Having a positive view of trade surplus stems from a misunderstanding of the concept of trade balance, which is based on the goal of balancing import and export. However, the idea that a negative trade balance is per se unacceptable has been firmly rejected by economists. This was stated by Mehrad Ebad, a member of Tehran Chamber of Commerce, Industries, Mines and Agriculture, in a write-up for the TCCIM website. A translation of the text follows:
Since 2016, only 60 out of 200 countries have registered a trade surplus or positive trade balance. The idea that a negative trade balance is per se unacceptable has been firmly rejected by economists, as countries with the largest negative trade balance are now among the leaders of the global economy.
Iran’s trade balance has been positive at times, thanks to the sale of crude oil and oil products. The view that exports must outweigh imports at any price hurts the country’s development. Those who see importers as swindlers do not pay attention to the fact that having a negative view of import deprives the country of having cheap and high-quality raw materials.
Focusing on the production of all goods, no matter what their quality and trying to export them and preventing the import of goods needed by the country, along with the sanctions and the low quality of some domestically-produced products with their poor packaging, and misguided forex policies have prevented sustainable, value-creating exports. With these policies, we have not even been able to introduce a reputable global brand to the region.
Wrong Policies
These policies have denied Iranian products with export advantage, namely pistachios, carpets, saffron, of their share of the world markets. In other words, the export policies of the past few decades have discouraged country’s veteran exporters; they no longer engage in trade.
On the other hand, import policies that are based on reducing imports, banning the entrance of items with domestically-produced counterparts and prolonging the order registration process have turned the country into an importer of low-quality goods. Supply has decreased while demand has increased on the back of government’s interference in the market. As a result of the imbalance between supply and demand, the price of imported goods has jumped.
Drawing up a list of domestically-produced goods and banning the import of those goods is one destructive import policies. A brief glance at this list is enough to understand that it was affected by rent-seeking motives because many locally-produced goods are not mentioned in the list while many items whose import is necessary for the health of the society have been banned.
The current import and export policies, such as setting a ceiling and having a history of activities in the field, limited order registration and the likes are not favorable policies to deal with sanctions. They even inflict more internal sanctions on the economy and disappoint the private sector.
I strongly recommend that economic surgery should begin with the removal of the subsidized forex policy; policymakers need to put on the agenda the introduction of fundamental reforms regarding import and export. These policies should lead to the sustainable export of products with competitive advantage and the import of high-quality materials to produce high-quality Iranian products.
