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As free trade with the EU looms, the country’s small farmers wonder how they will compete.by Yana Israelyan 16 June 2014
TBILISI | Spading up soil around his potato plants, Valerie Devnozashvili says growing spuds is hard, because you cannot see the vegetables underground.
In fact, the whole enterprise of small-scale agriculture is difficult, says Devnozashvili, who also grows wheat and corn on a farm of less than 2 hectares (5 acres) in eastern Georgia. The 55-year-old reckons he made about 1,000 lari ($570) in profit last year.
“You have to plow and till the land, sow seeds, spray plants with chemicals twice a season, and harvest. But your harvest is only enough to feed your family. There’s not much left to sell,” he says.
And selling those leftovers is not easy. No outlet in his village buys vegetables from local farmers, and Devnozashvili does not have a truck to take his produce to the nearest town. Last year he harvested eight tons of potatoes big enough to take to market – a little more than half of his total crop – but he barely sold any.
Soon neighbor Nodari Tsikhelashvili joins Devnozashvili for lunch. Tsikhelashvili, who farms a plot about 10 times the size of Devnozashvili’s, commiserates.
“Farming is generally an unprofitable business. It’s difficult to develop,” he says. The government has given farmers new equipment, he acknowledges, “but no one really knows how to operate it.”
Another potential headache is looming just down the road. Georgia is poised to sign a free trade agreement with the European Union in late June. The pact will open up the European market to Georgian goods, and vice versa. But it will also require Georgian exports to meet strict food safety and quality standards – which some farmers fear they will not be able to do.
"Agriculture is underdeveloped here,” Devnozashvili says. “Last year we had a poor fruit harvest, but there was plenty of fruit available on the market. Where did it come from? It was imported from Turkey.”
Tsikhelashvili nods in agreement. “Agriculture is a complex industry. The Soviet system wasn’t able to develop it; can the new authorities cope? The agreement with the EU may be good for the country, but it’s bad for farmers. The state should help us to sell our produce to Europe.”
The deal that Georgia plans to sign with the EU gives it access to a market of 500 million people, but that market is one of the most heavily regulated in the world.
After signing the agreement, farmers who wish to trade in the EU will not only to be required keep records of their goods’ attributes, such as size, weight, and color, but also to ensure the transparency of the entire cycle – from soil studies to packaging, said Nino Zambakhidze, chairwoman of the Georgian Farmers Association.
“It could be difficult to make them run their business in a new way,” Zambakhidze said, using the example of a small cheese-making facility she runs. “It was difficult to teach the employees to change their shoes when they enter the shop. It wasn’t until I installed indoor surveillance cameras and introduced penalties for violations that they complied.”
Irakli Lekvinadze, an economist who specializes in Georgia’s relations with the EU, said the agreement’s requirements could be tough, but because they are to be phased in over a decade, they should not be catastrophic.
“If Georgian farmers were required to comply with European standards today, most of them would go bankrupt,” Lekvinadze said. But he added, “It’s as wrong to say that Georgian goods will flood the European market after the agreement has been signed as to say that the Georgian economy will collapse.”
The European Union is among Georgia’s major trading partners, accounting for 26 percent of Georgian imports and 23 percent of its exports, according to the country’s statistics agency. Key exports include wine, mineral water, and hazelnuts, the latter making up 64 percent of the country’s goods sold abroad.
The facts of Georgia-EU trade would seem to belie worries that a major barrier will soon fall and a free-for-all ensue. The association agreement drops customs duties in both directions, but most of the 40-odd Georgian products regularly exported to the EU already enjoy low duties (although not the all-important wine or mineral water). Likewise, Georgia assesses only symbolic duties on imports from the EU.
Eager to ease farmers’ anxiety, officials at the Agriculture Ministry say the pact’s requirements seem complicated only at first glance and that meeting them will not entail large additional costs.
“Fear has big eyes,” said Kakha Sokhadze, head of the Food Safety Agency. “One shouldn’t be afraid of new standards. Many countries have successfully introduced them. The key European standards have already been written into [Georgian] law. New requirements mainly deal with product labeling and packaging.”
Sokhadze said Georgia’s food safety controls have been tightened in the last few years, with goods that do not meet quality standards removed from distribution and unscrupulous producers fined. In the past year his agency picked up only minor “irregularities” in its regular inspections of agricultural goods, he said, and they posed no danger to life or health.
In the past two years, the EU has rejected Georgian goods on a handful of occasions. Italy sent back a shipment of nuts that exporters had steamed to increase their weight; several batches of Georgian-made fruit juices were returned for containing preservatives in excess of EU standards; and a shipment of satsebeli, Georgia’s traditional hot sauce, was rejected over a banned artificial coloring agent.
THE LITTLE GUY
Lekvinadze warned that if badly handled, the agreement could serve the interests of big players, experienced in trading with the EU, while threatening the small farmers who account for most of Georgia’s agriculture.
“Small farmers don’t have the money to improve the quality of their products. But if the government develops the right strategy in its relations with the business sector, even small companies will be able to overcome this barrier, as happened in Bulgaria, Romania, Poland, where farmers were able to adapt themselves to new realities,” the economist said.
The EU has already given money to Georgia to develop agriculture, and the European Bank for Reconstruction and Development recently announced a 51 million euro ($69 million) loan to help the country’s exporters meet EU standards.
Georgian agriculture thrived in the Soviet era of collectivization, but farms are now much smaller. More than half the population works in agriculture, an overwhelming majority of them on farms of less than 5 hectares, according to 2013 report by the UN Food and Agriculture Organization.
While most countries in Central and Eastern Europe and some in the former Soviet Union reported a rise in agricultural output in the last decade, Georgia saw its meat and potato production plunge by half, the agency said. Its harvest of grain fell by 77 percent, of vegetables by 63 percent, and of fruit by 63 percent.
Despite Georgia’s temperate climate, about 80 percent of food sold in the country is imported, and agriculture has been the slowest part of the economy to recover from the financial crisis. The area of fertile land has been shrinking because not enough farmers rotate crops and use modern cultivation methods, and because of the increasing share of older people in rural areas, the UN agency said. Investors are reluctant to put their money into such a beleaguered pursuit.
Vakhtang Charaia, an analyst at the Caucasian Institute for Economic and Social Research, said consumers and producers in Georgia may be hit hard in the first few years of the agreement, but the long-term benefits will be worth the initial pain.
“The introduction of new technologies is welcome, of course, but it may push up prices because producers would have to spend extra money,” he said. “On the other hand, investment is expected to flow in, creating new jobs and raising living standards.”
Technical barriers such as phytosanitary and hygiene standards, packaging requirements, even the minimum acceptable sizes of vegetables for export are a much bigger challenge for Georgian producers than tariffs and taxes, said Irina Guruli of the Economic Policy Research Center in Tbilisi.
“It’s necessary to make up to 300 changes to bring our legislation into line with European rules. The changes cannot be made in one day or even in a year. Transition to new standards may take several years," she said.
A WAY FORWARD
To support agriculture, the government stepped up subsidies in 2013. Farmer Devnozashvili said the payments are enough to get a field plowed but not enough to boost production.
“If you drive along the main road, you’ll see many plowed fields, but nothing has been sown there,” he said.
But others have found their own way to thrive.
Georgi Mchedlidze, a farmer and agronomist from the central village of Nikozi, proudly shows off neat rows of almond and walnut seedlings stretching into the distance. Among them are saplings planted on the sidelines, treated with special care. These are rare varieties of almonds, which Mchedlidze grows for his experiments.
Ten years ago, Mchedlidze left for the United States to study and work as an agronomist. He returned to his native village last year to start this farm.
Nikozi is in a “buffer” zone along the de facto border between Georgia proper and the breakaway region of South Ossetia. Residents there sometimes unwittingly fall foul of the Russian soldiers who have been there since the 2008 war between Georgia and Russia. Some are detained for unknowingly crossing the line, and some complain that they cannot get access to fields, churches, and cemeteries on the other side.
“I took a risk to start up my business here,” Mchedlidze said. “I want farming to develop in my region. We have to master modern methods. It’s impossible to improve agriculture without it. Farmers elsewhere in the world no longer cultivate land the way we do. Our land has been exhausted. It should be restored.”
Among the needed changes, he said, are new methods of fertilizing. But Zambakhidze of the farmers’ association said there is no lab in Georgia doing soil analysis to EU standards to help farmers see what nutrients they should be using.
Mchedlidze’s 10-employee farm recently joined the ranks of Georgia’s 26 agricultural cooperatives. The organizations, which represent about 200 farmers, offer a chance to pool resources and help farmers overcome the obstacles of working tiny plots of land in isolation.
Still, most are loath to join, wary of anything that smacks of Soviet-era collectivization, in which workers had no say. Established in October, the Agricultural Cooperative Development Agency has been working to educate farmers about the differences between the modern institution and its reviled ancestor.
Asked about cooperatives, Devnozashvili admitted he doesn’t know how they differ from collective farms but says he’s open to the idea.
“I’d like to set up a cooperative, but I don’t know who I can team up with. You can’t work together with just anyone. You need a person you can trust," he said.
Although the agency offers help with red tape, the technicalities of creating and registering a cooperative put off many farmers, Zambakhidze said.
“In general, paperwork is a big problem for farmers. They’ve worked in the fields all their lives, and now they’re required to have some legal knowledge,” she said.
Another possibility as farmers face the competition of the EU is to develop a specialty, such as organic produce, Lekvinadze suggested.
Mchedlidze said the government needs to pay more attention to agriculture, which officials have admitted took a back seat to reforms in other areas in the post-Soviet period. Specifically, it needs to step up training for farmers, he said.
“Georgia is a small agrarian country. We have a lot of resources. But we don’t have enough knowledge,” he said. “We often cite America as an example, but it was the Americans who made it. We’re going to have to build our country ourselves without expecting others to do it.”