Technical standards

Observance of technical standards in the domestic and the EU market

The term “technical standards” has a rather broad meaning in the context of this survey. When asking about technical standards we meant any norms (formal and informal) with regard to the characteristics of products or processes that producers have to account for to be able to sell at the market. Such requirements are not necessarily fixed in official documents and obligatory to producers or exporters.

Out of all firms in the sample, 11 reported that they have to meet domestic technical regulations in order to sell in domestic markets. Further 12 firms do not have to take such regulations into account, while 77 firms indicate that they do not sell at the domestic market. With regard to the EU market, things look a little bit different. Out of the 91 exporters to the EU, 12 firms reported that they have to meet regulations to sell

Source: Survey results.

Figure 6.1. Time spent at borders while exporting products

0% 20% 40% 60% 80% 100%

> 101 51 to 100 26 to 50 10 to 25 1 to 9

Employees

Percent of respondents indicating given option

more than 1 day 1 day less than 1 day

to the EU market; further 24 are not confronted with such regulations in their EU export business, while 55 firms indicated that they do not know.⁴⁰At the first glance, it could be assumed that larger firms are often affected by technical regulations; however, it should be taken into account that the number of surveyed firms is rather small for the three classes of firms with more than 25 employees. Due to the larger sample size, the finding seems to be more robust that very small firms (one to nine employees) are more affected from EU technical regulations than small firms (10 to 25 employees), while the situation is reversed for technical regulations concerning the domestic market.

Costs of ensuring compliance with the EU technical standards and ease of access to information

The relative costs of domestic technical regulations compared to foreign regulations seem to depend on the area of regulation (Figure 6.3). Domestic regulations concerning performance and labelling are considered by the majority of responding firms as more expensive than the same type of foreign regulations, while those concerning product quality are regarded as inducing the same costs. However, these conclusions should be treated with caution, since just ten to eleven firms answered these questions.

40 Nine of these twelve firms belong to the sector “Manufacture of food products and beverages”, two to the sector

“Agriculture, hunting and related service activities” and one to the sector “Manufacture of basic metals”. Since the twelve firms form the subsample for the next 20 questions, it does not make sense to differentiate in their statistical evaluation between the different sectors.

Source: Survey results.

Figure 6.2. Shares of firms by size that have to comply with technical regulations in order to sell at the market

0% 20% 40% 60% 80% 100%

> 101 51 to 100 26 to 50 10 to 25 1 to 9

Employees

Percent of respondents indicating given option EU ma rket Domestic market

Firms were also asked what types of EU technical standards were most burdensome and expensive. Product quality and labelling seem to play an important role here, followed by performance as well as testing and certification (Figure 6.4). On other hand, the respondents did not separate health and consumer safety regulations from overall product quality requirements. But again, these conclusions should be treated with caution, since just twelve firms answered these questions.

Source: Survey results.

Figure 6.3. Costs of compliance with domestic technical regulations compared to foreign technical regulations for exports

Lower or significantly lower About the same Higher or significantly higher No answer

Source: Survey results.

Figure 6.4. Burden and expensiveness of EU technical standards

0%

Not important Somewhat important Important Very important No answer

However, even if certain EU technical standards were qualitatively considered as burdensome and expensive, actual relative costs of meeting the EU requirements were quite low. Four firms reported that the approximate costs of meeting the product characteristics amount to between 0.01 % and 1 % of their total sales, with a mean of 0.528 %. In agriculture, the cost was 1%, that is, double the average while it was negligible in the metals industry. With regard to marking, labelling and packaging requirements, 10 firms estimated that their relative costs were in the range between 0.01 % and 5 %, with a mean of 1.554 %. These costs amounted to 1 and 2 %, respectively, for agriculture and food and were negligible for the metal industry. One firm answered that other technical requirement costs amounted to 1 % of total sales.

All other firms either had zero costs to meet the EU requirements or did not answer these questions.

A final important question with regard to technical regulations is the ease of access to the necessary information. Here, 3 out of the relevant 12 firms reported that the access was easy, 7 that it was not very easy, and 2 found it difficult.

In sum, EU technical standards do not seem to be too burdensome. This might be explained by the nature of Georgian exports to the EU which include mostly mineral and raw materials, as well as niche products that a priori satisfy EU regulations. However, technical requirements in the destination market prevent the majority of Georgian firm from exporting to the EU but non-exporters were not presented in the survey.

Testing for conformity with technical regulations

This group of questions was additionally answered by a large group of “volunteers.”

Although only the twelve firms answering that they had to meet domestic technical regulations in order to sell in the EU Market were urged to answer them, actually up to 72 firms filled in this part of the questionnaire.

With regard to the question whether their products were tested for conformity with the foreign technical regulations before they were shipped to the EU, 57 firms indicated yes and only three firms no. Twelve firms reported that they did not know. However, the importance of the resulting costs was considered as rather low. Fifty firms reported that they are not at all important and further eight firms that they are somewhat important. No firm answered that they are important or even very important.

Furthermore, the acceptance of test results and conformity certificates issued domestically by the customs authorities of EU countries did not seem to be a problem.

This was at least the opinion of all 56 answering firms. But the willingness to release information came to a halt with the question whether the products of the firms were tested over the last year for conformity with the EU technical regulations in the destination country. Here, 56 firms answered that they did not know, while one firm respectively indicated yes or no. The same holds for the importance of the costs these tests. Only one firm considered the costs as somewhat important, while 10 firms answered that they did not know.

Furthermore, nine firms reported that they need to have several product tests if they export to more than one EU country, while two firms answered that this is not necessary. Altogether, the relative costs of product testing (% of last year’s sales) were again rather low. Four firms placed them between 0.01 % and 0.5 %, while the other firms reported no costs or did not answered this question.

The problem of duplication of testing to meet both domestic and foreign technical requirements does not seem to be relevant. Two firms answered that there was no duplication and seven firms observed only minor duplication. Finally, more as anecdotic evidence, one firm reported that technical regulations conformity inspections lasted on average two to four days upon arrival in an EU country.

Sanitary and phytosanitary measures

None of the 12 firms, which answered the question about the implementation of the HACCP system, had implemented it. Furthermore, none of them encountered burdensome sanitary and phytosanitary regulations when they were exporting to the EU. Consequently, they also did not spend anything to ensure compliance with the respective regulations. Three of the firms accentuated this by answering additionally that the costs of meeting the sanitary and phytosanitary regulations in the EU were not important for their company, while the others did not answer this question.

Sanitary and phytosanitary requirements affect mostly food and agriculture exports.

In this product group, Georgia exports only wine and hazelnuts to the EU. In case of wine, the exporters set up special labs furnished with European equipment to test for conformity with EU requirements. In case of hazelnuts, satisfying EU requirements does not take much extra effort due to the nature of the product.

At the same time, despite being an agricultural country, Georgia is unable to export other food and agricultural products, because Georgian producers cannot meet the SPS and standards requirements of EU countries. However, it is not reflected in the survey results, since the survey covers active exporters only.