Issue 1, 2012. February-March



On January 24th 2012, senior members of the Georgian government testified to the US Trade Representative on the subject of the Georgian labor code. This testimony was a defense of the code against criticisms offered by the large US labor union, the AFL-CIO.
However, the government also offered some suggested amendments to the code that may help to bring Georgia more in line with international standards and set a positive tone for the upcoming DCFTA discussions.

AmCham Staff

In September 2010, the AFL-CIO, a large US Labor Union, lodged a petition to the Federal Government suggesting that Georgia was failing to live up to its labor protection commitments.

If the petition is upheld, the consequences could be severe. Since 2001, Georgia has enjoyed a General System of Preferences (GSP) agreement with the United States. Under this program, Georgia has preferential duty free access to US markets for 4,800 different products.

However, as part of this system, Georgia is committed to uphold worker rights and if it is judged to be in breach of this commitment, GSP access to US markets could be withdrawn.

"It is unlikely that the US Government will withdraw GSP. That would be a very big step and does not happen very often," George Welton, executive director of AmCham, said. "But all sides in Georgia need to take this issue seriously nevertheless."

Defense of the Labor Code

In its response, the government of Georgia denied the charges, noting that workers earn more and enjoy more independence in dealing with the management under the current labor code than they ever had in Georgia before.

"The reformed labor markets facilitated economic restructuring, promoted productivity, increased competitiveness, and cushioned the economy against supply and demand shocks," officials noted in the response.

"Nominal earnings in all sectors rose on average by 375 percent (2003-2010) while the consumer price index rose only by 63 percent, resulting in a large increase in real earnings. In eight sectors, nominal earnings rose by more than 400 percent, and in five of those sectors, by more than 500 percent."

The government also pointed out that, according to the ILO, the proportion of Georgia's that is unionized work-force is higher than that of most EU countries and the United States, and more than a quarter of its population submit to collective bargaining.

In addition to the government's response, over a dozen local and foreign economists, business organizations, think tanks and non-government organizations, offered a defense of the Georgian Labor Code. These organizations included the American Chamber of Commerce of Georgia, The Heritage Foundation, and The Georgian Employers Association.

The American Chamber of Commerce argued that Georgia's current code needs to be seen as a massive improvement from the one that preceded it and that any remaining problems result from the implementation of the labor law, rather than the law itself.

As AmChams representation explained, ‘the appropriate response to those concerns [with the labor code] is not to withdraw GSP, but for the US Government, along with partners like the American Chamber of Commerce in Georgia, to continue working with the government to resolve these implementation issues'.

Zurab Japaridze, the director of the Institute for Strategy and Development, also wrote in favor of the labor code. He stressed that the current labor code is one of the country's "major" reforms, and it allows businesses - and employees - the flexibility and independence to negotiate without government interference.

"The employee has the right to demand anything he wants to be put in the contract and the employer also has the right to put anything he decides is appropriate in the contract. And if they agree, and this agreement is voluntary, then, for me, it is just."

The Georgian Government Offers a Way Forward

The government's response did not simply offer a defense of the code. In a section of its representation entitled ‘The Way Forward,' they also accept a range of areas where the government could see areas for improvement.

The intention of these developments, the government response says, is to ‘further develop and refine the labor laws of Georgia so that they are in line with the international labor standards'.

The concessions they offer are intended to offer even greater clarity and practical protections for those who want to collectively organize, bargain or strike. It also offers greater clarity on Georgia's code in order to offer greater protections to children.

Proposals to effectively "develop" collective bargaining include plans to "ensure a clear and better articulated prohibition of discrimination based on trade union membership during pre-contractual as well as contractual labor negotiations."

Amendments to "provide effective and dissuasive sanctions against acts of interference into trade union activities" are also briefly outlined.

Other possible changes include changes to the laws concerning strikes to "streamline" workers' rights to participate in protests or sympathy strikes; There are also plans to "further ensure acceptable conditions at work" by clarifying the provision on employer's rights to make "insubstantial" changes to the work contract.

While it is too soon to know whether the response will prove effective in protecting Georgia's GSP status, it has been viewed positively at home and abroad.

Paata Beltadze, head of staff at the Georgian Trade Union Confederation (GTUC), said the GTUC was not part of the AFL-CIO's petition, and is not in favor of Georgia losing GSP status.

The government's proposals, Beltadze noted, might be a positive step toward improving the situation if they lead to more discussions on better labor relations. "I assure you that, once there is a genuine political willingness and a structured dialogue between the parties with different positions [but with one aim: to find common interest and to build around their positions in a compromise, then it can happen," he said.

Welton, from AmCham, says that the government's response has been extremely well received. ‘In their response, the government demonstrated a willingness to be engaged, flexible and serious on a core issue. This should be seen as an extremely positive sign as Georgia moves into a wide range of international negotiations, from the DCFTA to the US Free Trade Discussions'.