US, Georgia to explore possible FTA, ponder expanded GSP
Inside US Trade | September 26, 2008
U.S., Georgia To Explore Possible FTA, Ponder Expanded GSP
Georgian Minister of Economic Development Ekaterina Sharashidze said last week that the U.S. and Georgia will explore the possibility of a bilateral free trade agreement during a U.S. delegation’s visit to Georgia this month.
"Obviously, free trade is a process and we’re just in the very early stages of discussing how to proceed," Sharashidze said in a Sept. 19 interview following a meeting with Commerce Secretary Carlos Gutierrez. "We’ll see how it goes."
She stressed that the bilateral U.S.-Georgian discussions would be informal and the first exploration of a possible FTA between the U.S. and Georgia. Sharashidze also said the U.S. and Georgia are still negotiating about which Georgian products that would be included under the Generalized System of Preferences (GSP), and said as many as 1,400 products are under discussion.
Deputy U.S. Trade Representative John Veroneau will lead a U.S. delegation to Tbilisi, Georgia, next week for the second meeting of the U.S.-Georgia Trade and Investment Council, according to USTR. But a USTR official sidestepped a question about the possibility of U.S.-Georgia FTA talks, saying that the meeting’s focus would be on the trade agenda announced by the Bush administration on Sept. 3.
That agenda includes negotiation of an "enhanced" bilateral investment treaty and expansion of the coverage of products from Georgia that receive duty-free access into the U.S. market under the GSP.
These trade measures were part of a promised $1 billion humanitarian and economic aid package to the former Soviet republic. A continuing resolution passed by the House on Sept. 24 and funding the government until March 6, 2009, includes a $365 million appropriation for "assistance for Georgia and the region for humanitarian and economic relief, reconstruction, energy-related programs and democracy activities."
The Senate version of the continuing resolution, which may come up for a vote later this week, includes the same funding for Georgia.
The European Union has also announced an aid package worth about $707 million to help resettle the country’s refugees and rebuild the country’s infrastructure.
Sharashidze said EU officials would be following the U.S.-Georgia FTA discussions and that EU trade officials have indicated that they want to start formal talks about an FTA with Georgia at some point next year, possibly in early spring. Informal FTA talks between the EU and Georgia started earlier this year and formal talks could start as early as April, according to an informed source.
"This is an indication that not only do we have direct economic support from the European Union and America, but this is a very strong signal to support consumer confidence and most of all to support investor confidence," Sharashidze said.
Mamuka Tsereteli, the executive director of the America-Georgia Business Council, said in a separate interview that it would take a "substantial amount of time" before the framework of an FTA between the U.S. and Georgia could be developed.
Tsereteli said he felt that U.S. trade officials would likely focus more on getting Congress to approve pending FTAs with Colombia, Panama and South Korea before formal negotiations with Georgia even began. House Majority Leader Steny Hoyer (D-MD) said this week that it is improbable that the U.S.-Colombia FTA will be approved by Congress this year as lawmakers are wrestling with a Wall Street bailout before adjournment.
Still, he said a potential FTA with Georgia could lead to additional trade agreements with Georgia’s neighbors, Armenia and Azerbaijan. "Georgia is a relatively small nation, but it’s a gateway to a much larger region," Tsereteli said.
The U.S. has seemingly little to gain economically from a free trade agreement with Georgia, a country of roughly 4.4 million people, according to Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. Georgia exported about $188 million in goods to the U.S. in 2007 and about $148 million in goods in the first half of 2008, according to the U.S. International Trade Commission.
However, the agreement could have major political ramifications for both countries, similar to the FTA the U.S. entered into with Israel that took effect in 1985, "It’s 100 percent political," Hufbauer said of a possible U.S.-Georgia FTA. Hufbauer said the potential FTA would allow the U.S. to show strong support for Georgia without having to involve the American military or impose economic sanctions against Russia.
Hufbauer said the political aim of the FTA between the U.S. and Georgia will be accomplished even if the agreement is never voted on in Congress. "It shows that the U.S. is continuing to be engaged [in Georgia]," Hufbauer said.
In a Sept. 19 statement released after his meeting with Sharashidze, Gutierrez said that U.S. officials would be "working with Minister Sharashidze to expand the U.S.-Georgia trade and commercial relationship."
"We are committed to ensuring that the democratic and economic gains that Georgia has made over the past several years are not lost," Gutierrez said.
According to the statement, Deputy Secretary of Commerce John Sullivan plans to host a U.S.-Georgia Business Summit in Tbilisi on Oct. 27. That same week Sullivan will take part in a trade mission to Tbilisi, organized by the America-Georgia Business Council and the American Chamber of Commerce in Georgia, that will help U.S. companies "develop new business opportunities and learn how to participate in reconstruction projects in Georgia," according to the statement.
Sharashidze said that Georgia’s fastest growing sectors for investment include banking, construction, real estate, energy, consumer goods and hospitality.
