Georgia and the Middle Corridor That’s Speeding up Global Trade

Europe and China are increasingly interdependent. China was the EU’s second-largest trading partner in 2022, with imports and exports of €856.3 billion, 15.3% of the EU’s total trade, according to Eurostat. Trade between the two economic powerhouses increased by more than 20% last year and has doubled since 2016.

China is the EU’s largest source of imports, notably of telecommunications equipment, data processing machines and electrical machinery. Europe relies on China for rare-earth minerals used in the manufacture of batteries, magnets and microchips. “The EU’s dependence on Beijing was laid bare during the Covid-19 epidemic when countries and companies scrambled to source masks and other equipment,” Bloomberg noted regarding the bloc’s desire to boost its trading relationships throughout the East.

China is also the third-largest destination for EU exports, particularly automobiles and food.

However, there is a logistical challenge to transporting these goods on their journey of up to 5,000 miles. Air freight can be prohibitively expensive. Maritime freight sent on the much longer “Ocean Road” from China to Europe can take between 30 and 45 days. Meanwhile, the viability of the Northern Corridor rail route linking China to Europe has been reduced by the conflict in Ukraine.

The need is for an alternative route that is shorter and passes through territories that are committed to supporting fast and efficient transit.

Since early 2022, there has been a surge in activity through the 4,764-km (2,960 mile) Middle Corridor, a growing trade route that links China to Europe in as little as 12 days via Georgia and the Caucasus.

In March last year, Georgia, Turkey, Azerbaijan and Kazakhstan signed an Action Plan agreement to further develop this Trans-Caspian International Transport Route

This shift southwards is being helped by Georgia’s transit-oriented economy and investment in modern railways and port facilities. Georgia’s government is supporting a tax-free transit system designed to minimize clearance formalities and provide easy access between Europe and landlocked Central Asian countries that are rich in energy resources and metals.

This is resulting in a surge in investment activity. FDI to Georgia jumped to $745.3 million in Q3 2022, double the amount for the same period in 2021.

Georgia’s emergence as a gateway between East and West is bolstered by its portfolio of free-trade agreements, including those with the EU and China, which give Georgia access to a market of 2.3 billion people. It has almost no customs duties and charges 15% corporation tax only on distributed profit. For the past two years, it has posted double-digit GDP growth, with an increase of 10% in 2022 following an uptick of 10.4% in 2021. The World Bank forecasts growth of 4% in 2023 and 5% in 2024, making Georgia a top-performing economy in the Eurasia region.

Georgia reported a 30% increase in freight turnover through the Middle Corridor in 2022. “The importance of the Middle Corridor is particularly noteworthy in the current geopolitical situation, when cargo traffic in the corridor has increased and the interest of international carriers is growing every year,” says Georgian Economy Minister Levan Davitashvili.

Transport volumes on the Middle Corridor have “increased significantly,” notes the German Economic Team, a specialist consultancy funded by the German government, which predicts a “continuation of the growth trend.” It observes that “From a European perspective, [the Middle Corridor] offers access to the growing markets of Central Asia and the Caucasus region, as well as faster access to the Middle East, North Africa and the European Mediterranean region via the ports in Georgia and Turkey.”

Freight companies and logistics centers are increasingly looking to the alternative Middle Corridor route to ship goods between East and West. Transport companies including Danish shipping giant Maersk, Finnish firm Nurminen Logistics, Dutch provider Rail Bridge Cargo and German company CEVA Logistics have begun container services via the Trans-Caspian route. With a commitment to efficient logistics and transit systems and a long-term investment in transport infrastructure, Georgia is emerging as the critical link in this new Eurasian supply chain.