How a free trade deal with Georgia could benefit the US

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Why might the US suddenly be interested in Georgia? It might make more economic sense than you think.

Free trade agreements are regularly being negotiated and signed across the globe, but it looks as though a new one might be emerging between one of the biggest countries in the world - and one of the more modest.

According to trade experts, US president Donald Trump is keen to sign a trade deal with the country of Georgia, which has a population of just over four million and only emerged as an independent state in 1991.

Why Georgia?

A country in eastern Europe geographically, it is situated on the Black Sea coast and can therefore geopolitically be classed as falling within Europe, the Middle East, or both.

So, why might the US suddenly be interested in Georgia? Firstly, perhaps, because other countries have already negotiated with the former Soviet state.

It has had close ties with the European Union since 2014 when they both entered into the EU-Georgia Association Agreement to establish a Deep and Comprehensive Free Trade Area. This ensured Georgia free movement of goods, services, capital and people within the bloc.

Other deals also exist between Georgia, China and Turkey, to name but two more.

Another point is that Georgia has always been a loyal supporter of America's military action in Afghanistan and has even retained troops there. With the war finally beginning to come to a close, Mr Trump may want to make a similar expression of support and thanks by offering Georgia an economic boost.

After all, the president of the US is known to favour one-to-one trade deals and already has FTAs with 11 smaller nations, according to the US Census Bureau - what difference would one more make?

What's more, there has already been trade dialogue between the US and the eastern European country dating back to 2012; the two nations signed a bilateral investment treaty and a bilateral trade and investment framework agreement.

Since almost everything appears to be in place, surely it would seem foolish not to go the final furlong and sign the deal?

More to Georgia economically than meets the eye

However, to write this potential partnership off as a 'might as well' for the US would be to do Georgia a disservice and fail to recognise the possible benefits for both sides.

Actually, a formal agreement would strengthen an already-positive trade relationship, according to Washington-based conservative think tank the Heritage Foundation. This group has long been pushing for an FTA with Georgia and argued that Mr Trump should make it a priority for this year.

The organisation points out that Georgia is currently ranked seventh in the World Bank's Ease of Doing Business index, and has risen from 124th on the Index of Economic Freedom published by the Heritage Foundation to just 16th, the biggest jump on record.

In addition, Georgia's GDP growth was the fastest in its region for 2017 and 2018 at 4.8 per cent a year, with the International Monetary Fund predicting a sustained rate of 4.9 per cent for 2019 to 2021.

Meanwhile, a study published by PwC in 2018 suggested US exports to Georgia would grow by 20 per cent over three years if there ever was a free trade deal, delivering tangible economic benefits - and it could also open up an entry point to a regional market of half a billion people for US companies.

For Georgia's part, an FTA would not only help its economy grow, but also align it more closely with the European economies it wishes to identify more strongly with.

Georgian prime minister Giorgi Gakharia has made no secret of the fact that he is eager for an FTA to happen. Speaking at an economic forum called Georgia and The World 2020, he was quoted by Georgia Today as saying: "A trade agreement is a logical continuation of our partnership with the US. We've nurtured our relationship to the point where we are ready to welcome more US companies to Georgia.

"Georgia is a small market and yet we want our country to emerge mainly as a platform and hub for trade and business activities between larger economies, and for investment services." 

With so many plus points for the US as well as this small eastern European nation in signing an FTA, it seems likely that a deal may indeed be forthcoming before too long - and that it certainly isn't about Mr Trump doing Georgia a favour.