the CAREC region by providing a better understanding of the impact of SPSQ measures on Georgia’s agricultural trade with CAREC countries.