The Obama Administration is currently considering political and economic options to counter Russia. One option should be obvious: free trade and economic freedom.
By advancing U.S. trade interests in Russia’s sphere of influence the U.S. can promote economic freedom and mutually beneficial exchange while at the same time putting pressure on Russia.
This type of promotion is rightly needed in the region. Economic freedom, measured by The Heritage Foundation’s Index of Economic Freedom (published jointly with The Wall Street Journal), is merely average. In fact, if not boosted by a strong score from Georgia and a respectable one from Kazakhstan, it would be downright poor.
The U.S. could advance free trade and economic freedom in the region by two means. First, renew the Generalized System of Preferences (GSP). GSP is a preferential trade program meant to promote trade with developing countries; it expired in July 2013. Georgia, Kazakhstan, and Turkey—three of Russia’s regional neighbors—all qualified and took advantage of the GSP program.
Renewing GSP would again open up duty-free trade to these partners and reaffirm U.S. commitment and commercial ties to the region. In 2013, GSP imports from Georgia and Kazakhstan under GSP amounted to around $100 million, while GSP trade from Turkey totaled $1.3 billion.
There is an important caveat: Russia benefited from nearly $500 million in GSP imports into the U.S. last year. Suspending Russia from any renewed GSP program will be necessary.
Second, open free trade negotiations with Georgia and other countries in the region. In 2012, President Obama said he was willing to consider opening free trade negotiations with the former Soviet republic. Now is the time to act. Negotiating a free trade agreement with Georgia would help strengthen the institutions of an economy that in recent years has increasingly trended toward economic freedom. The U.S. could build off already strong bilateral ties, including an ongoing discussion of trade issues in their Trade and Investment Framework Agreements and Strategic Partnership Charter.
While Georgia–U.S. trade is relatively small, an FTA could reaffirm and broaden a bilateral investment treaty signed in 1994. It would also send a strong signal of support to the region, particularly since Georgia’s neighbor Armenia opted to sign an economic partnership agreement with Russia in 2013.
The President and Congress should recognize that trade is also a tool in their foreign policy toolkit. Besides the obvious economic benefits that free trade accrues to all parties, building commercial ties with strategic partners can be equally as valuable in achieving foreign policy goals. Promoting free trade along Russia’s periphery should be at the top of the President’s foreign policy agenda.
