Export Structures by Commodities

The Sussex Framework suggests considering the sectoral pattern of trade in order to help to identify (1) the sectoral distribution of likely trade creation and trade diversion and (2) those sectors which are of particular importance to the economies concerned. This is important from the perspective of economic significance, but also important from a political economy perspective.

Table 4.2 presents the 10 largest commodity groups of exports in 2006 aggregated at HS-2 level, as well as changes in their exports over time. The ten largest export groups are comprised of non-energy mineral products, base metals, vegetables and foodstuffs, machinery and equipments, and chemical products.

“Iron and steel” HS group, mainly ferro-alloys and ferrous metal scrap, were the major source of Georgia’s export (16.6% of all exports in 2006 vs. 5.9 % in 1996).

Iron and steel exports have increased as much as 14 times over 1996-2006. In 2006, the key destination markets for iron and steel were Turkey (37.3% of all group exports), the USA (18.7%), and Russia (14.2%).

The second most important export category in 2006 was “Beverages and spirits”

including wines and mineral waters, and made up 12.1% of total exports.

Beverages and spirits have lost its leading export position, though their exports have grown by 7 times from 1996. The key markets for this group were Ukraine (28.9%), Russia (28.2%), and the EU (22.6%). The second largest group of agricultural exports included edible fruit and nuts (6.2% of total exports in 2006).

The key markets included the EU (77.4%), Russia (8.8%) and Ukraine (7.0%). “Ores, slag and ash” group was the third and captured 8.2% of in 2006; its share almost sustained over the period. The EU was the main destination market (85%). Vehicles, aircrafts²⁷and machinery and mechanical appliances together comprised 19.2% of

27Major part of aircrafts was exported to Turkmenistan due to the barter deals with Turkmenistan against the debt on gas supplied to Georgia in 90-es.

total exports in 2006 vs. 3% in 1996 and 8.8% in 2001. Their exports showed the strongest growth by about 30 times from 1996. The key markets of vehicles (HS 87) were Azerbaijan (48.4%), Turkey (12.4%) and Armenia (11.2%). Aircrafts (HS 88) were mainly exported to Turkmenistan (83%) due to the barter deals with Turkmenistan against the debt on gas supplied to Georgia in 90-es. The EU (43.8%), United Arab Emirates (15.2%) and Turkmenistan (12.1%) were the key markets for machinery and mechanical appliances (HS 84). The importance of precious stones and metals also has grown over the period in total imports (from 0.5% to 5.2%).

Canada was the key destination market for this group (94%).

Overall, in 2006 as compared with 1996 there have been considerable changes in the export structure of Georgia. The ten most important commodity groups in 2006 captured 75% of all exports, while in 1996 they were only 36% of total exports (67.7% in 2001). Furthermore, there has been a shift in the export composition from foodstuffs and agricultural products toward resource-based and high-technology products over the last decade. Noteworthy, the share of all agricultural and foodstuffs exports in Georgia’s total exports declined from 30.2% in 1996 to 23.7% in 2006.

Source: WITS.

Table 4.6. The 10 largest commodity groups of Georgia’s total exports, by 2 digit HS HS

code

Product description 1996 2001 2006

million

22 Beverages, spirits and vinegar

16.4 8.2% 53.59 16.75% 119.6 12.1%

26 Ores, slag and ash 13.7 6.9% 23.32 7.29% 81.7 8.2%

87 Vehicles other than railway or tramway rolling-stock

2.1 1.0% 2.46 0.77% 73.2 7.4%

84 Nuclear reactors, boilers, machinery and mechanical appliances

3.4 1.7% 11.68 3.65% 62.5 6.3%

8 Edible fruit and nuts; peel of citrus fruits or melons and watermelons

10.9 5.5% 11.64 3.64% 61.7 6.2%

88 Aircraft, spacecraft, and parts thereof

0.4 0.2% 36.08 11.28% 54.9 5.5%

71 Natural or cultured pearls precious or semi-precious

Bilateral trade with the EU is more concentrated compared to Georgia’s total trade, though Georgia has diversified to some extent its exports to the EU over the last decade (see Table 4.7). Non-energy mineral products (ores, slag and ash)

Source: WITS.

Table 4.7. The 10 largest commodity groups of Georgia’s exports to the EU, by HS 2-digit HS

code

Product description 1996 2001 2006

million

22 Beverages, spirits and vinegar

1.1 3.6% 4.67 7.26% 27.0 10.6%

27 Mineral fuels, mineral oils and products of their

20 Preparations of vegetables, fruit, nuts

1.1 3.4% 1.02 1.59% 5.0 2.0%

88 Aircraft, spacecraft, and parts thereof

0.1 0.2% 0.11 0.17% 4.7 1.8%

Total 26.5 82.30% 33.42 51.96% 227.6 89.20%

Source: WITS.

Table 4.8. The 10 largest exports of Georgia to the EU in 2006, by HS 2-digit (the EU mirror statistics)

HS code

Product description million USD %

27 Mineral fuels, mineral oils and products of their distillation;

350.49 54.02%

26 Ores, slag and ash 69.81 10.76%

8 Edible fruit and nuts 50.00 7.71%

22 Beverages, spirits and vinegar 45.74 7.05%

85 Electrical machinery and equipment 25.98 4.00%

31 Fertilizers 19.28 2.97%

72 Iron and steel 13.27 2.05%

84 Nuclear reactors, boilers, machinery and mechanical appliances

10.75 1.66%

76 Aluminium and articles thereof 9.30 1.43%

74 Copper and articles thereof 7.41 1.14%

Total 602.03 92.78%

traditionally led the list of most important exports to the EU (27.2% in 2006), though its share has declined compared with 1996 (41.5%). At the same time, there has been a considerable rise in importance of edible fruits and nuts as compared with 1996 and 2001 (from 2.2% in 1996 up to 18.7% in 2006), and beverages and spirits (from 3.6% in 1996 to 10.6% in 2006). Machinery and mechanical appliances was the third largest group and their share expanded considerably from 2.7% up to 10.7% over 1996-2006. Among other important export products to the EU were mineral fuels (5.9%), fertilizers (5.2%), and iron and steel (4.7%), etc. As previously mentioned, there is a huge difference in countries’ reporting of Georgia’s exports of mineral fuels (HS 27) to the EU (see Table 48 for the EU mirror statistics).

Taking into the account the fairly low level of the EU tariffs on both Georgian agricultural and non-agricultural commodities, the scope of shallow integration-induced trade creation due to the tariff reduction is likely to be limited. In the longer perspective, Georgia’s future comparative advantages still remain to be created by investment in new economic structures (for example outsourcing by Turkish industries) to take advantage of low Georgian labour costs.