Georgia between European Scylla and Chinese Charybdis

Giorgi Kalatozishvili, Tbilisi. Exclusively for Vestnik Kavkaza
Georgia between European Scylla and Chinese Charybdis

"Georgia will become the first country in the region to start negotiations on a free trade area with China," the former Prime Minister of Georgia Irakli Garibashvili promised following talks with his Chinese counterpart Li Keqiang at the end of last year. The Minister of Economy and Sustainable Development of Georgia, Dmitry Kumsishvili, confirmed that talks between Beijing and Tbilisi on this subject will be completed within the coming year. "Both sides are interested in the fact that the private sector receives an opportunity to increase trade turnover. After the conclusion of the EU association agreement, Georgian products have preferences at $600 million in the EU market, and after the signing of a free trade agreement with China a $2 billion market will be opened for our products," Kumsishvili considered the bright prospect, stressing that the free trade area with China will cause "an increase in foreign investments and the creation of new jobs."

However, what can Georgia offer the Chinese market? China has become the global factory, which manufactured 'everything' a long time ago, and traditional Georgian products, fruits and vegetables, are not competitive in its market due to the flow of similar products from subtropical and tropical countries, which are closer to China.

Georgia could export wine, but despite the huge volume, China will not be able to replace Russia, Ukraine, Kazakhstan and other former Soviet countries, simply because in China there is a totally different attitude to wine in general and to the Georgian stuff in particular. The situation is similar for mineral water.

In addition, the Georgian government has not commented on the question of how the free trade area with China will affect the implementation of the Agreement on the Deep and Comprehensive Free Trade Area with the EU. However, there is a key point for future negotiations – the FTA with China means the opening of Georgia's economic borders to Chinese products, somewhat contradicts the commitments of Tbilisi under the EU agreements. So, as in the case with the negotiations between Ukraine, Russia and the EU, negotiations between Georgia and China on an FTA cannot be tripartite.

However, Tbilisi believes that this is not the main problem and that it will be able to make arrangements with Brussels in parallel with Beijing. China is certainly aware of the difficulties, but encourages Georgia's movement towards China, which is more and more active in the post-Soviet space, including in the South Caucasus region.

It is noteworthy that the negotiations on the FTA, in which Beijing is interested more than Tbilisi, began immediately after China expressed its readiness to implement a grand construction project of a deep-water port with a capacity of 100 million tons of cargo per year on Georgia's Black Sea Coast. For Georgia this project may be of the same value as the construction of the Panama Canal for Panama or the Suez Canal for Egypt. It is not surprising that the Georgian authorities are actively cooperating with the great Asian power and ready for a deeper integration in the economic sphere, while hoping for China's ability to help in achieving a modus vivendi with the EU.

The political orientation of the country toward the West is in conflict with its economic interests: Europe is believed to be the cultural and civilizational landmark for Georgia, but the EU is unlikely to be able to implement such an ambitious project as the construction of a deep-water port of Houston or Amsterdam proportions on the Georgian coast.

However, independent experts advise the Georgian authorities to find a "middle ground" in order not to ruin domestic production, which is already breathing its last. "It is a very serious challenge, because it will be hard for Georgian manufacturers to compete with their Chinese counterparts, taking into account the economic system prevailing in China with its paternalism, ultra-low costs, meager salaries and fixed expenditure," the economist Emzar Dzhgerenaya noted.