Irakli Gharibashvili: “Georgia has signed free trade agreements with the markets of 2.3 billion consumers.”

Verdict: FactCheck concludes that Irakli Gharibashvili’s statement is TRUE.

Resume: On 27 June 2014, Georgia signed the Association Agreement with the EU in which the free trade agreement is one of its most important elements. Since January 2018, a free trade agreement with China also came into effect. Georgia has signed similar agreements and others with equal significance with the UK, Turkey and CIS member states. The total number of people living in these countries is 2.3 billion which amounts to 29% of the global population. The share of these countries in the world economy is even higher at 43% which is a far more important indicator as compared to the size of the population.

Analysis

In his interview with China Central Television (CCTV), the Prime Minister of Georgia, Irakli Gharibashvili, underlined the importance of free trade and stated whilst speaking about the context of bringing Georgia and China closer in terms of the economy: “Georgia signed free trade agreements with a market of 2.3 billion consumers.”

Georgia is open vis-à-vis international trade. There are no export duties whilst tariffs on import are either low or non-existent. The budget foresees GEL 16.3 billion from the taxes where import tax is under 0.8% and amounts to merely GEL 130 million.

The negligible amount of import tax volume is precipitated by low tariffs (0%, 5% or 12%) and by free trade agreements – or treaties that are equal in substance – signed with most of the country’s top trade partners. Such agreements have been signed with the EU, the UK, EFTA (Norway, Switzerland, Iceland, Lichtenstein), Turkey, Ukraine, the CIS, China and Hong-Kong.

As of 2022, these countries with whom Georgia has unlevied trade, have accounted for 80% of the country’s total trade turnover (86% of export and 78% of import).

Market size is usually measured by the size of the economy. The total economy of these countries which have free trade with Georgia exceeds USD 40 trillion which is over 40% of the global economy. This fact would have been a much better indicator to convey this information, although the Prime Minister still decided to emphasise the size of the population.

Table 1: Countries in Terms of Size of Population (2023) and Economy (2022)

Source: worldpopulationreview.com and the World Bank

The total number of people living in these countries and groups of countries is indeed 2.3 billion. Given the fact that this figure is accurate as well as the total share of the population of these countries being smaller as compared to these countries in the total economy to the world population/economy ratio, the use of such a methodology cannot be considered as a manipulation.

Apart from the aforementioned countries, Georgia has ongoing negotiations on free trade agreements with the USA, Japan, South Korea, India, Israel, the UAE and Saudi Arabia. If concluded successfully, Georgia will have unlevied trade with those countries which account for over two-thirds of the world’s economic output and where more than half of the global population lives.

There is consensus which is better – free trade or protectionism. Some economists believe that free trade takes priority since prices decline as a result of the abolition of tariffs which allows people to buy more and diverse goods. Some others argue that it is more important to protect local production and this goal cannot be reached without taxing imported goods.

Despite this divergence in opinions, countries that have free trade with the rest of the world are richer as compared to other countries with closed economies. The top ten countries in terms of the free trade ranking are as follows: Singapore, Australia, New Zealand, Georgia, Mauritania, Switzerland, Taiwan, Brunei, Norway and Spain. Although neither Georgia nor Mauritania can be considered as developed countries, the rest of the eight are rich countries. Chad, Equatorial Guinea, Sudan, Djibouti and North Korea are at the bottom of the ranking. In this case, all of them without exception are poor countries.

In his interview, Irakli Gharibashvili also stated that if Chinese industrial or other types of companies open branches in Georgia – whether in the form of factories or enterprises for components – they will have an opportunity to freely export their goods to the EU without tariff barriers. This kind of opportunity was available before but has hitherto not been used. As of 2023, China is second largest economy after the USA whilst the EU (total) is the third largest. Prior to the pandemic, the trade turnover between China and the EU was EUR 562 billion in 2019 which increased to EUR 856 billion in 2022.