Annotation. Complete integration of the Georgian economy into the global community is particularly important in the first twenties of XXI century that requires active involvement of the state authority and rational regulation of foreign trade relationships as spontaneousand uncontrolled international business relations pose a danger to maintenance of country’s independence and increase of problems in view of business safety. In any country globally, the sustainable foreign economic policy and business safety is essentially determined by the status of balance of payment, development level of the national industry, steady currency, rate of inflation, foreign trade volume (commercial turnover of export and import), size of investment inflows and priority areas of capital investment that collectively affect current status of the country’s economic growth as well as further development of the country.

Keywords: foreign trade, importance of state regulation, business safety, global business, technologies, competitiveness, export potential and nomenclature, free trade regime, dumping and compensatory duty. 

Introduction. In a modern world, trade contacts and relations of countries are largely integrated and interdependent because post-industrial and high-technology manufacturing countries produce products not only for national but for the world markets as well. Therefore, the more developed is the country, higher is its necessity with regard to development of international trade. Developing countries and countries in transition have limited number of high technologies and material resources and narrow domestic market. Such countries lack possibility to produce all goods required for industrial and consumption use of the national market, as a result, international trade is an instrument for the developing world to consume desired commodity and to achieve more welfare thoughliberal trade policy and free trade regimes actively pursued by the state may have a negative impact on the development of priority fields and protective mechanisms for business safety as dumping and subsided import, excessive import and intentional expansion of foreign companies on the national market are reasons for derivation of damage and bankruptcy of national production.

Without state regulation and activities in Georgia, the country may appear in a harder situation and it will be deprived of possibility to use privileges granted by WTO membership and free trade agreements.

General analysis and research. Importance and relevance of foreign trade in global business is due to deepening of international labor distribution and objective processes of current globalization. Agreements of the World Trade Organization and introduction of liberal trade policy have become special stimuli for development of international trade. Since June 14^th, 2000 Georgia has become the 137^th member state of WTO and in response to assumed obligations, the country took significant measures towards foreign trade liberalization such as cancellation of export-import quotas, abolishment of export-import licensing and requirement to register foreign trade contracts. Differential customs duties tax at a rate of 5% and 12% has been imposed on import. Customs duty on export has been abolished and preferential customs duties have been set on import of goods designated for production (raw materials, machinery and equipment, technologies, etc.). Foreign trade liberalization has become a crucial basis for implementation of economic reforms in the country. But import still significantly exceeds export that is a severe problem. Table N1 below provides a clear picture for illustration of current status and dynamics of the foreign trade. 

Georgian Foreign Trade Dynamics during 2013-2019 years

(Current prices: millions of USD)[1]

The table demonstrates that a basic criterion for evaluation of efficacy of Georgia’s foreign trade is a trade balance which essentially reflects a level of country’s economic development and degree of its relationship with foreign markets.  Problems of Georgia’s balance of payment is significantly related to unfavorable trends in foreign trade as confirmed by foreign trade dynamics of Georgia during 2013-2019 (see Table 1) that indicates a permanent and steady deficit of foreign balance regarded as a negative trend for any country in the world. Complexity of this issue is specifically expressed in Georgia when over several decades import 3 and more times exceeds export and respectively, negative trade balance represents a heavy burden for country’s economic development and financial stability. Consequently, due to crisis in economy and business sector, Georgia is essentially dependent on international market and consumption of imported products. Besides, negative trade balance for several decades puts a heavy burden on capital account of balance of payments that induces the state government and a private sector to grow foreign liabilities and thus to meet increased demands for foreign currency. Problems related to balance of payments of Georgia is associated with unfavorable condition of foreign trade policy, in particular, deficit steady nature of trade balance (annual negative trade balance exceeds -5 billions of  USD) that dramatically worsens the country’s balance of payments and financial state, increases foreign debt and dependence that correspondingly reduces investment capital, delays foreign debt service and in general, makes a negative impact on economic growth and business safety.

Local national production in the country fails to meet domestic market demands; therefore, population is much dependent on import. Besides, commodity structure of export is unfavorable with too much national resources and raw material while the traditional goods for production of which the country has absolute and relative advantages are imported to the country. As a result, majority of demands are satisfied with imported products. Products produced in the European Union and other developed countries create solidcompetitiveness because of quality while products imported from CIS countries, Turkey, Iran and other developing countries are marked by dumping prices.

Top trading by turnover in  2018[2]

Ongoing expansion of global processeshasbroadened geographic scope and structure of Georgia’s foreign trade though has not resulted in cardinal change in view of overcoming the  trade balance deficit.

Substantial share of trade relationships with post-Soviet countries (Ukraine, Armenia, Azerbaijan and especially Russia) is not only due to geographic proximity and restoration of conventional trade relations, but also due to use of outdated technologies and machinery which makes it impossible to produce high-quality and competitive products. The market of CIS countries is more accessible and homogenous for local production than the market of developed countries. Introduction of innovative technologies and rational use is basis for production of national products and increase of competitiveness and a special attention should be drawn to quality of products as a guarantee for export expansion, quality of Georgian products and clean environment should be promoted that is a significant prerequisite for sale of export products and is also required by international standards. In order to stabilize the negative balance of foreign trade, we should also actively employ import replacement strategy because the largest portion of goods imported to Georgia is comprised of agricultural and food products which can be produced locally and be of better quality and healthier. Import replacing trade policy should become a priority of national production to reduce high share of import-dependence and expenditures. If rational and regulated foreign trade policy is achieved, Georgia will have vast possibilities to get actively involved in global business and world community in compliance with the rules of competitiveness.

In 2014-2019 years Georgia made certain progress in view of adoption of sale markets and diversification that is an instrument for increase of export potential and local production. This creates broad prospects for a country to sell goods and services while it is recommended to import such products production of which costs much less in other countries as compared to Georgia. 

CIS countries are traditional countries of foreign trade for Georgia and countries have free trade relations since 1994. According to results of trade turnover for the past 10 years, since 2009 Georgia has imported  from CIS countries goods worth 1288 billions of USD and in 2018 this indicator was considerably increased comprising 2 690 billions of USD, while within the same period Georgia exported to CIS products worth 1 670 billions of USD.

Trade relations between Georgia and Turkey hasalso a long history and a free trade agreement was signed in 2008. In 2008 Georgia imported from Turkey 940 million USD products and in 2018 this indicator was 1475 billion USD that clearly demonstrates asymmetric advantage and evidently winning position of a prominent trade player in a region with respect to Georgia. 

Since 2014 a Deep and Comprehensive Free Trade Agreement between Georgia and EU (28 countries) was enacted (DCFTA). In 2018, according to statistical data, import accounted for 3 363 billion USD and export was increased by 15% as compared to previous period and accounted for 730, 7 million USD.

Georgia has a free trade agreement with the Peoples Republic of China (since May 13, 2017 and was enacted since January 1, 2018). Georgia also has free trade agreements with EFTA countries (Norway, Lichtenstein, Iceland, Switzerland) since May, 2018 and Hong-Kong (since February 2019). Large number of free trade agreements with high-developed countries is an indisputably progressive process for Georgia but it is well-founded that a trade partner country (party) with strong export potential and vast possibilities to produce competitive products will better enjoy the benefits of civilized conditions of free trade agreements.

In order to overcome asymmetric position with trade partners, Georgia needs to give priority to production of high-quality export products and rising of competitiveness, compliance with international standards of packaging and labeling and environmental regulations. Besides, exporting countries should intensify actions towards promotion of reliability of Georgian export products (through commercials, advertising and PR technologies) and achievement of consistency of logistics chain supply. 

Conclusion. Increase of business ssafety and coordination of state regulation mechanisms of foreign trade policy in Georgia is a requirement of modern times. With consideration of problems outlined above, it is evident that Georgia has no effective system of state regulation of foreign trade that has negative impact on the total system of business safety because under WTO agreements and liberal trade policy non-tariff measures and barriers are removed that is an imperative regulation of WTO towards member states but the sole instrument for regulation of import to protect the national market in Georgia is not basically applied, specifically,   globally wide-spread antidumping policy and compensatory duties, as well as import non-tariff restrictions (phyto-sanitary, veterinary regulations, technical standards, etc). Without application of such instruments, the system of foreign trade relations will lose not only a role of business catalyst, but also endangers chances of its effective development.

Fascination with liberal trade policy and free trade regimes by the state may negatively affect development of competitive and priority areas because dumping and subsided import, excessive import and expansion of national market may result in derivation of damage and bankruptcy of national production. Without protective mechanisms for business safety and state activities in Georgia, the country may appear in a harder situation and it will be deprived of possibility to use privileges granted by WTO membership and free trade agreements and to achieve positive results. 

References 

1. L.KHIKHADZE, Modern Trends of International Trade Regulation Globally and in Georgia, RS GLOBAL,   "International Trends in Science and Technology". RS GLOBAL, 2018
2. L.KHIKHADZE, The world trading organization’s mission in the conditions of globalization and its influence on the transitional economical countries, World Economy and International Economic Relations International Scientific Collection, kiev, Tbilisi, chainau, 2018
3. L.KHIKHADZE, Modern Aspects of Governmental Regulation of International Trade. International Scientific Conference (Tendencies of Development of Economy and Business in Georgia) Tbilisi, 2012, p. 220;
4. www.wto.org
5. www.unsitral.org
6. www.unctad.org
7. www.economy.ge
8. www. geostat.ge
9. www. mfa.gov.ge
10. www.ictplgeorgia.ge