Georgian-US Trade Statistics Is Missing One Billion
21 June, 2012

Approximately 54% trade difference exceeding one billion dollars was disclosed in Georgian-US trade statistics in 2004-2012. The missing amount is on Georgian side, which arises the contraband and elite corruption suspicions in the country. Georgian government ascribes the alleged loss to the incorrect calculation method. 

Georgian state budget missed more than USD 1 billion in the trade with its strategic partner the US in 2004-2012, Shalva Mekvabishvili, an independent economic analyst, assures in his researched aired on June 13, 2012.

He compared trade data of Georgian-American export-import put on official web-pages of the US State Census Bureau and Geostat, national statistics body of Georgia, and disclosed approximately 54% loss in Georgian data amounting to USD 1.858 billion.  Mekvabishvili believes the missing goods in Georgia bespeak of a shadow economy and elite corruption.
According to the research, the US data indicate that trade with Georgia accounted for USD 4. 276 million in 2004-2012. Georgian statistics put USD 2.418 million for the similar reported period of trade that translates into the USD 1.858 million loss cutting the US data down by 54.5%. As a consequence, Georgian state budget lost at least billion through unpaid customs tolls.
“56.7% of the trade between the US and Georgia was ‘shadowed’ in Georgia in 2004 compared with the US data,” the research reads. “The shadow figures break down as following: 57.5% - in 2005, 49% - in 2006, 38.8% - 2007, 38% - in 2009, 27.2%-2010, 45.5% - in 2011, and 45.6% in January-March of 2012.”
Mekvabishvili accentuates that difference in figures mainly come on those product import of which are monopolized in Georgia like oil product, meat, rice, and alcohol drinks [except wine] that indicates on elite corruption enabling elite importers to hide taxes.
“Pet food for example shows almost no difference while sectors that are monopolized show huge difference,” Mekvabishvili explained to Georgian Journal.
Based on the research, 98.6% of oil product sent from the US in 2011, as well as 89.2% of alcohol drinks [except the wine], 87% of rice, and 66.5% were not registered in Georgia. As a result of only meat contraband Georgian state budget faced at least GEL 12 million through unpaid Value Added Tax (VAT), Mekvabishvili elaborated.
Lili Begiashvili, Deputy Head of Revenue Service of Georgia, ascribes the allegedly missing trade to inadequate calculation made by Mekvabishvili who did not envisage specifics of sea transportation that makes price difference in any foreign trade globe over.
“The method of calculation most probably does not envisage either sea transportation specifics that always make price difference between the cargo’s start and destination countries, or insurance and logistics costs. Statistics calculation should be based on its special method if you calculate figures without this method you always can make different figures,” Begiahsvili said in the interview with GJ.
Moreover, she assures that ship owners been commercial entities bear no obligation to deliver cargos to the place of their destination.
“If they on their way will stop at some other ports and find more profitable to sell the cargo there they have full right to do this and we cannot control that, nobody has a right to prohibit this. That explains the difference,” she elaborated.
Mekvabishvili counters that freight insurance and transportation costs could make only about 5% difference not as big as he disclosed in fact.
“Besides, why only the monopolized goods show the difference and others are OK?” he asks.
Independent customs experts think the research cannot be taken for granted and an in-depth analysis should follow. They assure such data errors are quite frequent in trade statistics and partly the reason is defects in some countries’ customs statistics. Quite often customs of exporting countries in the destination country indicate not the final point but the port country. Therefore cargos exported by the US to Azerbaijan and Armenia or Afghanistan through Georgia  may indicate Georgia as the destination country while it is re-export to Georgia in fact.
However, they do not rule out contraband and corruption schemes. Therefore suspicious economic crime cases should be researched on the state level as far as it is beyond independent experts’ competence.
Mekvabishvili together with other independent Georgian experts, asked the US Embassy in Georgia to set up a bilateral working group to find out the reason of the questioned trade difference.
“Both American and Georgian authorities should give an answer where these differences came from,” Soso Tsiskarishvili, an economic analyst, said.  
Begiashvili rules out contraband fears and does not think the issue is worth of any in-depth research as far as all data are transparent. 
“We have our data open at our web-sites; the US also has data available on its web-site. Let everybody compare them in due manner, what else are we supposed to do?” Begiahsvili argued.
The US embassy in Georgia says it is aware of the difference between the US and Georgian trade statistics and refrains from making conclusions before further analysis is made.
“It is not uncommon for there to be differences in statistics between trading partners, which can be attributable to a variety of factors.  Before reaching any conclusions about the reasons for the discrepancy between current U.S. and Georgian trade statistics, further study and analysis are required,” The US embassy commented to GJ.

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