The Iraqi government’s decision to triple import duties has given rise to concerns among manufacturers and traders, arguing that the decision will lead to reduced competitiveness compared with other countries such as Turkey.
Head of Iran-Iraq Joint Chamber of Commerce, Jahanbakhsh Sanjabi-Shirazi on Wednesday anticipated that Iran could lose $300 million to $600 million in export of non-essential goods to Iraq, adding that the decision will not affect overall exports in the long-run as Iran’s exports comprise mainly of essential commodities which are in high demand in Iraq, Shargh newspaper reported.
“The rise in customs duties will not pose a serious barrier to exports as it will be partly compensated by the hike in prices of finished products,” he said.
Addressing the concerns voiced by Iranian traders regarding reduced competitiveness of Iranian products, he said the large-scale manufacturers who tend to export directly, without any intermediary, could regain economic viability by increasing the volume of exports.
He assured the traders that the situation is temporary; noting that Iraq’s foreign trade is expected to rise following a surge in the level of oil exports, which he said could partly compensate the hike in import duties.
Iraq’s ministry of finance headed by the veteran politician, Hoshyar Zebari, recently issued a directive authorizing the Iraqi customs offices to raise import duties. The new regulation increases Iraq’s import duties to 15% from the previous 5%.
Bedeviled by the drastic fall in oil prices in international markets, the decision, which has been on the cards for sometimes, was taken by the government to partly plug a budget deficit of $70 billion anticipated for the current year.
The government has drafted its $137 billion annual budget for 2015 based on an oil price of $100 per barrel. Oil prices have fallen to below $60 per barrel from its peak of $144 in June last year.
Despite occasional ups and downs, bilateral trade has been on the rise over the past few years, making Iraq the second biggest market for Iranian products, next only to China.
While Iraq’s exports to Iran have been marginal, including commodities such as scrap iron, tobacco and aluminum alloy, Iran has been exporting a wide range of commodities including mineral water, apples, yoghurt, biscuits, pistachio, cement, tiles, ceramics, etc. to the western neighbor.
Trade between Iran and Iraq currently stands at $12 billion, with trade balance heavily in favor of Iran. The two neighbors hope to increase annual bilateral trade to $25 billion in the coming years.
