Main Trends in Georgia s Foreign Trade in the Context  of European Union Candidate Status

Shota Shaburishvili  Davit Sikharulidze  Leila  Kadagishvili  Tea Munjishvili  Vanda  Chitashvili

Journal number 1 ∘ Shota Shaburishvili ∘ Davit Sikharulidze ∘ Leila Kadagishvili ∘ Tea Munjishvili ∘ Vanda Chitashvili ∘
Main Trends in Georgia s Foreign Trade in the Context of European Union Candidate Status

doi.org/10.52340/eab.2025.17.01.07

The ongoing changes in Georgia’s foreign trade geography and structure, coupled with the transition to a new phase of integration with the European Union, highlight the importance of assessing the main trends in trade and economic relations with EU member states. This article analyzes the fundamental theories of international trade and empirical scientific studies that explore the results of a country's foreign trade within regional integration unions. It examines the evolution of the framework for cooperation between Georgia and the EU, and analyzes foreign trade under the conditions of a Deep and Comprehensive Free Trade Area (DCFTA).
The Main Advantages of EU Membership:
• Political stability and the accelerated of economic development; member countries commit to the EU's common foreign and security policy, which aims to maintain peace and strengthen international security in line with the principles of the United Nations Charter.
• The freedom for citizens to live, study, or work anywhere within the EU.
• Access to the single market enhances the country's trade potential, available financing sources, and the volume of investments.
• High environmental and consumer standards, among others.
Before obtaining candidate status, Georgia went through a long and difficult path. Relations with the EU began after Georgia gained independence and have undergone significant evolution. For the new state, with a transitional economy and developing institutions, establishing international relations and developing economic ties was quite challenging, and the EU played a significant role in this providing humanitarian, technical, and financial assistance. Georgia was gradually moving closer to the strong and progressive family of the European Union. On March 3, 2022, Georgia applied for EU membership. On June 23 of the same year, by a unanimous decision of the 27 countries' leaders, Georgia was granted the prospect of membership. On December 14, 2023, Georgia was granted candidate status with the condition that necessary steps, as outlined in the European Commission’s recommendations of November 8, would be taken. The recommendations cover a wide range of issues, including security, democracy, the rule of law, human rights, anti-corruption measures, and more. From 2024, significant political challenges have emerged in the context of deepening relations with the EU. According to the European Council’s report, major negative processes have surfaced, which has effectively halted Georgia's EU accession process. Nonetheless, candidate status provides Georgia with the opportunity for access to additional financial resources, with expected main economic outcomes including an increase in trade with EU countries and foreign direct investments.
The existing relationship between Georgia and the EU is based on the Deep and Comprehensive Free Trade Area (DCFTA), which represents a natural progression from Free Trade Agreements (FTA) and encompasses broader economic and legal aspects. It should be noted that the DCFTA signed by the EU with Georgia, Moldova, and Ukraine is one of the first documents of the new generation of free trade agreements, characterized by its deep and comprehensive nature and significant ambitions. Numerous studies have been conducted to assess the impact of the DCFTA on international trade and economic of in the countries. These studies aimed not only to analyze changes in trade flows but also to examine broader economic effects, including investments, legislative, and institutional reforms. However, the results of these studies have often been inconsistent, preventing clear conclusions from being drawn.
The European Union is Georgia's main trading partner and the largest source of foreign direct investments. From the signing of the DCFTA until 2024, the total trade volume with the EU increased by 57%, primarily due to imports. During this period, the import-export ratio averaged 3.5, reaching 5.43 in 2023. Over the past decade, the volume of exports increased by 7.5%, while imports grew by 68%. Despite a noticeable decline in the export of goods from Georgia to the EU in 2023-2024, imports continued to rise. The negative trade balance remains one of the most significant challenges for Georgia's economy, and integration into the EU is expected to play a decisive role in addressing this issue. Through the re-export of high-tech products imported from the EU, Georgia has already achieved a positive trade balance with the CIS countries. This trend is further strengthened by the growing influx of foreign direct investments from the EU. With its advantageous geographical location, liberal trade policy, and prospects for deeper integration with the EU, Georgia has the opportunity to increase its trade potential and position itself as a "gateway" for the re-export of goods to the Caspian Basin and Central Asian countries.

Keywords: European Union; International Trade; Candidate Status; Export; Import.
JEL Codes: F15, F13, F14, F21, P45

References:
• agmosavlet partnioroba (2010). [Eastern Partnership]. in Georgian https://eeas.europa.eu/archives/delegations/georgia/documents/virtual_library/easternpart_glossary2010_ka.pdf
• evropis sabchos ofisi saqartveloshi (2024). [Council of Europe Office in Georgia (2024)]. in Georgian https://www.coe.int/ka/web/tbilisi/home
• saqartvelos statistikis erovnuli samsaxuri (2024). [National Statistical Service of Georgia (2024).] geostat.ge in Georgian
• Shaburishvili Sh. (2018). damatebuli girebulebis globaluri jachvis fenomeni tanamedrove saertashoriso biznesshi [The Global Value Chain Phenomenon in Modern International Business. Economics and Business, 1, 70-84.] in Georgian
• Shaburishvili Sh. (2024). samamulo konkurentunarianobis determinantebis kvleva saqartvelos magalitze. [The Study of National Competitiveness Determinants in Case of Georgia. Economics and Business, 3.] in Georgian
• shetankhmeba partniorobisa da tanamshromlobis shesakheb (1996). [Agreement on Partnership and Cooperation.] in Georgian https://matsne.gov.ge/ka/document/view/1212956?publication=0
• Shengelia T. (2016). globaluri biznesi [Global Business. Tbilisi: Universal.] in Georgian
• Baier S., Bergstrand J. (2007). Do Free Trade Agreements Actually Increase Members International Trade? Journal of International Economics, 71(1), 72-95. doi:https://doi.org/10.1016/j.jinteco.2006.02.005
• Baskaran T., Blöchl F., Brüc T. (2011). The Heckscher-Ohlin Model and the Network Structure of International Trade. International Review of Economics & Finance, 20(2), 135-145.
• Bernhofen D. (2005). Gottfried Haberler's 1930 Reformulation of Comparative Advantage in Retrospect. doi:https://doi.org/10.1111/j.1467-9396.2005.00550.x
• Cinar E., Johnson M., & Geusz K. (2016). Estimating Chinese Trade Relationships With the Silk Road Countries. China and World Economy, 85-103.
• Delegation of the European Union to Georgia (2024). https://www.eeas.europa.eu/georgia/evrokavshiri-da-sakartvelo_ka?s=221
• Escaith H., Miroudot S. (2016). Industry-level Competitiveness and Inefficiency Spillovers in Global Value Chains.
• EU (2024). Accession Criteria (Copenhagen Criteria). https://eur-lex.europa.eu/EN/legal-content/glossary/accession-criteria-copenhagen-criteria.html
• EU Enlargement (2024). https://european-union.europa.eu/principles-countries-history/eu-enlargement_en
• EU External Action (2024). The Diplomatic Service of the European Union. https://www.eeas.europa.eu/eeas/about-european-external-action-service_en
• EU Neighbours East (2024). https://euneighbourseast.eu/ka/enlargement/
• European Commission (2024). EU Trade Relations With Georgia. Facts, Figures and Latest Developments.
https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/georgia_en
• European Commission (2024). Trade Agreements With Georgia and Moldova. https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12086-Trade-agreements-with-Georgia-and-Moldova-evaluation_en
• European Neighbourhood Policy and Enlargement Negotiations (2024). https://neighbourhood-enlargement.ec.europa.eu/enlargement-policy/overview-instrument-pre-accession-assistance_en
• European Union (2024). Facts and Figures on the European Union. https://european-union.europa.eu/principles-countries-history/facts-and-figures-european-union_en
• European-Union, Europa.eu (2023). Facts and Figures on life in the European Union. https://european-union.europa.eu/principles-countries-history/key-facts-and-figures/life-eu_en (02 05, 2024).
• Eurostat (2024). https://ec.europa.eu/eurostat/web/main/data/database
• Frankel J. (1997). Regional Trading Blocs in the World Economic System. Institute for International Economics,. doi:http://dx.doi.org/10.7208/chicago/9780226260228.001.0001
• Gaganidze G. (2018). Foreign Trade of Georgia, Moldova and Ukraine With the European Union After the Signing of the Association Agreement. Ecoforum, 7(1).
• Hellyer М. (2019). Ukraine’s Trade Under the DCFTA: a Gravity Model. Scientia fructuosa, 128(6), 20-32. doi:https://doi.org/10.31617/visnik.knute.2019(128)02
• IDFI (2023). https://idfi.ge/ge/review_of_the_european_commission_s_assessment_implementation_of_the_12_priorities_and_new_conditions
• Kadagishvili L., Maisuradze R. (2022). Impact of Regional Integration on Trade and Economic Cooperation - a Key Study of Georgia and Azerbaijan. International Journal of Economic Sciences, 11(2), 58-79.
• Lang I., Shaburishvili S., Sikharulidze D. (2023). Georgia’s Foreign Trade Potential With the United States: A Gravity Model Approach. Jounal of Easter European and Central Asian Researche, 10(7), 1088-1099. doi:https://doi.org/10.15
• Lazarashvili K., Sikharulidze D., Lekishvili T., Kikutadze V. (2022). The Economic Repercussions of Covid-19 and Well-Being in Georgia, Book. In The Unequal Costs of Covid-19 on Well-being in Europe (pp. 41-58). Springer International Publishing.
• Mekvabishvili E., Atanelishvili T. (2017). Personal Remittances in the Post-Soviet Countries (Comparative Analysis). Bull. Georg. Natl. Acad. Sci, 157-163.
• Meskhia I., Shaburishvili S. (2014). Major Threats to Economic Stability in the Post-communist Georgia: Reality and Prognosis. Organization in Changing Environment – Conditions, Methods and Management Practices, 31-44.
• Munjishvili T., Sikharulidze D., Shugliashvili T., Shaburishvili S., Kadagishvili L. (2023) AI Platform of Enterprise Financial Stability Analytics. Springer, Cham, 223-231. https://doi.org/10.1007/978-3-031-66517-2_17
• Porter M. (1990). The Competitive Advantage of Nations. Harvard Business Review, 73-91.
• Putkaradze, R. (2010). Trade and Economic Relations Between Georgia and the European Union: Problems and Perspectives. Tbilisi: Universali.
• Ruffin R. (2002). David Ricardo's Discovery of Comparative Advantage . Duke University Press, 34(4), 727-748.
• Scott L., Baier H., & Bergstrand M. (2014). Economic Integration Agreements and the Margins of International Trade. Journal of International Economics, 93(2), 339-350.
• Shaburishvili S. (2011). Peculiarities of Georgian Foreign Trade with the European Union. Bulletin of Khmelnitsky National University, 2, 252-254.
• Shaburishvili S. (2016). Social Changes and Economic Development in Georgia. Economy and organization management, 3(23), 12-18.
• Silagadze A., Zubiashvili T. (2015). Parameters of the European Union and the Post-Soviet Georgia’s Economy. International Journal of Business and Management Studies, 441–448.
• Tinbergen J. (1962). An Analysis of World Trade Flows. Shaping the World Economy (3), 1-117. doi:https://doi.org/10.1002/tie.5060050113
• Tskhomelidze E. (2022). Effectiveness of the Deep and Comprehensive Free Trade Area: A Structural Gravity Model Approach. Journal of Eastern European and Central Asian Research, 9(6), 965-977. doi:https://doi.org/10.15549/jeecar.v9i6.990
• Yang Y., Liu W. (2024). Free Trade Agreements and Domestic Value Added in Exports: an Analysis from the Network Perspective. Economic Modelling. doi:https://doi.org/10.1016/j.econmod.2024.106656

Economics and Business Referential and Reviewed International Scientific-Analytical Journal of Ivane Javakhishvili Tbilisi State University, Faculty of Economics and Business

ISSN 1987-5789 ESSN 2587-5426 doi 10.52340	Journal number 1 ∘ Shota Shaburishvili ∘ Davit Sikharulidze ∘ Leila Kadagishvili ∘ Tea Munjishvili ∘ Vanda Chitashvili ∘ Main Trends in Georgia s Foreign Trade in the Context of European Union Candidate Status doi.org/10.52340/eab.2025.17.01.07 The ongoing changes in Georgia’s foreign trade geography and structure, coupled with the transition to a new phase of integration with the European Union, highlight the importance of assessing the main trends in trade and economic relations with EU member states. This article analyzes the fundamental theories of international trade and empirical scientific studies that explore the results of a country's foreign trade within regional integration unions. It examines the evolution of the framework for cooperation between Georgia and the EU, and analyzes foreign trade under the conditions of a Deep and Comprehensive Free Trade Area (DCFTA). The Main Advantages of EU Membership: • Political stability and the accelerated of economic development; member countries commit to the EU's common foreign and security policy, which aims to maintain peace and strengthen international security in line with the principles of the United Nations Charter. • The freedom for citizens to live, study, or work anywhere within the EU. • Access to the single market enhances the country's trade potential, available financing sources, and the volume of investments. • High environmental and consumer standards, among others. Before obtaining candidate status, Georgia went through a long and difficult path. Relations with the EU began after Georgia gained independence and have undergone significant evolution. For the new state, with a transitional economy and developing institutions, establishing international relations and developing economic ties was quite challenging, and the EU played a significant role in this providing humanitarian, technical, and financial assistance. Georgia was gradually moving closer to the strong and progressive family of the European Union. On March 3, 2022, Georgia applied for EU membership. On June 23 of the same year, by a unanimous decision of the 27 countries' leaders, Georgia was granted the prospect of membership. On December 14, 2023, Georgia was granted candidate status with the condition that necessary steps, as outlined in the European Commission’s recommendations of November 8, would be taken. The recommendations cover a wide range of issues, including security, democracy, the rule of law, human rights, anti-corruption measures, and more. From 2024, significant political challenges have emerged in the context of deepening relations with the EU. According to the European Council’s report, major negative processes have surfaced, which has effectively halted Georgia's EU accession process. Nonetheless, candidate status provides Georgia with the opportunity for access to additional financial resources, with expected main economic outcomes including an increase in trade with EU countries and foreign direct investments. The existing relationship between Georgia and the EU is based on the Deep and Comprehensive Free Trade Area (DCFTA), which represents a natural progression from Free Trade Agreements (FTA) and encompasses broader economic and legal aspects. It should be noted that the DCFTA signed by the EU with Georgia, Moldova, and Ukraine is one of the first documents of the new generation of free trade agreements, characterized by its deep and comprehensive nature and significant ambitions. Numerous studies have been conducted to assess the impact of the DCFTA on international trade and economic of in the countries. These studies aimed not only to analyze changes in trade flows but also to examine broader economic effects, including investments, legislative, and institutional reforms. However, the results of these studies have often been inconsistent, preventing clear conclusions from being drawn. The European Union is Georgia's main trading partner and the largest source of foreign direct investments. From the signing of the DCFTA until 2024, the total trade volume with the EU increased by 57%, primarily due to imports. During this period, the import-export ratio averaged 3.5, reaching 5.43 in 2023. Over the past decade, the volume of exports increased by 7.5%, while imports grew by 68%. Despite a noticeable decline in the export of goods from Georgia to the EU in 2023-2024, imports continued to rise. The negative trade balance remains one of the most significant challenges for Georgia's economy, and integration into the EU is expected to play a decisive role in addressing this issue. Through the re-export of high-tech products imported from the EU, Georgia has already achieved a positive trade balance with the CIS countries. This trend is further strengthened by the growing influx of foreign direct investments from the EU. With its advantageous geographical location, liberal trade policy, and prospects for deeper integration with the EU, Georgia has the opportunity to increase its trade potential and position itself as a "gateway" for the re-export of goods to the Caspian Basin and Central Asian countries. Keywords: European Union; International Trade; Candidate Status; Export; Import. JEL Codes: F15, F13, F14, F21, P45 References: • agmosavlet partnioroba (2010). [Eastern Partnership]. in Georgian https://eeas.europa.eu/archives/delegations/georgia/documents/virtual_library/easternpart_glossary2010_ka.pdf • evropis sabchos ofisi saqartveloshi (2024). [Council of Europe Office in Georgia (2024)]. in Georgian https://www.coe.int/ka/web/tbilisi/home • saqartvelos statistikis erovnuli samsaxuri (2024). [National Statistical Service of Georgia (2024).] geostat.ge in Georgian • Shaburishvili Sh. (2018). damatebuli girebulebis globaluri jachvis fenomeni tanamedrove saertashoriso biznesshi [The Global Value Chain Phenomenon in Modern International Business. Economics and Business, 1, 70-84.] in Georgian • Shaburishvili Sh. (2024). samamulo konkurentunarianobis determinantebis kvleva saqartvelos magalitze. [The Study of National Competitiveness Determinants in Case of Georgia. Economics and Business, 3.] in Georgian • shetankhmeba partniorobisa da tanamshromlobis shesakheb (1996). [Agreement on Partnership and Cooperation.] in Georgian https://matsne.gov.ge/ka/document/view/1212956?publication=0 • Shengelia T. (2016). globaluri biznesi [Global Business. Tbilisi: Universal.] in Georgian • Baier S., Bergstrand J. (2007). Do Free Trade Agreements Actually Increase Members International Trade? Journal of International Economics, 71(1), 72-95. doi:https://doi.org/10.1016/j.jinteco.2006.02.005 • Baskaran T., Blöchl F., Brüc T. (2011). The Heckscher-Ohlin Model and the Network Structure of International Trade. International Review of Economics & Finance, 20(2), 135-145. • Bernhofen D. (2005). Gottfried Haberler's 1930 Reformulation of Comparative Advantage in Retrospect. doi:https://doi.org/10.1111/j.1467-9396.2005.00550.x • Cinar E., Johnson M., & Geusz K. (2016). Estimating Chinese Trade Relationships With the Silk Road Countries. China and World Economy, 85-103. • Delegation of the European Union to Georgia (2024). https://www.eeas.europa.eu/georgia/evrokavshiri-da-sakartvelo_ka?s=221 • Escaith H., Miroudot S. (2016). Industry-level Competitiveness and Inefficiency Spillovers in Global Value Chains. • EU (2024). Accession Criteria (Copenhagen Criteria). https://eur-lex.europa.eu/EN/legal-content/glossary/accession-criteria-copenhagen-criteria.html • EU Enlargement (2024). https://european-union.europa.eu/principles-countries-history/eu-enlargement_en • EU External Action (2024). The Diplomatic Service of the European Union. https://www.eeas.europa.eu/eeas/about-european-external-action-service_en • EU Neighbours East (2024). https://euneighbourseast.eu/ka/enlargement/ • European Commission (2024). EU Trade Relations With Georgia. Facts, Figures and Latest Developments. https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/georgia_en • European Commission (2024). Trade Agreements With Georgia and Moldova. https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12086-Trade-agreements-with-Georgia-and-Moldova-evaluation_en • European Neighbourhood Policy and Enlargement Negotiations (2024). https://neighbourhood-enlargement.ec.europa.eu/enlargement-policy/overview-instrument-pre-accession-assistance_en • European Union (2024). Facts and Figures on the European Union. https://european-union.europa.eu/principles-countries-history/facts-and-figures-european-union_en • European-Union, Europa.eu (2023). Facts and Figures on life in the European Union. https://european-union.europa.eu/principles-countries-history/key-facts-and-figures/life-eu_en (02 05, 2024). • Eurostat (2024). https://ec.europa.eu/eurostat/web/main/data/database • Frankel J. (1997). Regional Trading Blocs in the World Economic System. Institute for International Economics,. doi:http://dx.doi.org/10.7208/chicago/9780226260228.001.0001 • Gaganidze G. (2018). Foreign Trade of Georgia, Moldova and Ukraine With the European Union After the Signing of the Association Agreement. Ecoforum, 7(1). • Hellyer М. (2019). Ukraine’s Trade Under the DCFTA: a Gravity Model. Scientia fructuosa, 128(6), 20-32. doi:https://doi.org/10.31617/visnik.knute.2019(128)02 • IDFI (2023). https://idfi.ge/ge/review_of_the_european_commission_s_assessment_implementation_of_the_12_priorities_and_new_conditions • Kadagishvili L., Maisuradze R. (2022). Impact of Regional Integration on Trade and Economic Cooperation - a Key Study of Georgia and Azerbaijan. International Journal of Economic Sciences, 11(2), 58-79. • Lang I., Shaburishvili S., Sikharulidze D. (2023). Georgia’s Foreign Trade Potential With the United States: A Gravity Model Approach. Jounal of Easter European and Central Asian Researche, 10(7), 1088-1099. doi:https://doi.org/10.15 • Lazarashvili K., Sikharulidze D., Lekishvili T., Kikutadze V. (2022). The Economic Repercussions of Covid-19 and Well-Being in Georgia, Book. In The Unequal Costs of Covid-19 on Well-being in Europe (pp. 41-58). Springer International Publishing. • Mekvabishvili E., Atanelishvili T. (2017). Personal Remittances in the Post-Soviet Countries (Comparative Analysis). Bull. Georg. Natl. Acad. Sci, 157-163. • Meskhia I., Shaburishvili S. (2014). Major Threats to Economic Stability in the Post-communist Georgia: Reality and Prognosis. Organization in Changing Environment – Conditions, Methods and Management Practices, 31-44. • Munjishvili T., Sikharulidze D., Shugliashvili T., Shaburishvili S., Kadagishvili L. (2023) AI Platform of Enterprise Financial Stability Analytics. Springer, Cham, 223-231. https://doi.org/10.1007/978-3-031-66517-2_17 • Porter M. (1990). The Competitive Advantage of Nations. Harvard Business Review, 73-91. • Putkaradze, R. (2010). Trade and Economic Relations Between Georgia and the European Union: Problems and Perspectives. Tbilisi: Universali. • Ruffin R. (2002). David Ricardo's Discovery of Comparative Advantage . Duke University Press, 34(4), 727-748. • Scott L., Baier H., & Bergstrand M. (2014). Economic Integration Agreements and the Margins of International Trade. Journal of International Economics, 93(2), 339-350. • Shaburishvili S. (2011). Peculiarities of Georgian Foreign Trade with the European Union. Bulletin of Khmelnitsky National University, 2, 252-254. • Shaburishvili S. (2016). Social Changes and Economic Development in Georgia. Economy and organization management, 3(23), 12-18. • Silagadze A., Zubiashvili T. (2015). Parameters of the European Union and the Post-Soviet Georgia’s Economy. International Journal of Business and Management Studies, 441–448. • Tinbergen J. (1962). An Analysis of World Trade Flows. Shaping the World Economy (3), 1-117. doi:https://doi.org/10.1002/tie.5060050113 • Tskhomelidze E. (2022). Effectiveness of the Deep and Comprehensive Free Trade Area: A Structural Gravity Model Approach. Journal of Eastern European and Central Asian Research, 9(6), 965-977. doi:https://doi.org/10.15549/jeecar.v9i6.990 • Yang Y., Liu W. (2024). Free Trade Agreements and Domestic Value Added in Exports: an Analysis from the Network Perspective. Economic Modelling. doi:https://doi.org/10.1016/j.econmod.2024.106656