Georgia On My Mind
I don’t often think about Georgia. The country, not the home of the Atlanta Falcons. But an article in Asia Times last week caught my imagination as a good example of unintended consequences in trade.
Georgia: Land of Sweet Mountain Water
The story begins in 2006 when Russia, in a political fit, closed its borders to goods coming in from Georgia, mostly wine and bottled water. It was a vain attempt at coercion by Moscow that, ironically, may be strengthening Georgia’s economy and has certainly diversified Georgia’s customer base. Not that Georgian companies weren’t hurt by the Russian embargo, but most of that hurt was swamped by the damage caused by the 2008 war between the two neighbors. Neighborhood spats are never good.
Moscow has finally seen its error and has said it will reopen the border later this month. Georgia’s exporters are greeting this with glee, but – now that Russia has proven itself an unreliable market – the Georgian companies are not slowing their push to develop other markets.
Georgian wine enjoyed a great market in Russia before the embargo, which almost wiped out several producers. Georgia’s wine exports dropped from 10.6 million liters in the second quarter of 2005 to less than 2 million in the same months of 2009. Their wines are little known in the West, but Georgia is developing new customers in central Asia, China and recently appeared in Singapore.
Georgia’s top bottled water producer, Borjomi, saw its sales drop 43%. The company is bouncing back with its bottles now sold in thirty different countries, even entering the China market in 2008.
Just goes to show that embargoes almost never work the way you think they might.
