In a sign of progress towards a free trade agreement between Iran and Pakistan, Iranian authorities have approved the initial draft shared by Pakistan and returned it with their input, paving the way for kicking off formal negotiations on streamlining bilateral commerce.
According to the Pakistani newspaper The Express Tribune, Pakistan presented its draft of the proposed FTA to Iran during Iranian President Hassan Rouhani’s state visit to Pakistan back in March.
While in Pakistan, Rouhani met with Pakistan’s Prime Minister Nawaz Sharif and the two sides agreed to replace the current preferential trade agreement the two countries have already in place since September 2006 with an FTA.
“We have recently got back the initial draft that we shared earlier with the Iranian authorities. They have given their input and agreed to push ahead with the plan,” said a senior officer in the Pakistani Ministry of Commerce.
“Now, we will soon start formal negotiations on tariff lines, duties and other matters to finalize the document as quickly as possible. A Pakistani delegation will leave for Iran most probably by next month to start talks on the FTA.”
As soon as the international community lifted sanctions against Tehran over its nuclear program earlier this year, Pakistan and Iran came up with a five-year roadmap with the objective of boosting trade to $5 billion. Under the roadmap, they also agreed last month to open special bank accounts in their currencies in Pakistani and Iranian central banks for streamlining the payment mechanism for trade transactions.
During sanctions, there was no proper payment mechanism for bilateral trade as there were restrictions on financial transactions with the Islamic Republic, which led to a significant decline in Pakistan’s trade with Iran over the past few years.
The year 2012 was the peak of Iran-Pakistan trade, when commercial exchanges exceeded $3 billion. The figure, however, declined in the following years. According to the Islamic Republic of Iran Customs Administration, two-way trade plummeted to $861 million in the last Iranian year that ended in March, of which $635 million pertained to Iran’s exports to Pakistan 34% lower compared to the year before, and $226 million to imports from Pakistan–down 16%.
IRICA data on mutual commercial exchanges are for the first four months of the current Iranian year (March 20-July 21), during which Iran exported 646,400 tons of goods worth $256.4 million to Pakistan, which indicates a 30% increase in value compared with last year’s corresponding period.
Meanwhile, more than 166,700 tons of goods valued at $160.4 million were imported during the four months, indicating a 119% surge. Petrochemicals, bitumen, gas, lead, vegetable seeds, carpet, pistachios and tiles were among the main exports. The imports chiefly included rice, fruit, sesame, chickpeas, beans and lentil.
