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The new silk road: The US needs a free trade deal with Georgia

The new silk road: The US needs a free trade deal with Georgia
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Georgia, the small European country nestled along the shores of the Black Sea and astride Europe’s highest mountains, is one of the few unequivocal success stories in a region where America’s security and commercial interests are strong and growing. The next natural step to extend that relationship is a Georgia-U.S. Free Trade Agreement. This would enhance the security and prosperity of Georgia, while offering U.S. companies a new and dynamic route into Eurasia, the Middle East and the EU.  

Due in large part to bipartisan support in Congress and the U.S. government, Georgia is thriving. USAID, OPIC, Millennium Challenge, and the Departments of State, Commerce and Defense all continue to contribute to that success. This has helped create a long track record of free-market economic reforms and diversification and improvements in the democratic environment that continue to unleash the talents and entrepreneurial instincts of its highly educated population.

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Prudent policy, exports, tourism, investment and a commitment to becoming a regional hub for trade have fueled this success. Meanwhile, diversification in energy, tourism, transportation, agriculture, logistics, and business processes offer exciting growth potential.

As a result, in October, the International Monetary Fund revised Georgia’s annual growth to 4.3 percent which is an extremely healthy outlook and more than double the regional average. Moody’s has already signaled its confidence in Georgia by upgrading its local and foreign currency issuer ratings to Ba2 from Ba3, one notch away from investment grade.  

These improvements reflect the success of market reform efforts over many years. Most recently, this has been led by Georgian Prime Minister Giorgi Kvirikashvili’s four-point strategy to draw investment to the country by modifying income tax laws favorably for most businesses, streamlining governance to drive efficiency, accelerating critical infrastructure projects, and focusing investment in education on the most needed areas and professions.

Georgia has the most business friendly, reliable, and predictable business environment in the region.  Georgia’s favorable tax regime is the 9th least burdensome in the world, according to World Economic Forum. This is significant enticement to both local and international investors.

Moreover, Georgia is emerging as a regional hub for trade on the New Silk Road. Georgia is now less than 10 days overland from China, and within four days of any point in Europe. A new deep-water port on the Black Sea will further enhance this connectivity as it will be capable of handling up to 100 million tons of cargo and the world’s largest container ships. The Anaklia Port Project, estimated at $2.5 billion, is an ambitious joint venture between US and Georgian firms and will be operated by an American company.

Georgia now has a Deep and Comprehensive Free Trade Agreement with the EU, and its citizens enjoy visa-free travel to the Schengen countries. Georgia has free trade agreements with Turkey, the European Free Trade Association countries, and CIS countries including the Russian Federation.  Georgia recently signed an exclusive free trade agreement with China, which is having an explosive impact on Georgia’s export markets and promises to put this small country in an enviable position — with a modern deep-water port — along Eurasia’s New Silk Road. In all, Georgia currently has free access to a market of over two billion consumers.

Improvements to Georgia’s infrastructure will, in itself, bring huge business opportunities. The Georgian Government has announced $4.5 billion of transport infrastructure projects over the next four years; a continuation of transport, energy and infrastructure enhancements that have been taking place for years.

Major U.S. companies like AECOM in engineering contracting and General Electric in contracting and equipment sales have been taking advantage of Georgia’s opportunities. Other U.S. companies have also invested over many years in tourism, telecom, IT, energy production (hydro, wind and solar) and many other sectors. But the Georgian market still remains relatively unknown to U.S. companies.

To help correct this oversight and help U.S. companies take better advantage of these opportunities the most urgent need is a Free Trade Agreement between Georgia and the United States.  An FTA would benefit both countries significantly.

We have seen, for example, how America’s FTA’s with Chile and Singapore dramatically increased exports and overall trade, giving US companies’ footholds for accessing new markets and expanding their business in those regions.  Georgia is a highly educated and westernized, low-cost and low-tax access point to Europe, Eurasia, the Middle East and Asia. And for many American companies, it can provide a similar foothold.

The bond between Georgia and the United States was based initially on an unbreakable commitment to freedom and on increasing geopolitical and energy security along this European borderland. Now commerce and trade undergird and support that commitment. The next logical step in this welcome process is a Free Trade Agreement that offers American investors a leg-up in a busy and growing marketplace. This should be a priority to strengthen the economy and security of both countries.  

Michael Cowgill is the president of the American Chamber of Commerce in Georgia and president and co-founder of the Georgian American University.