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[Contribution] Georgia-Korea FTA is a win-win for both partnersBy Sanjay Kumar
Published : March 22, 2023 - 15:00
Georgia and South Korea have more in common than meets the eye. The sheer size of the economy and population aside, fundamentally, both countries share a long-lasting historical experience of struggle for independence and freedom. Nowadays, both Georgia and South Korea find themselves in a complex geostrategic regional environment, yet their adherence to the rule-based international order and shared values of democracy, human rights and the rule of law is unwavering.
A closer look at economy in general and international trade in particular reveals that Georgia and South Korea are both proponents of the free market economy, multilateral trading system and more liberalized trade. South Korea is a true economic power house and the remarkable success of Asia’s number four economy in recent years, is nothing short of a miracle. Georgia, on the other hand, has stood out as a top reformer and its business environment ranked seventh among 190 states in the World Bank’s 2020 Doing Business Report. Georgia’s economy showed an impressive double digit growth of 10.5 percent and 10.1 percent in 2021 and 2022, respectively. Furthermore, according to the International Monetary Fund’s projections, Georgia will ensure fastest economic growth in medium term (2023-2027) among regional and European countries, amounting to 5 percent, supported by infrastructure spending, foreign direct investment inflows and structural reforms.
Georgia’s vision to position itself as a regional trade, energy, transport, logistics and digital hub is compelling. Considering its strategic location, with access to Europe, Asia and the Middle East, coupled with simple and service-oriented customs policy and administration, Georgia is poised to serve as a critical link in various connectivity initiatives between Europe and Asia and vice versa. The two recently announced flagship projects -- the Black Sea Submarine Electricity Cable project (a quadrilateral memorandum between Georgia, Azerbaijan, Romania and Hungary was signed in December, 2022) and the revival of the Anaklia Deep Sea Port project on Georgia’s Black Sea coast (call for expression of interests was announced in February, 2023), reaffirm further Georgia’s strategic importance in creating transit opportunities/back-to-back trading options of green renewable energy across between the EU and South Caucasus and consolidating its role in European logistics landscape.
Meanwhile, bilateral economic cooperation between Georgia and South Korea has been deepening in recent years. The two signed the Agreement on Economic Cooperation in March 2019, which promotes joint activities and collaboration in the areas of mutual interest.
Furthermore, negotiations are currently ongoing on the draft agreement for the promotion and protection of investments, the so-called bilateral investment treaty, which should pave the way for greater investment and economic cooperation, including through promotion and facilitation of joint ventures and investment projects on the territories of both countries.
Currently, as members of the World Trade Organization, Georgia and South Korea enjoy trade relations based on the foreign trade policy provisions under the auspices of the WTO. The trends in bilateral trade have been mixed over the past years. We saw upward trends in the years following the 2008-2009 world economic crisis, with an annual high of $164 million in 2014. The figure fell to $87 million in 2015, but as of 2018, bilateral trade between the two countries begun to recover, with trade volume reaching $113 million in 2020, even despite the COVID-19 pandemic. In 2022, the trade volume amounted to $97 million, showing growth of 21 percent compared to the previous year. Georgia’s main export commodities to the Republic of Korea include copper ores, copper scrap, plastic products, wine in comparatively lesser volumes, plastic containers, mineral waters, etc.
Against this backdrop, it is only prudent that both countries are committed to establishing a free trade regime and are in fact undertaking necessary procedures to launch promptly official negotiations. A Joint Declaration on the conclusion of the Feasibility Study on Free Trade Agreement between Georgia and the South Korea was signed between the relevant ministries of both countries on Nov. 30, 2022.
In line with the findings and recommendations of the study, the Georgia-South Korea free trade agreement promises substantial advantages for both partners. It would serve as a catalyst for subsequent enhancement of trade and economic collaboration between the two countries and will ensure the setup of institutional framework for the broad spectrum of bilateral cooperation. The talks on the potential FTA should launch based on mutual interest covering trade in goods and services, as well as wider areas of trade facilitation, trade remedies, non-tariff measures, intellectual property and others.
Following the conclusion of the FTA between the parties, substantial growth in the exports of Georgian wine is expected, which Korean consumers have come to appreciate and love. The agreement will also lead to growth in the export of mineral waters, tea, honey, nuts, fruits and vegetable juices and cans, spices, non-alcoholic carbonated drinks and other high quality Georgian products, to name the few.
It is obvious that the real potential in bilateral trade-economic cooperation remains untapped and hence, the timely conclusion of the FTA would have positive macroeconomic impact on the economies of both countries.
More importantly, Georgia can effectively serve as the best gateway for the Korean companies in the region, taking into account its geographic location and business environment it offers. Georgia is renowned by the network of preferential trade regimes it enjoys within and beyond the region, covering one-third of world consumer markets. It is the only country in the region enjoying free trade with China and the European Union.
Most recently, Georgia and United Arab Emirates concluded negotiations on the comprehensive economic cooperation agreement on March 17, 2023 after only three rounds. Based on the agreement, Georgia will benefit from a free trade regime with the UAE, opening additional opportunities for the country’s export oriented companies to access additional 10 million consumer market without import duties.
Hence, Georgia and South Korea are only to gain from the timely conclusion of the FTA.
Doing so would elevate the bilateral ties to a qualitatively new level, while enabling both parties to achieve deeper regional economic integration and greater participation in global value chains.
Tarash Papaskua is the Georgian Ambassador to South Korea. The views expressed in this article are his own. -- Ed.
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