ITC Executive Director: Redrafting the Roots of Int’l Trade for the Future

Exclusive Interview

At last week’s 2019 Tbilisi Silk Road Forum, GEORGIA TODAY sat down with Arancha González, the Executive Director of the International Trade Center (ITC), to get her take on Georgia’s present and future potential.

“Georgia is a small country, but one that is extremely open to trade and investment and needing trade and investment stability,” she told us. “Right now, there is too much instability around the world and this instability is having an impact on contracting growth, contracting investment, and it is generating a lot of business uncertainty. What we need to do is bring certainty to the economy and for that there is a need to invest in multilateralism, invest in processes and institutions that apply to everybody, so that everybody has a collective insurance policy against unilateralism and against protectionism. In the meantime, for small open economies like Georgia, what's important is to make sure you don't put all your eggs in one basket, that you find a way to not only diversify your markets but also to diversify your products; diversify the sources of value addition. This is a country that needs to invest more in value addition because that's where the jobs for tomorrow would be.”

You mentioned instability and how it reflects on Georgia’s trade. How much does solving that instability lay in our own hands?

The US and China are where the big sources of instability are today and they are not only economic, they are also geopolitical. So, of course, a small country may think that it's too small to have an impact on these two giants but a lot of small hands can have a balancing effect and this is where multilateralism matters: Georgia on its own, neighbor Armenia on its own, Turkey on its own and the list goes on: each of them on their own is too small but all of them together can be a balancing force, can be a force for good to ensure that China and the US come back to the negotiating table.

And Russia? Some western experts urge Georgia to remain cautious about trade with Moscow, fearing that Russia will use it as leverage politically or diplomatically. What’s your stance on that?

It’s not easy because there is the experience of history and obviously the experience of history is a mix of the two. You don't choose your neighbors, and in my view it makes sense to invest in making for a good neighborhood because I don't see many countries thriving in bad neighborhoods. To the extent that you can improve relations with your neighbors, I think it makes sense because it's not just trade, it is human context: tourism is part of this connectivity, and all of this requires stability in the neighborhood. As such, investing in the economic stability of your neighborhood is by definition good.

Now, you also have that experience of history, so it is understandable that you do not want to put all your eggs in one basket, that you want to have good relations with your neighbors and improve your relations with them. The neighborhood Georgia is in is particularly complicated, and we all know you also need to hedge your bets. I don't think it’s wrong to try to stabilize your relationship with Russia, including on the trade and economic front, but as you do that I think it would be smart to try and make sure you've got buffers which can help you if things don't go well in any area- to not just look at this in terms of political stability but also in terms of economic stability. Other countries have learned that if you connect with one country and that country does not do well economically, then you can be dragged down by their lower performance economically, which to me goes in the direction of needing to bet a little bit more on finding new markets, finding new customers and especially investing in more value-added locally. This is the biggest investment a country like Georgia can make because then the content, the local content, the job content, the revenue content of your work will be higher than what it is today.

When you read the Georgia brief on the ITC website, it doesn't exactly fill you with confidence about the country’s prospects. What do you think Georgia's trade potential is and how much of this potential is realized currently?

The potential is very big: you've got some things playing for you: you've got quite a good Ease of Doing Business, that's good if you want to exploit your potential; you have quite an open trade and investment regime; you've got quite good interoperability and interconnectivity. What you have not got playing very well for you is skills and technology, and these two are ingredients for value-added for the future. What you have to do is make sure you stabilize your medium to long term investments and it's not just investment in infrastructure but also investments in people, and that will not bear fruit in the next electoral cycle, it will bear fruit maybe in the next three election cycles, but this is what will matter for the future. I don't call this industrialization because I don't believe in industrialization, I believe in value-added. For example, Georgia is incredibly involved in agriculture. Agriculture is a huge source of value-added, you only need ask New Zealand, a country that has basically been built on revolution in its agricultural sector. But this means more technology in the agricultural sector, greater value-added, not exporting commodity, which is why we're working with Georgia. The work that ITC is doing in Georgia is helping Georgian agricultural producers to create higher value-added products; so not just exporting fruits but exporting juices too, and not just exporting juices, because there are many people exporting juices, but exporting types of juices that no-one else exports. We've been working with a dried fruit producer here that has now been approved as a supplier to Nestle; so that to me is value-added, which means skills and technology: the two things that the country has to invest in to get more funds back.

There is another segment: revolution in agriculture. Agriculture is no longer a farmer with a plow: agriculture is technological agriculture, with irrigation techniques, with seeds, with packaging, with transformation processes that are state of the art.

A second sector which can leverage much more in Georgia is the tourism sector. Tourism is another form of trade. We don't call it trade but you are exporting value-added and, again, where you position yourself, whether you position yourself in a market of low value-added tourism services, whether your position yourself in a higher value-added, with people coming here not just to backpack around the country but maybe to have a culinary experience or try mountain trekking, it also requires more investment in skills and also requires more investment in technology.

How long have you personally been working with Georgia?

I was Chief of Staff of the World Trade Organization Director-General, so quite a while.

Have you seen such a long term vision in Georgia as there is today?

I've seen it more recently than I did in the past. I think Georgia is investing more in the long term, including the Tbilisi Silk Road Forum: it’s not a short term investment, it’s long-term because what you are doing is redrafting the roots of international trade for the future.

By Vazha Tavberidze