Research Reports

South Caucasus Trade Study
Monday, 12 August, 2019

In September 2015, United Nations member states adopted the 2030 Agenda for Sustainable Development (the “Agenda”) and seventeen Sustainable Development Goals (SDGs). The Agenda and the SDGs propose that countries achieve sustainable development in economic, social, and environmental dimensions simultaneously.

The Agenda stipulates that international trade is expected to play a role in the implementation of achieving the SDGs. The United Nations Conference on Trade and Development (UNCTAD) has a long-standing tradition, going back at least to 1964, of recognizing international trade as a means of promoting socio-economic development: “Economic and social progress throughout the world depends in large measure on a steady expansion of international trade. The extensive development of equitable and mutually advantageous international trade creates a good basis for the establishment of neighborly relations between States, helps to strengthen peace and an atmosphere of mutual confidence and understanding among nations, and promotes higher living standards and more rapid economic progress in all countries of the world.”

In order to accomplish the SDGs, in practice, trade policy formulation and implementation pose an important challenge for policy-makers. In an increasingly globalized world, it requires policy coherence at national, regional, and global levels. The objective of this report is to assist in the design of each trade and trade facilitation policies, and of institutions and projects that contribute to the achievement of the SDGs in the South Caucasus.

As part of a broad development strategy to increase growth, reduce poverty and achieve the SDGs within small, open economies, Armenia, Azerbaijan, and Georgia need to develop and expand exports and further integrate into the world economy. This report (produced during February 2017 – May 2018) discusses how trade policy and trade facilitation can be used to expand exports in Armenia, Azerbaijan, and Georgia, thereby contributing to faster growth and poverty reduction. This work evaluates the situation and offers recommendations on the trade policies of the three countries. It also assesses trade policy broadly to include not only tariffs but also non-tariff barriers, standards, and regulations, as they impact trade and trade support institutions; and it further assesses multilateral, unilateral, and regional trade policies. Under trade facilitation, we assess policies that facilitate or hinder the flow of goods across borders, as well as addressing the region’s substantial infrastructural requirements for international trade. Considering the dynamic nature of barriers to trade, as well as the often difficult task of distinguishing between legitimate regulatory functions and non-tariff barriers, this study proposes an institutional mechanism that is able to address the most pressing blocks facing exporters and importers. Furthermore, this report also evaluates the issues and provides recommendations pertaining to the two sectors that are vital to earnings from exports throughout the region, and which have been prioritized by the authorities in each of the three countries: agriculture and tourism.

Trade policies that are global in perspective alongside the lowering of trade costs are critical for the South Caucasus. Certain economies, since 1980, with significantly increased growth and a reduction in poverty have used exports and trade to attain their successes. These include the “development miracle” countries of Singapore, South Korea, Hong Kong, and Taiwan (China), as well as Mauritius and Chile.3 Their experiences indicate that the countries of the South Caucasus should consider trade strategies that are global in scope and which work to reduce trade costs. Trade and transport links are also seen as appropriate growth engines for the region, however crucial gains are to be generated externally. Therefore, it is important to keep trade barriers low to capture these gains and to lower trade costs by improving facilitation.