Determinants of Georgia’s Foreign Trade With 3+3 Format Countries

Imeda Paksadze

Batumi Navigation University

Batumi, Georgia

https://orcid.org/0000-0003-3772-9308

Ali Riza Sandalcilar

Recep Tayyip Erdoğan University

Rize, Türkiye

https://orcid.org/0000-0002-9185-6968

ABSTRACT

This study examines the economic dimension of the 3+3 initiative, which emerged in the South Caucasus after 2020, by analyzing Georgia’s foreign trade relations. As part of broader regional cooperation and integration efforts, this framework has the potential to reshape Georgia’s trade orientation and regional economic ties. Against this background, the study seeks to address a gap in the literature by identifying the determinants of Georgia’s foreign trade flows using a panel gravity model.

The empirical findings indicate that the main determinants of Georgia’s foreign trade are economic size and shared borders. In the export models, the distance variable is negative and statistically significant, confirming that greater geographical distance increases trade costs. In contrast, distance and partner-country GDP are statistically insignificant in the import models, suggesting that imports are driven primarily by Georgia’s domestic demand. The common religion variable is negative and significant in most models, indicating that cultural proximity does not have the expected positive effect on trade. Likewise, free trade agreements exhibit limited or statistically insignificant effects.

Overall, the results suggest that economic size and geographical proximity are the primary drivers of Georgia’s foreign trade, while cultural and institutional factors play a more limited role. The findings highlight the importance of strengthening trade relations with neighboring countries and maximizing the benefits of economic growth. They also emphasize the need to support Georgia’s trade policy through infrastructure investment, improved border-crossing procedures, and more effective implementation of free trade agreements