Interview: Turkish Economic Mission to Expand PTA With Iran

Turkey's Minister of Economic Affairs Nihat Zeybekci is scheduled to lead a 100-member delegation to Iran to expand the preferential trade agreement in place between the two countries, Secretary-General of Iran-Turkey Commercial Council Jalal Ebrahimi told Financial Tribune.  

"The delegation, which is due in Tehran on July 8, will comprise representatives of Turkish industry owners, economic players and merchants as well as officials from the Turkish Ministry of Economic Affairs," he said.

"At present, the two sides have 160 items each under their PTA. During their stay, the Turkish mission and representatives from Iran's Ministry of Industries, Mining and Trade will negotiate to add 40 items each to the existing list of commodities."

Ebrahimi added that the PTA expansion to an overall of 400 goods is aimed at paving the way for arriving at the $30 billion target in bilateral trade between the two neighboring countries as per an economic roadmap agreed between the two sides.

Iran is, for the first time, including steel and industrial products in the list of commodities it is exporting to Turkey under preferential tariffs. The list has until now included agricultural products only.

The PTA between Iran and Turkey was signed in January 2014 and took effect a year later.

Based on the initial agreement, Turkey lowered tariffs for 125 Iranian goods. In return, Iran reduced rates for 140 Turkish items.

ICCIMA Calls for PTA Revision

A recent study carried out by the Research Center of Iran Chamber of Commerce, Industries, Mines and Agriculture on Iran's trade with Turkey before and after the implementation of the preferential trade agreement between the two countries in 2015 shows that the deal has not benefited the Iranian side.

ICCIMA believes Iran has lost the ground mainly due to its choosing the wrong type of goods to be exported to Turkey, arguing that some 80% of the goods chosen by Iran as part of the PTA had not been among the country's exports to the neighboring country prior to the implementation of PTA.

A study of trade balance of PTA-included commodities shows the exchanges have tilted toward the Turkish side.

Iran's chamber of commerce believes Turkey has carefully chosen commodities with high potential in the Iranian market, whereas Iran has chosen goods with low export values.

The items Turkey has opted to export to Iran at preferential tariffs include textile and clothes, electrical equipment, healthcare products, steel products, auto parts, furniture, home appliances, plastic, aluminum, wood, rubber and glass products as well as spare parts.

Iran's exports as part of the PTA, on the other hand, included fruit, vegetable, spice, convenience food, juice, biscuit, chocolate, chewing gum, pickle, tomato paste, licorice roots, fish, flower, dairy products and egg.

The PTA stipulates no weight limit for Turkey's exports to Iran while there is a 51% weight limit on Iran's exported commodities.

ICCIMA believes the list of Iran's export items should be reconsidered and revised, taking into account Iran's export capacities and Turkey's performance.

40% Rise in Bilateral Trade

Last year, according to Ebrahimi, non-oil trade between Iran and Turkey stood at around $5 billion, indicating a 40% increase compared with 2015, with Iran registering a surplus in its current account.

Trade figures pertaining to two-way trade for the first four months of 2017 also indicate a surplus in favor of Iran as non-oil exchanges stood at $3.55 billion with Iran exporting $2.501 billion to Turkey and importing $1.054 billion in return.

Iran imported industrial equipment, chemicals, foodstuff, machinery, textile and apparel from Turkey and exported pistachio, nuts, vegetables and petrochemicals to the neighboring country over the period.

"This is as far as the official trade figures go. Unfortunately, there is a huge volume of contraband that heads to Iran from Turkey with which we have around 766 kilometers of common border. Estimates are that between $4 billion and $5 billion worth of contraband goods, mainly apparel and cosmetics, are smuggled into Iran from Turkey every year," he said.

Ebrahimi believes bilateral trade in 2017 will definitely exceed that of 2016 and the trend will continue to grow, provided that the Iranian private sector becomes more familiar with the Turkish market and takes advantage of proper marketing and elevates the quality of exported products.

"For instance, so far this year, Iran has exported more than 4 million tons of dates worth close to $2.63 million to Turkey with each kilo priced at $0.65. This is while dates exported from Iraq or Saudi Arabia to the same destination are priced at between $2.5 and $4," he said.

"This speaks of shortcomings on our part, including the fact that we are not directly involved in the Turkish market in regard with some goods, our packaging has deficiencies and we are negligent of the customers' needs and demands."

Many items in Iran, says the official, are fit for exports to Turkey. "This requires Iranian producers and exporters to engage in face-to-face and B2B meetings and negotiations with their Turkish counterparts."

However, as Iran is not a member of World Trade Organization, pursuing preferential agreements with other countries seems to be the only way to enhance commercial ties.

More than 20 years have passed since WTO received Iran’s application for accession on July 19, 1996. It took the organization nine years to accept Iran as an observer member. In 2005, WTO eventually established a working party composed of a group of representatives tasked with assessing Iran’s accession bid. However, the chairman of the party has not yet been elected.

At present, Iran remains the world's largest economy outside the world body.