On 10 September 2015, during his visit to China, the Prime Minister of Georgia, Irakli Gharibashvili, talked about concluding a free-trade regime with China. Mr Gharibashvili stated that Georgia will be the first country in the region which will have a free-trade regime with China.
FactCheckverified whether or not the countries of our region have free-trade regimes with China and also analysed the issue of trade between Georgia and China.
Free trade between two countries implies trade without custom duties and quantitative limitation (quotas). The Government of Georgia is seeking to conclude this kind of trade deal with China and is ready to start negotiations. Free trade increases trade volume between two countries as well as the level of diversification which is mutually beneficial. At the present moment, Georgia has free-trade agreements with the countries of the European Union, members of the Commonwealth of Independent States (with the exception of Russia) and Turkey.
According to the Chinese Free Trade Agreements network,China has free-trade regimes with the member states of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam), Hong Kong, South Korea, Pakistan, Chile, Peru, Costa Rica, New Zealand, Australia, Iceland and Switzerland. Additionally, negotiations to conclude free-trade agreements are on-going with certain Arabic countries (Bahrain, Kuwait, Oman, Saudi Arabia and the UAE), Japan, Norway, Sri Lanka and the Maldives. China is also considering starting negotiations with India, Columbia, Moldova and Georgia.
As it appears, China does not have free-trade agreements with any countries from our region and if Georgia manages to pass the negotiations steps without delays, it will be the first country indeed. As concerns Europe, China has already concluded free-trade agreements with Switzerland and Iceland whilst negotiation with Norway is still in progress. China does not have a free-trade agreement with the EU and it is not even on the agenda. Together with Georgia, China is considering starting trade negotiations with Moldova.
Since 2010, Georgia’s export to China has been increasing rapidly (Graph 1). In 2009, total exports were USD 6 million whilst in 2014 they reached USD 90.4 million.
Graph 1:
Georgia’s Export to China (USD million)
Source: National Statistics Office of Georgia
On the other hand, Chinese exports to Georgia have also been increasing markedly (Graph 2). They increased fourfold in 2014 as compared to 2009.
Graph 2:
Import of Chinese Production to Georgia (USD million)
Source: National Statistics Office of Georgia
In January-July 2015, trade turnover between Georgia and China reached USD 421 billion which is 7.6% of Georgia’s total trade turnover. As a result, China is Georgia’s third trade partner in terms of trade volume after Turkey and Azerbaijan.
As of January-July 2015, the biggest chunk of Georgia’s exports to China comprises copper ore and concentrates (USD 40 million) and wine (USD 3 million). Computers, home appliances and furniture dominate Chinese exports to Georgia.
Of note is the fact that Chinese production is one of the most competitive in the world and can easily penetrate any market, including Georgia’s, despite custom duties. On the other hand, a free-trade agreement with China means the opening of a considerable market of 1.4 billion people for Georgian products.
Conclusion
China has 21 free-trade agreements in the world whilst there are on-going negotiations with an additional ten countries. None of these countries belongs to our region. Further, China does not have free-trade agreements with EU member states. However, it does have free-trade agreements with Switzerland and Iceland whilst negotiations with Norway remain in progress.
Trade between China and Georgia has been increasing rapidly and as a result China has become Georgia’s third trade partner in terms of trade volume. A free-trade regime with China will help Georgia to increase the volume of exports but have only a minor impact on import from China because Chinese production is highly competitive even if tariff barriers are imposed. At the same time, Georgia has a liberal trade regime with custom duties from 0% to 12%.
FactCheck concludes that the Prime Minister’s statement is MOSTLY TRUE.
