Economy, Domestic Economy

Debate Over Protectionism Heating Up

Debate Over Protectionism Heating UpDebate Over Protectionism Heating Up

Despite growing optimism that Iran will open up to foreign investment soon, policymakers have been taking a strong position on protecting domestic industries, in line with the general economic framework known as ‘Resistance Economy’ - a set of guidelines proposed by the Leader of the Islamic Revolution Ayatollah Seyed Ali Khamenei to counter sanctions, promote domestic growth and reduce reliance on oil revenues.

In the latest in a series of measures to promote domestic industries, the government agreed on tougher tariffs on steel imports, while simultaneously lowering required royalty payments from iron ore companies. The administration has also been applauded for convincing Peugeot to agree to stringent production and export targets.

Opinions are divided within Iran on whether protectionism is the right way forward. The Resistance Economy consists of 24 general policy prescriptions, the translation of which to concrete measures is not always straightforward and open to interpretation. Businessmen and politicians have sometimes broken ranks by offering conflicting lines of action.

The government has also been planning to enforce a range of restrictions on food, health and beauty products since the start of the new Iranian year (March 21).

However, the head of the Beverage and Foodstuff Importers Association (BFI) told Ta’adol newspaper that he was “not informed about this” and that if true, it would probably relate “only to processed foods, not to unfinished products.” The head of the Iranian Association of Cosmetics, Toiletries and Perfumery Importers (IACTP), also stated that the protective policies “have not been executed” and “won’t be” in the near future.

In response to the issue of lingering protectionism in the beauty and food sector, head of the BFI, Alireza Monaqebi, offers his particular interpretation of the Resistance Economy. For him, “imports should not be limited by force.” Iranian consumers are attached to foreign beauty and food products, and closing the trade circuit would only inflate smuggling, Monaqebi argues. “It is extremely tough to force consumers who were buying foreign products yesterday to buy Iranian goods.”

General director of the monitoring and evaluation department at the Food and Drug Administration (FDA), Seyed Hedayat Hosseini, puts forward a less liberal view. He stated that the ministry of health and medical education, to which the FDA is affiliated, will always do its best to promote domestic production by “implementing [import] restrictions to the farthest level possible from a legal viewpoint.”

The health ministry has a history of shielding Iranian producers from international competition. Most of their policies have been aimed at improving the quality of food within Iran, which cheap imports from China and India have reportedly endangered.

Debates on the extent of protectionist measures look set to heat up once sanctions against Iran (imposed by the West over the country’s nuclear energy program) are removed and international competition might likely put pressure on many non-oil industries.

A large amount of food and cosmetic products are produced in Iran; however registered imports of beauty products stand at $1 billion, while even more is estimated to be smuggled, according to the deputy minister of health, Rasoul Dinarvand, in December last year. Chinese beauty products – often blamed for their low quality – dominate the Iranian market. One expert stated that Iran’s 20 beauty product factories supply 30 to 35 percent of the domestic market.

Iran has been more successful in exporting food products, particularly sweets and chocolate, most of which is exported to neighboring countries.