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Antidumping Law: Supporters and Objectors

The Government of Georgia is developing an antidumping law and the parliament is expected to adopt the bill by the end of the autumn session.

The full version of the bill was not published yet, but objectors have already expressed complaints. Members of the New Political Center of Girchebi (Pinecones) are criticizing the bill. Zurab Japaridze, one of the leaders of the new political center, says the government plans to restrict comparatively cheaper imported products and this decision will damage the population.

“The adoption and then real enactment of the antidumping law will increase prices. No other results are expected. We will have only specific result in the form of increased prices and, naturally, this process will hit socially vulnerable part of our society. Why? There are very simple reasons. What does the antidumping law imply? Some countries may practice incorrect policy of subsidizing certain sorts of exports products. Consequently, these products may be imported to Georgia at low tariffs.

 The Georgian government plans to restrict imports of cheaper products to the country. This signifies Georgian residents will not be able to buy cheap products, as only expensive products will remain in the market.

Only several business companies will make profits of this decision, who may have employed 200 to 400 persons and a major part of our population will bear losses”, Zurab Japaridze said.

The Free Democrats political party also objects to adopting the bill. An adoption of price regulatory mechanisms represents interference in the free market, Vasil Revishvili, a member of the party’s economic team, noted.

“No regulations that regulate prices through instructions can be correct’, Vasil Revishvili added.

An antidumping law contains foreign trade restricting norms that set barriers to foreign companies so as they could not sell their products in Georgia below the prime cost.

Under the WTO standards, there are two explanations for the dumping policy: 

 Importer companies sell imported products in foreign countries at below the prime cost compared to the country of origin.

Importer companies sell products in foreign countries at below the normal prices compared to the country of origin.

Economy Minister Dimitri Qumsishvili says foreign companies may set deliberately lower prices with the aim to gain dominating positions on the Georgian market and in this case domestic companies will  bear losses.

I will clarify what is presumed behind this bill. The time of adopting this bill is not a subject of discussion. I assure you that the antidumping law fully meets the international legislation and in practice all member counties of the World Trade Organization (WTO) have adopted similar legislations.

There is nothing against the convention. Consequently, this is an elementary mechanism to protect our enterprisers if someone dishonestly treats your market”.

Vice Premier Giorgi Kvirikashvili also approves the bill because of risks that some companies may deliberately set dumping prices to lead domestic companies to bankruptcy with the aim to become monopolists in the Georgian market.

As a rule, antidumping laws serves to promote the domestic production. An adoption of the antidumping law will set new regulations to the business sector and specific companies will be granted protectionist preferences.

Besides political forces, the business sector’s opinion has also split. One part asserts the antidumping law will damage Georgian citizens by restricting admittance of cheap products and services to the market.

Another part shares the Economy Minister’s position and assures the antidumping law will bring profits to the country.

BDO managing partner Zurab Lalazashvili says the adoption of the antidumping law will destroy the Georgian economy.

“In general, we should realize the results of the antidumping law and additional regulations very well. As a rule, similar legislation may be expedient and acceptable in distinct segments for a certain period in case of confirmed monopolies. In all other cases, these decisions will bring high prices and lower competition. I do not touch quality-related issues if this or that category of pour consumers find the quality of this or that product acceptable. In general, regulation of prices will bring destructive results to the Georgian economy.

We should realize regulated prices grow prices and narrow competition and generate consumer discontent. I do not believe this law will save any industry. Initially, this law may promote certain industries, but in several years these regulations will damage both consumers and the sector”.

Meanwhile, Levan Silagava, a head of the association of grain growers, positively appraises the antidumping law. He asserts this law will rescue the domestic flour production.

“We manifestly back the antidumping law enactment. First, when joining the WTO, Georgia assumed the obligation of adopting an antidumping law. High-ranking officials made these statements in due time. Adoption and enactment of this law will bring much benefit to the domestic production. Our field is in heavy condition.

In practice, we cannot enter the European market. Nevertheless, the association agreement contains protection mechanisms too.

Georgia has signed a free trade agreement with Turkey, but tax-free regime does not include flour exports. Tax-free regime enables to export only 2000 tons of Georgian flour to Turkey, while the more volumes are taxed by 12%. Two thousand tons make up Georgia’s daily consumption volume and it is clear this is a small quota, but we can submit an example when Urekhi company tried to employ this quota in Turkey, but faced huge problems and failed to export even 2000 tons”, Levan Silagava said and added:

The WTO agreement and the EU association agreement contain direct indications that if importers pose a threat to some domestic companies through dumping prices, the country is authorized to apply law, including antidumping laws.

They frequently refer to excessive regulations, but if Europe has adopted this law and it is not excessive in Europe, why are the antidumping regulations considered excessive in Georgia?

When Russian flour is imported to Georgia, it is cheaper compared to the domestic flour and we assert this is a shadow dumping, because flour production is 30% cheaper in Russia compared to the Georgian production.

Over the past 3 years, three major mill complexes were suspended in Georgia. If this tendency continues, Georgian mill complexes will have to import flour from abroad. If we do not adopt the antidumping legislation, the Georgian market will be saturated by foreign flour, because the market players will have to stop production.

Over 400 citizens have lost job places after suspension of 3 mill complexes. Moreover, the neighboring grain production field will be also damaged. The more job places disappear in Georgia, the more job places will be created in Russia. The same tendency is discerned in other sectors too, including the egg production faces the same problem”, Levan Silagava said.