Major Potential in Georgia-China Free Trade, Study Finds

Georgia is uniquely positioned to be a bridge between East and West. With it’s relationship with Europe firmly established, the country’s political and business leaders are now turning their attention toward China, currently its 4th-largest trading partner and 3rd-largest source of foreign direct investment. In June 2015 Georgia became a founding member of the Chinese-led Asian Infrastructure Investment Bank, and last month Prime Minister Irakli Garibashvili referred to China when commenting that “Georgia is not only looking West” with regards to foreign policy.

Both Georgia and China would benefit from closer economic ties, says a recent study by the Tbilisi-based consultancy Policy and Management Consulting Group (PMCG). Titled the “Joint Feasibility Study on China-Georgia Possible Free Trade Agreement” and produced in collaboration with the University of International Business and Economics, the Ministry of Economy and Sustainable Development of Georgia and the Ministry of Economy of China, the study projects that a free trade deal would boost Georgia’s annual exports to China by 9 percent and China’s to Georgia by 1.7 percent.

Georgia’s top exports to China currently are copper ore, copper scrap and wine, all of which could see higher volumes from a more open trade regime. Wine and non-alcoholic beverage producers would benefit most, according to the study, with annual wine exports to China projected to increase by 28.5 percent and non-alcoholic beverages by 36.7 percent.

On the Chinese side, most exports to Georgia are higher value-added goods like electronics, steel and shoes. China’s gains would be more modest (Georgia already has very low tariffs on Chinese goods), but the study projects that under a free trade agreement more Chinese goods would be purchased by Georgian consumers.

The benefits of a free trade deal would not be limited to trade in goods, however. According to the Joint Feasability Study, an agreement would also facilitate trade in services and FDI, the latter being of particular importance to Georgia. Chinese firms currently invest in major projects in Georgia’s infrastructure sector, including the Poti Free Industrial Zone. More FDI is seen as crucial to the country’s continued economic development.

Joseph Larsen