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Parliament of Georgia in Rustaveli Avenue, Tbilisi
The Georgian Parliament in Tbilisi flying the EU and Georgian flags. Photo: Wikimedia Commons

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Bendukidze spoke about European opposition to Georgia's liberal labour reforms in a presentation at "Georgia's Transformation into a Modern Market Democracy" - a Policy Forum at the Cato Institute in Washington, DC, 13 May 2008.

"One of the most controversial reforms we underwent was labor reform. Why controversial? Maybe it is difficult to explain in the USA, as the USA does not have a labor code or someone dictating how can I be hired or fired and that is the difference to all other countries, especially Europe where the contractual agreements between employer and employee is practically not allowed.

Why was it controversial? Not because of the result of how it was done but because there is now huge pressure from EU trade unions to reverse the situation. ILO is pressing the EU to withdraw the GSP+ system (import duty preferences for Georgia, rewarded 2 years ago) and that if we want to maintain those preferences we should abolish our labor code. That means that sometimes not just the political processes within the country can change the regulations, but also some international organizations can be very active on changing institutional situation within the country."

A radio interview with Bendukidze broadcasted on Radio Ekho Moskvy, 21 January 2007 (transcript [in Russian]) also discusses the EU:

"In 20 years the EU will be already a different organization. And it's even a question, whether it will remain an organization at all, whether it will exist at all in 20 years. No one knows what the EU will be like… So it's not clear how it's possible to want to join something if you have no idea what it will look like in the future."

Speech by Bendukidze on Dutch television "Riverside Conversation Talk Show" (Dutch broadcaster VRPO) aired on 3 April 2005. Video is in Dutch and English; Bendukidze's remarks are in English with Dutch subtitles, starting from 05:50; around 37:00 on Europe)

"I do not want Georgia to be part of the European sclerotic civilization. Many things in Europe, they would kill our growth, of course. There is too much regulation in Europe. Our government has declared that it wants to put a lot of energy into economic cooperation and the harmonization of regulations with Europe in the next ten years. I fear that ten years may become an eternity."

Bendukidze's frustration with Europe was shared by many in the government. This appeared to be a big change from 2004, when the EU decided to include the whole of South Caucasus in the European Neighbourhood Policy, the EU flag was flying everywhere and Georgia seemed determined to join the EU as a full member, not just as part of the ENP. However, as Barbara Lippert put it (2006):

"In the context of negotiating new and enhanced agreements the Eastern European and Southern Caucasus countries explicitly seek a membership perspective or at least its discussion as a medium or long-term option. This issue is highly contested and controversial among (and sometimes inside) the member states. At present, the cleavage runs mainly between old member states which are mostly opposed, or at least undecided, toward an accession perspective and new member states which tend to favour a membership perspective."

(Barbara Lippert, "The EU Neighbourhood Policy Profile, Potential, Perspective", Intereconomics, July/August 2007, p. 183)

This discrepancy between what Georgians thought ENP could bring and what the EU expected Georgians to deliver was the cause of some frustration. In 2008 the European Parliament commissioned a Briefing Paper calling for a reassessment of EU assistance strategies in Georgia:

"In recent years, Georgia has made remarkable progress in strengthening governance structures and implementing reforms conducive to economic growth. However, Georgia's progress in state-building has been achieved partly at the expense of democratic power-sharing. In light of growing concerns about Georgia's democratic performance, a certain readjustment of EU assistance priorities is necessary.

The EU should rebalance its assistance between the objective of state capacity building and the objective of democracy-building, addressing problems such as insufficient separation of powers, undeveloped mechanisms of interest articulation and representation, and the weakness of the judiciary, the parliament, the party system, media, and the civil society."

The August 2008 war posed many questions about Georgia's foreign policy orientation vis--vis NATO and the EU. It also dealt a severe blow to Georgia's hopes to become a NATO member in the short- or medium run. In April 2009, reflecting on the ramifications of the war, leading Georgia political expert Ghia Nodia authored a report "How Much Has the World Changed? Implications for Georgia's Policies." While Nodia does not believe that Georgia should radically overhaul its foreign policy, he does argue for some "readjustments." In particular, he writes that Georgia should seek to engage more with the EU, which is becoming "an increasingly important player in the region." Nodia also indicates that the government would be well-advised to abandon its emphasis on "short-term solutions" and instead concentrate on long-term institutional and democratic development, which are more consistent with the expectations of the EU:

"Since 2004, the Georgian government acted on the assumption that it was possible to solve the most burning issues of Georgia's security resolve the separatist conflicts, get membership of NATO within several years … fast progress and short-term solutions are obviously unrealistic."

"Deepening democratic reforms and facilitating national consensus around the rules of the political game is the foremost if extremely challenging task of the Georgian government."

Nodia's sober look at Georgia's prospects was fully warranted. In 2009, the EU initiated a shift toward a regional, rather than bilateral, approach to South Caucasus countries. An October 2009 RFE/RL article addressing this topic suggested that in the EU's opinion, Georgia was no longer ahead of its counterparts in the region in the area of democratic development:

"In practice, this means the three countries [of the South Caucasus] find themselves in relatively similar starting positions as the EU prepares to launch talks with them in November on new association agreements. None can realistically hope for EU membership in the foreseeable future, but all three can qualify for free trade and visa-free travel arrangements with the EU in the long term … Behind the scenes, EU officials make it clear that Georgia no longer enjoys front-runner status in the region. All three governments have serious problems with democratic standards, harbor prisoners of conscience, and harass free media in their countries."

Bilateral cooperation between the European Union and Georgia advanced in 1996 when the two sides signed the Partnership and Cooperation Agreement (PCA), which entered into force on 1st of July 1999. The European Neighbourhood Policy (ENP) entered into force in 2004. See the official website with all background documents.

An article by ECFR "Can the EU win the peace in Georgia?" (2008) warns:

"Like the wars in the Balkans, the Georgian conflict is a direct threat to a European project that seeks to replace old paradigms such as the balance of power, spheres of influence and military conquest with integration, negotiation and the rule of law. EU member states must respond with a strategy to protect and extend the liberal security order on the European continent. They need to look beyond the immediate crisis and rethink many of their favoured policies in the Eastern neighbourhood The new strategy we suggest is tailored around four points. It entails re-thinking the EU's approach to Georgia; creating a shared understanding of both Russia's motivation and the challenge it poses to European security; resisting a twisted use of the Kosovo precedent; and changing the dynamics of the European neighbourhood."

In 2008, the EU embarked on a mission to enhance the relationship with its eastern neighbors. For more on this, please see: European Commission (2008) "Communication from the Commission to the European Parliament and the Council - Eastern Partnership."

Also in 2008, as a part of Eastern Partnership, the European Commission hired CASE Center for Social and Economic Research to do a feasibility study on a free trade agreement between EU and Georgia. CASE concluded that the most suitable agreement for Georgia would be Deep and Comprehensive Free Trade Agreement (FTA). The CASE Brief (2008) "Free Trade Agreement Between The European Union and Georgia: How Feasible Is It?" summarized the policy recommendation:

"Based on the analysis of a range of deep integration scenarios, the greatest benefit to both Georgia and the EU would accrue with a Deep FTA+.

A Deep FTA+ would involve a significant approximation of law along the priorities of the ENP Action Plan for Georgia, in addition to supplementary flanking measures on competition, rule of law, governance and corruption and their effective implementation, which would mean re-branding Georgia as a safe and attractive investment location. At the same time, given the current progress of the implementation of the ENP Action Plan, serious questions remain as to both the willingness and the institutional capacity of Georgia to undertake further commitments in the regulatory area.

From a human resources perspective, Georgia's governmental bodies are uneven in terms of the education, qualifications, and international experience of their European counterparts; however, this situation could be eased with future technical assistance and training."

For the full report, see: CASE (2008), "Economic Feasibility, General Economic Impact and Implications of a Free Trade Agreement Between the European Union and Georgia". CASE concluded that "the services, agro-food, and energy sectors were identified as those that would draw the most advantages from a Deep FTA+."

In addition, IFC did a study on manufacturing competitiveness in Georgia and came to the conclusion and agriculture and agro-processing is the most competitive sector. For more information, see IFC 2010: "Georgia Sector Competitiveness Overview Identification of Most Promising Manufacturing Sectors and Priority Actions to Accelerate Investment and Growth: Preliminary Recommendations to Government of Georgia."

GEPLAC also produced an introductory paper on a Deep and Comprehensive FTA for Georgia.

The European Commission published progress reports in 2009, which can be found at "Progress Report Georgia 2009: Implementation of the European Neighbourhood Policy in 2008."

In addition, the European Commission has put together a list of Publicly Available Background Research on the ENP (2009)

See also:

April 2010

 Back The problem of Europe - Next 
Reinventing Georgia: The story of a Libertarian Revolution
Georgia as a model
Georgia as a model
  Bendukidze and Russian capitalism
Bendukidze and Russian capitalism
     
Jacobins in Tbilisi
Jacobins in Tbilisi
  The future of Georgian libertarianism
The future of Georgian libertarianism

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15 April 2010, 00:00