What can Georgia receive from international trade?

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There is constant quarrel among economists concerning what is better for Georgia the involvement in the international commerce, which comprises economical patency and accordingly the economy of the country is defined by the standards of the world economy, or closed economy. The economical patency is comprised by the variety of negative events. It causes the elevation of the country dependence on the operations of export and import, dependence on international financial sources, there occurs the limit of local production, increase of unemployment etc.

The international trade consists of different hazards for Georgia, however we must discuss the issue as follows, what can Georgia receive from international trade more profit or losses.

Generally, if the country chooses the closed economy, in this type of conditions and terms the prices are established by taking into consideration the local market and the prices established on the international market does not influence on it. If Georgia chooses the closed economy it is certain that the prices will be established by considering the local demands and delivery. It is quite possible that the value of the same product in Georgia to be more expensive rather than the same product on the world market. In this case the local producers and importers of the mentioned production receive profit, because they sell the same product in higher price than established on the world market, the purchasers are to receive losses, who pay more than established on the world market.

In case of international trade the values existing in Georgia will be the same as the world values, that will bring losses to local producers and importers, however the purchasers will get profit because they will pay less then they used to pay.

As we can see in the terms of international commerce we have in Georgia the people who are profitable and on the contrary due to this relation, the important issue is the profit or loss for the country, in order to find this out we can use the curve.

As we already mentioned, if the closed economy existed in Georgia the price on conditional product would be established by taking into consideration the demand and delivery on the local market, which is indicated with K point on the curve, in the terms of closed economy the purchasers, who get this product their profit comprises of A conditional unit, and producer’s B+C unit, in the terms of international commerce (Taking into consideration the fact, that the values established on the local market is higher than the values on the world market).

The profit of purchaser will be increased up to A+B+D conditional unit, the producers will be C conditional unit.

As we can see the loss of local producers and importers consists of B, and the profit the purchaser received consists of B+D, as we can see (B+D> B) the international trade brought for the total country more profit then loss, despite the negative influence of the international trade on the economy of Georgia as well as other countries.

As we saw the international trade is full of hazards for the country, it threatens the local enterprise, the local work forces, according to its influence the country becomes dependent on export and import. Besides these negative events the international trade brings more profit then losses, not for some certain producer or purchaser but for the total society and country.

Tinatin Buturishvili

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