A report by the Trade Promotion Organization of Iran indicates that the trade deficit with Turkey during the first five months of 2015 declined $44 million compared to the preceding five-month period as a result of Iran-Turkey Preferential Trade Agreement, despite criticism by many politicians and business groups that the agreement was not in Iran’s favor.
Iran registered a trade deficit of $136 million with Turkey during August-December 2014. The deficit shrank by $44 million to $92 million during first five months of 2015, IRNA reported.
Almost a decade after the idea of preferential trade was first proposed, Iran and Turkey signed a PTA in 2014 that went into effect in January 2015. According to the PTA, each country agreed to reduce tariffs on a list of imports from the other side. The list includes 142 Iranian products and 120 Turkish goods.
Based on TPOI’s report, Iranian products included in the PTA accounted for $84 million of Iran’s non-oil exports to Turkey between January and May 2015. This is while Iran exported only about $35.5 million worth of similar items in the preceding five-month period (August-December 2014). Iran’s exports to Turkey during the similar period last year (January-May 2014) stood at $41.45 million.
Meanwhile, Iran’s imports of Turkish commodities listed in the PTA amounted to $176.8 million during the first five months of 2015. Iran imported $172.10 million of commodities during the preceding five months (August-December 2014) and $147.23 million during the first five months of 2014.
The report concludes that the PTA has in fact been in Iran’s favor as it has resulted in an increase of more than 100% in non-oil exports to Turkey compared with only less than 20% increase in imports from the country during the five-month period compared to the same period last year.
Soon after the Iran-Turkey PTA went into effect, several Iranian politicians and business groups expressed deep reservations about it. The critics argued that several domestic industries, especially the textile and clothing sector, could lose a large portion of the domestic market to Turkish exports.
In response to this objection, the TPOI report points out that the clothing items listed in the PTA with Turkey have recorded a negligible increase of $500,000 in imports compared with the preceding five-month period, indicating that a large amount of Turkish products are being illegally smuggled into Iran.
> Long-Term Benefits
Director of TPOI’s Representative Offices Affairs, Reza Abbasgholi defended the PTA on Monday, pointing that in addition to boosting Iran’s exports to Turkey, the PTA encourages Turkish manufacturers to invest in Iran to benefit from incentives such as availability of cheap energy and educated workforce.
“Turkish investment in Iran would facilitate transfer of technological know-how and help Iranian companies improve the quality of their products,” said the official, recalling that Iranian traders lost many neighboring markets such as Iraq, Afghanistan and Common Wealth of Independent States over the past years due to lower quality of Iranian products.
He also noted that as Iran is pursuing membership in the World Trade Organization, the long-term benefits of having a PTA with Turkey outweigh any short-term loss to domestic manufacturers, “as it brings with it economic growth, access to new markets, foreign investments and transfer of technology.”
Earlier in June, TPOI head Valiollah Afkhamirad announced that Iran was planning to revise the import tariffs on some Turkish goods listed in the PTA to protect domestic industries.
The Iran-Turkey PTA allows both sides to revise import tariffs or change some items in the list every three months to protect their domestic industries, said Afkhamirad. “Accordingly, Iran is planning to increase import tariffs on some Turkish commodities whose imports have increased sharply because of the PTA,” he said.
Intro: The PTA has worked in Iran’s favor as it resulted in an increase of more than 100% in non-oil exports to Turkey compared with less than 20% increase in imports from the country during the first five months of 2015 compared to the same period last year
