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Free Trade with Turkey: Pros & Cons

Published: November 12, 2012 | 10:04 am
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Despite simplified trade relations with Turkey, Georgian market is far behind the neighbor in terms of its production realization.

For the past few years Turkey remains Georgia’s top trade partner. Thus, Georgian-Turkish trade turnover has growth tendency, on Turkish benefit though.

Since Russia put an embargo on Georgian production in 2006, Turkey became the number one export market. However, in a few years other countries replaced the leader. As for import, Turkey maintains its leadership position. This has been supported at a great extent by Georgian-Turkish trade relations entering a new phase.

On December 19, 2006 a Preference Trade Agreement was signed in Ankara between Georgia and the Republic of Turkey. Both side officials were predicting this would turn into a Free Trade Agreement and it came true soon on November 21, 2007.

According to the agreement, customs duties on imports and any charges having equivalent effect on industrial products originating in the Republic of Turkey or Georgia are reciprocally abolished upon the entry into force of this agreement.

For the past few years Turkey remains Georgia’s top trade partner, based on import volume mainly.

According to the National Statistics Office of Georgia, Turkish shares in the total export volume make 7%, based on January-September, 2012 data. This means that Georgia’s export volume to Turkey is less than the volume of production exported to the U.S.A and Armenia.

From 2007 to 2011 Georgia’s trade turnover with Turkey was as follows: 2007- USD 171 763.9; 2008- USD 262.768.7; 2010- 216.799.3; 2011- USD 227.583.8.

According to Maia Guntsadze, Deputy Executive Director of the National Statistics Office of Georgia, the top ten exported products from Georgia to Turkey include: scrap-iron, ferroalloy, cars, cloths, electricity, copper, aluminum, cast iron and fertilizers.

Despite the fact that, according to the Free Trade Agreement, 1 million liters of Georgian wine is allowed to be exported to Turkey tax free, it is not included in the top ten list of export products to Turkey. Part of Georgian wine-makers are not interested in Turkish market while some, for instance, Schuchmann Wines Chateau Georgia is holding negotiations with Turkish side and plans to enter the neighboring market in near future.

The reason for the lack of the interest of Georgian wine-makers in Turkish market might be that wine is a non-traditional drink in Turkey.

 

Import data look different. Here Turkey is the ultimate leader. According to January-September, 2012 statistics, the neighboring country leads with 18% shares.

The export-import data shows that, despite Free Trade regime, the balance is not reached.

Though the Free Trade agreement allows Georgian manufacturers export their production to Turkey free from customs duties, Turkish market is still low-saturated with Georgian production.

According to Irakli Lekvinadze, Economy Expert, Georgian-Turkish relations are quite dynamic, which is strengthened by visa-free regime, geopolitical interests and economic partnership.

“Since the activation of Free Trade regime between the countries, trade turnover has become more active, which is proved by the growth indicator. In general, Turkey is Georgia’s largest trade partner. Trade turnover between the two countries has increased from USD 900 million to USD 1.5 billion from 2007 to 2011, which is a significant growth,” noted Lekvinadze. “Turkey’s shares in the total trade turnover have increased from 14% to 17% while export growth has made USD 51 million and import showed USD 572 million growth.”

As Lekvinadze said, Free Trade regime with Turkey is doubtlessly profitable for Georgia. “There’s no doubt that Free Trade regime with Turkey is profitable for Georgia. Yes, our export volume is less compared to import statistics, but closing market or setting limitations is not a solution.”

 

While Georgian-Turkish relations keep moving unchanged, a number of new Turkish small and medium size companies are opening in Georgia. Turkish businesses are well represented in Georgia’s banking sector, construction materials, transportation, restaurants.

 

According to Lekvinadze, the export-import misbalance between Georgia and Turkey doesn’t carry Turkish expansion threat when Georgia’s local market is competitive.

 

 

 

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