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US-Georgia Economic Relations: Time For An FTA? – Analysis

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By Wilder Alejandro Sanchez

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A late 2021 letter by several members of the United States Congress requests the U.S. Trade Representative, Ambassador Katherine Tie, to increase commerce and investment with Georgia. While more significant trade will not alter the complicated dynamics of the Caucasus, at a bilateral level, strengthening this sector is essential for Washington-Tbilisi relations and will have obvious positive repercussions on the Georgian economy. Signing a Free Trade Agreement between the two countries is a necessary first step for this process to occur.

Calls for more trade

The letter highlighted Georgia’s importance and how the country has been a reliable U.S. ally for the past three decades since it achieved its independence from the Soviet Union. “Georgia is a critical ally of the United States. As an evolving democracy, Georgia must make important political and economic reforms which will increase stability in the Caucasus region, and the prospect of enhanced trade relations with the United States could catalyze those reform,” the letter explains, which was signed by various Representatives, including Gerry Connolly (D-VA), Jimmy Gomez (D-CA), Adam Kinzinger (R-IL), Carol Miller (R-WV) and Steve Womack (R-AR). Several of these Representatives visited Georgia in September.

The letter highlights how more trade will have a trickle-down effect on Georgia’s economics and help promote US-made goods and strategies. “Greater economic engagement with the United States at the appropriate time could further propel Georgia’s market reforms and pro-investment policies and give American goods and services a greater foothold in South Caucasus, Central Asia, Turkey and Eastern Europe,” the signatories of the letter argue, which was partially reproduced by the Georgian embassy in Washington and by Georgian news services.

After meeting with Georgian Prime Minister Irakli Garibashvili in September, Representative Mooney also issued a call for greater trade. He is quoted as saying, “we talked about free trade, [and] increasing trade and economic relationships between the United States and Georgia.”

Without a doubt, there is plenty of space to grow as nowadays trade between Washington and Tbilisi is not particularly strong. According to U.S. government figures, trade reached USD587.7 million in U.S. exports and USD158.7 million in imports in 2021. The amount is slightly more than in 2020 when exports reached USD436 million, and imports were USD148.8 million. The leading U.S. exports are vehicles, meat (poultry), machinery, and ores, while the top Georgian imports are iron and steel, inorganic chemicals, and beverages (wine). In a recent development, a California-based company, Catapult VC, will reportedly invest in “technology ventures, [and] will launch a fund dedicated to investing in Georgia’s innovative startup.” If this venture moves forward, it will help diversify trade and investment initiatives that exist between the two countries. Georgia is the U.S.’s 100th largest trading good partner, placing it higher than neighboring Armenia (166th partner) and Azerbaijan (125th) but still far away from Central Asian states like Kazakhstan, which is the U.S.’s 81st largest partner.

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A legal framework between the two nations to improve trade and investments includes the US-Georgia Trade and Investment Framework Agreement and a Bilateral Investment Treaty (BIT). Nevertheless, as the letter states, Washington does not have a free trade agreement (FTA) with Tbilisi. On the issue of the FTA, a June 2021 report by the U.S. Congressional Research Service explains, “since 2012, the United States and Georgia periodically have discussed the possibility of a free-trade agreement. The Georgia Support Act (H.R. 923), if enacted, would express the sense of Congress that ‘the United States Trade Representative should make progress toward negotiations with Georgia’ on a free trade agreement.” However, at the time of this writing, there is no indication that an FTA will be signed during U.S. President Joe Biden’s term in office.

Current relations

Georgia has sought to strengthen relations with the United States since the 2008 war, which signified the loss of control over Abkhazia and South Ossetia. While Georgia is not a NATO member, the U.S. military aims to have a more prominent presence in the Black Sea. Georgia has emerged as a critical partner to achieve this objective as last November, Blue Ridge-class command and control ship USS Mount Whitney (LCC-20) and Arleigh Burke-class guided-missile destroyer USS Porter (DDG-78) docked in the Georgian port of Batumi. In 2021, the U.S. State Department approved a potential sale of eighty-two (82) Javelin FGM-148 Missiles and forty-six (46) Javelin Command Launch Units (CLU) to Georgia, a deal worth USD30 million.

From a diplomatic perspective, Georgia participated President Biden’s Summit for Democracy in late 2021. Moreover, senior U.S. officials like U.S. Secretary of State Antony Blinken, and U.S. Deputy Secretary of State Wendy Sherman, have recently expressed support for Georgia, particularly vis-à-vis Russia’s ambitions and activities.

With that said, Washington has not given the Georgian government a blank check in exchange for helping promote U.S. interests in the region. While certainly more democratic than other regional states, there are concerns about Georgian democracy, free and fair elections, and respect for opposition political parties. As the CRS explains, “with regard to Georgia’s 2020 parliamentary elections, U.S. officials shared the assessment of the international observation mission that the elections ‘were competitive and, overall, fundamental freedoms were respected.’” With that said, “the U.S. Embassy in Georgia expressed concern about irregularities and allegations of abuse that ‘while not sufficient to invalidate the results, continue to mar Georgia’s electoral process and are unacceptable,’” the report adds.

These statements refer to Georgia’s parliamentary elections, when Prime Minister Giorgi Gakharia won a third term and the ruling Georgian Dream party won the most seats. Opposition parties boycotted the polls and there were violent protests in the streets. In early 2021, a top opposition leader, Nika Melia, was arrested due to accusations of “inciting violence in street protests in June 2019.” Ironically, PM Ghakaria resigned over orders to detain Melia, but his successor, current PM Garibashvili, proceeded with the arrest order anyways. US Ambassador to Georgia, Kelly Degnan, recently commented about the status of democracy in the country. “Regarding the Central Election Commission, it’s obvious that there is already a deficit of confidence in the electoral process, we’ve seen that in the last few elections,” she noted.

Sign an FTA

It is debatable how much the letter by U.S. members of Congress will affect bilateral trade and investment with Georgia. Ambassador Tai, the U.S. Trade Representative, as well as Ambassador Degnan, can certainly help organize U.S. trade delegations to visit Tbilisi. However, investment negotiations and the actual construction of investment-related infrastructure are long-term processes, so it would take years to see results. Trade could improve in the short term, but it all depends on what Georgia has to offer the U.S. consumer market, industries and businesses. For example, while Georgian wine has a strong fan base in the U.S., the volume can always increase.

The first obvious step should be for Washington and Tbilisi to sign an FTA. This commercial agreement would create a legal framework that would facilitate future trade and investment initiatives that U.S. members of Congress are requesting and which the Georgian government and business community would certainly like to see.

The views expressed in this article belong to the author and do not necessarily reflect those of Geopoliticalmonitor.com or any institution the author is associated with.

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