A Lesson in Regional Trade

Professor of Economics
A Lesson in Regional TradeA Lesson in Regional Trade

Governments across the Middle East and North Africa region emphasize the significance of exports.

They all want to expand their markets and depart from their tradition of importing commodities, equipment and consumer goods.

Ironically, the emphasis on global trade has not been translated into strong regional trade in many cases.

While they seek stronger trade partnerships with developed economies or emerging markets, they neglect expanding their regional market. Iran’s exports to Qatar are a case in point.

Following the blockade imposed on Qatar by four Arab counties, the Qataris had to look elsewhere to import food items and agricultural products. Iran was and is an obvious choice.                   

Many Iranian businessmen and exporters also saw this as an opportunity to enter Qatar’s market. However, having an opportunity is one thing, being ready to take advantage of it is a different matter.

Between March 2016 and February 2017, Iran exported $103 million worth of commodity and products to Qatar. The cargos’ tonnage was about 1 million tons and included cement, Persian rugs and food products. Iran’s share of Qatar market was small at best and insignificant at worst.

The two neighbors did not have a well-established growing trade partnership in commodities and services, although Iranian ports are among the closest to Qatar.

To assess the size of Qatar’s market, let us remember that compared to Iran, Turkey’s exports reached $524 million. Still it did feature among Qatar’s top 10 trade partners.

For its part and with the World 2022 on the horizon, Qatar imports mostly technology, equipment, construction materials and minerals. Food and livestock constitute 10% of total imports in Qatar. Still, Iran’s share of this small segment of Qatar’s import is meager.

Following the blockade, the demand for Iranian produce increased significantly. And suddenly Iranian exporters realized they do not have the fleet, the infrastructure and the paperwork. Ports such as Bulkeir have neither storage facilities nor the mechanized loading docks to accommodate the increase in the volume of exports to Qatar.

Valfajr Shipping Company needed to apply for permits needed for its fleet to sail to Qatar. For those who were discussing how to get Iranian products to European markets, this moment of self-discovery could not have arrived sooner. An emphasis on discussing exporting to faraway lands has distracted many from focusing on markets at hand.

It must be added that many have responded swiftly to shortages. Valfajr Shipping Company applied and received the necessary paperwork. Iran opened Genaveh Port to maritime traffic with Qatar. Exporters and their syndicates began reviewing their strategies and what they need to sustain and expand trade with Qatar.

Some, without hesitation, welcome Turkish exporters, inviting them to receive services from Iranian companies and ports.

Gauging the potential of trade with Qatar, Iranian businesses and farmers are looking ahead and beyond the current situation. The blockade has served as a wakeup call. Competition in natural gas aside, neighbors are neighbors and to do business, they need to have their house in order. Fortunately for Iran, it has found a chance to do exactly that, five years before the World Cup.

Ideally, future would see both countries investing in each other’s infrastructure and ports to keep a healthy and growing bilateral trade. After all, political volatility might not subdue, but economic partnerships always reduce its destabilizing effects. This is something Iran and Qatar are happy to learn and know that they can look at each other as true neighbors and not just regional rivals.

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