Georgia Anticipates Free Trade with US
09 February, 2012
Georgia Anticipates Free Trade with US

Negotiations on Free Trade Agreement between Georgia and the US are supposed to start this year but economic analysts think Georgia can scarcely enjoy the benefits of unfettered trade with the world’s largest market if Georgian production and industrial capacity does not increase.

Next to the security cooperation, the US President Barack Obama discussed a possible Free Trade Agreement (FTA) with Georgian President Mikheil Saakashvili at a White House meeting on January 30, 2012. The latter has been touting the largest

world market to Georgian entrepreneurs ever since Russian market was closed to Georgia than 2006. Saakashvili ardently advocated Georgian exporters to focus on twice 313 million American market that is twice bigger than Russian market, more liberal, stable and free of political conjunctures. However, to hit the dream market Georgian entrepreneurs lack due exporting skills and their product - due quality. And yet the US is among top ten trade partners to Georgia it still comes after Russia that is number six trade partner by making 4.6% of entire Georgia trade turnover by latest data of 2011 while the US is number seven by 4. 2%. Although the US share in Georgian export makes 6.6% exceeding Russian by 1.7% and 3.5% of import. Meantime the EU makes 27% of Georgian foreign trade by 19% in export and 29% in import.
Therefore Georgian economic analyst think the statements on upcoming FTA with the US is of rather political than economic importance at the moment as far as Georgia has no due industrial and producing capacity to enjoy the benefits of barrier-free trade with the US. 
“This here FTA with the US is of rather political than economic importance at the moment as far as we have no such a voluminous trade with the US as with Ukraine, number two trade partner to Georgia, or the EU for example. However it is an additional stimulus to Georgian entrepreneurs to think of exporting to the US market, and yet it is just future prospect what we need to do is to start works to streamline our producing and quality skills with the US market requirements,” Davit Narmania, Executive Director of Caucasian Institute for Economic and Social Research, said.
Georgian government believes negotiations on FTA with the US will start this year however when the deal will be concluded finally one can only guess. As the past experience shows such negotiations take from 3 to even 15-25 years in some cases. However, taking into account that the US President himself accentuated on such a possibility that can be a “win-win” deal to both countries, Irakli Matkava, Deputy Minister of Economy of Georgia, presumes that very likely the FTA negotiations will go smoother to Georgia, a strategic partner to the US.
Although Georgia has not much to export to the US at the moment Georgian government expects oversee investors from countries with limited access to the US market to come to Georgia and use it as a producing country to enhance export at American market ultimately.
“How we use the FTA with the US depends on our entrepreneurs themselves, they should focus on the US market demands. Besides, there are many countries with limited market access at the US and the EU, and if we have free trade with both [FTA negotiations with the EU start this February] markets we expect investors from those countries including our neighbor countries to come to Georgia and use it as a producing country,” Matkava told Georgian Journal.
Narmania finds this kind of prospect questionable for whether or not other countries can use Georgia as a producing country depends on the agreement terms and can be clear only after the agreement is concluded. The fact is that Georgia still cannot get full benefits of GPRS+ trade regime with the EU exempting about 7200 export product from customs tariffs and exports just 30 names out of the list. And no big investors’ turnout ensued this trade regime in Georgia.  
According to George Welton, Executive Director of American Chamber of Commerce (AmCham) in Georgia, the impact of President Obama’s initiative could be massive for a country like Georgia.
“Free trade agreement is not just about the movement of goods and services. America’s willingness to enter into negotiations with Georgia on this subject is a re-statement of the strength of the relationship between the two countries and the confidence that the United States has in Georgia’s future. Georgia exported 143 million USD of goods to the United States in 2011, with significant exports of manganese, fruit juice and mineral water. A deeper trade agreement could build on that and offers Georgia considerable economic development opportunities,” Welton said in the interview with Georgian Journal.
He believes it is impossible to judge the scope of benefits that unfettered access to the world’s largest economy offers.
“In the past, developing ‘tiger’ economies like Japan, South Korea and Taiwan have seen their growth significantly enhanced by access to US Markets. At the current time Georgia’s share in US foreign trade is tiny and even if we use our full export potential it will still remain a small portion of the pie compared to other countries because of the different economies of scale. What’s important is that the increased export to the US or any other country for that matter will trigger further development of other chains of Georgian economy,” Welton elaborated.

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