Analysis of Georgia’s international trade relations (საქართველოს საერთაშორისო სავაჭრო კავშირების ანალიზი)

Abstract

In the context of trade liberalization, governments have changed protectionist tools, and in many cases, they protect domestic industries with the variations of non-tariff barriers. Georgia has signed bilateral or multilateral trade agreements with many countries around the world, which aim to stimulate trade flows. However, despite the occurrence of the free trade regimes that relieve trade from the burden of tariffs, the effect of non-tariff barriers is in some cases full-scale. In the present article, against the background of these non-tariff barriers, an attempt is made to assess the effectiveness of stimulating Georgia’s international trade flows using the following well-known indices in the economic literature: Trade Openness Index, Geographical and Sectoral Trade Composition Indices, Export Diversification Level Index, Export Growth Margin, and Sectoral Comparative Advantage Index. In the present paper I conducted a detailed analysis about Georgia’s current international trade flows. In particular, the structural characteristics and trade indices are estimated based on the export and import statistics for September 2020. In international trade, indices help us to show the results of the country’s trade activities. The trade results include: 1) Georgia’s trade flows’ quantity statistics, 2) What are trading commodities, and 3) who are Georgia’s trading partners. The analysis of all three components is important, since each of them generates effects that have an impact on the domestic economy. The country’s trade volume is closely linked to trade openness, which measures the ability of the economy to integrate into world trade flows and in the global value chains. Trade openness can also be understood as an indicator of the “achievement” of trade policy. As for the second topic, about trading commodities, it defines the structure of the imports and exports, connected to productive factors and the technologies available in the economy. Also, it is directly related to the diversification of the Georgia’s exports and the country’s comparative advantage. The third topic - who are Georgia’s trading partners - reveals the fact of how profitable the country’s position is. For example, the existence of trade lines with growing and technologically strong markets will lead to the increase in the productivity of the economy. Geographical and territorial distances between countries are important here. In the article we will see that free trade regimes have a positive impact on Georgia’s international trade flows, which is reflected in Georgia’s trade openness index. Georgia has many trading partners, including EU developed countries, to which it trades in similar industries, which is a positive indicator of sectoral convergence with these developed economies. We will also see that Georgian economy has a low level of export diversification. However, locally, the export growth margins of the economy are normal.