Time is right for a US-Georgia Free Trade Agreement

This week Vice Prime Minister and Foreign Minister of Georgia Giorgi Kvirikashvili will meet with U.S. Trade Representative Michael Froman to conduct a high-level trade dialogue. The American – Georgian business community hopes that this meeting will lead to the beginning of negotiations on a U.S.-Georgia Free Trade Agreement (FTA). Opening such negotiations would increase opportunities for American businesses to export to, and invest in, Georgia.  

At a time when ‘Westernization’ is under pressure in the region, an FTA would be a tangible political signal of continued U.S. support for Georgia.    

{mosads}This type of visible support is particularly important as Russia continues to pressure Western-oriented governments in the region. While the government of Georgia remains committed to Euro-Atlantic integration, there are forces inside the country that would dearly love to see that orientation come to an end.   

The U.S. alone can’t deliver NATO or EU membership. However, opening negotiations on a U.S.-Georgia FTA is a bilateral step that would be an ideal signal of support for Georgia’s Westernization agenda.  

U.S. exports to Georgia, at $300 million in 2014, are significant and largely concentrated in machinery and cars. However, there is evidence of fast expansion in others areas. In the last two years fast food chains such as Wendy’s, Dunkin Donuts, Domino’s Pizza, Burger King, Taco Bell, KFC and Subway have all entered the Georgian market for the first time. Clothing retail is also rapidly expanding with U.S. brands such as GAP, Banana Republic and Tommy Hilfiger opening storefronts in Georgia. 

Large infrastructure projects and government procurements also offer sizeable opportunities for U.S. firms. Projected investment in hydropower alone is $4.1 billion over the next few years. While U.S. investors are prominent in developing large-scale projects, Asian and European firms have been winning the majority of engineering and construction projects. American firms would do well to enjoy the same trade agreements as their international competitors.  

The government is also currently selecting the final consortium to build a new port in Georgia that could represent a $5 billion investment over the next 7-10 years. The Conti Group, a U.S. firm, is on one of two final consortia. American companies are also participating in projects from medical facility development to waste management. 

An FTA between the two countries would not only aid these companies in exporting American products and machinery to facilitate these projects, but would also greatly encourage other American companies looking to expand into the region. 

Georgia has worked hard to become a valuable partner to the U.S. The country is already a hub for the region, with low corruption, a simplified tax system, bilateral trade ties with its neighbors and a business-friendly legislative environment.  

In the technology sector, the government of Georgia recently signed an agreement with Microsoft to respect intellectual property rights. The deal, worth $20 million, is unique in the region, and is just the beginning of a series of measures aimed at intellectual property protection that could open up the country for ICT sales and investments in research and development.

Business opportunities that would follow an U.S. – Georgia FTA also move significantly beyond Georgia’s borders. Georgia’s economic and strategic importance as a transit route for oil and gas supplies has never been so important – the country offers the only route from the Caspian Sea to Europe that does not go through Russia. A BP-led consortium is in the process of tripling the capacity of gas that is transported across the country, with a pipeline upgrade that represents a $2 billion investment in Georgia alone. 

As important as Georgia is in the energy transportation world, the country is not only valuable as a transit route for oil and gas. A ‘New Silk Road’ transit route is quickly emerging between Europe and Asia – Georgia is supporting the development of this route through a heavy investment in port, road and rail infrastructure.  

The recent Tbilisi Silk Road Forum, which was held earlier this month, , saw over 500 companies from 34 countries, including the US, visit the country to investigate ways of utilizing Georgia’s location and trade-route potential.  

Offering a ‘force-amplifier’ to these benefits, Georgia signed the Association Agreement, including a Deep and Comprehensive Free Trade Agreement (DCFTA), in June of last year.

The DCFTA will give Georgia free-trade access to the EU for its goods and services. This further enhances Georgia’s attractiveness for businesses that want to gain access to the EU market and will make Georgia a more comfortable place for Western countries to set up businesses with a view to other regional markets.

An FTA with Georgia is also unlikely to create any significant new competition for U.S. companies. Manganese makes up more than 80 percent of U.S. imports from Georgia. This is mined and processed in Georgia by a U.S. company and does not compete with U.S. producers.  

Politically, opening negotiations on a FTA would send a signal of continued material support for Georgia at an extremely important time. Georgia’s track record of reforms to fight corruption and improve the business environment has been widely acknowledged.  

In a region where human rights and rule of law are often ignored, Georgia has remained a rare bastion of democratization, Westernization and transparency. Entering into discussion about a Georgia-U.S. FTA would acknowledge this success.  

At a time when Georgia is at risk, this FTA negotiation would also provide a platform for revitalized bilateral engagement and a mechanism to encourage increased U.S. commercial engagement in the region. It would open up opportunities for U.S. companies and boost the argument for Westernization, just when Georgia needs it the most.

Williamson is president of the American Chamber of Commerce in Georgia.