Iran-Turkey Trade Hurdles

Political challenges and tariff barriers are the main impediments to Iran’s trade ties with Turkey, according to a report by the Export Promotion Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture.

“Iran’s traditional rivals, including the US, Israel and Saudi Arabia, pursue their anti-Iranian political aims by forging an alliance with Turkey. They are willing to lessen the presence of Iranian economic players in the Turkish market. Moreover, Persian Gulf littoral states, particularly Iraq and Qatar, have focused on taking the place of Iran in supplying Turkey’s oil and natural gas by using the latest technologies,” the report reads.

Banking complications, hurdles in the way of financial transactions due to nuclear sanctions, poor packaging, failure of Iranian businesses to maintain a continuous presence in Turkey’s market or to have a website, not being a member of World Trade Organization and unhealthy rivalry among Iranian traders have also posed obstacles to development of strong trade ties between the two neighboring countries.    

In addition to non-economic, political barriers, Iran’s tariff system has inflated the end-price of local products and sapped the country’s competitiveness and export ability, according to the report. 

There seems to be strong resistance to making changes in this system. Manufacturing companies naturally oppose any reduction in import tariff rates. Lowering tariffs, they argue, will give way to unrestrained imports and hurt industries and cost jobs. 

In contrast, other countries’ trade experiences show protective tariffs are bad for the development of industries. 

To remove these barriers, the report recommends forging free trade agreements with Turkey. Such agreements would ensure growth in non-oil trade, improve export figures for Iran and create more jobs. 

Trademark registration in Turkey, promotion and sales of products by having a local representative there and taking part in exhibitions will also help Iranian companies gain a toehold in Turkey’s market, the report concluded.

Iran and Turkey have signed a preferential trade agreement since 2014. Based on the initial agreement, Turkey lowered tariffs for 125 Iranian goods, in return for Iran reducing rates for 140 Turkish products. 

The two sides have revised the list of commodities included in the PTA several times since it went into force in 2015.