Iran-Pakistan Trade on the Decline

Trade between Pakistan and Iran is at the lowest ebb, as Pakistan’s exports alarmingly plunged to $318 million in 2015-16 from $1.32 billion in 2008-09, confirming that the Preferential Trade Agreement between the two neighboring countries is no more functional.

Pakistan’s imports from Iran stand at about $280 million, a senior Pakistani official at Economic Affairs Division told The News.

Iran, which is the immediate neighboring country, has the trade volume of $18 billion with India even in the presence of US sanctions, raising eyebrows as to why Pakistan could not manage to keep trade with Iran at a reasonable level. Most trade between Iran and India is based on barter system and this model has failed in the case of Pakistan.

Top Pakistani decision-makers have decided to initiate trade diplomacy with Iran and to this effect, both countries are going to hold crucial talks in the meeting of Joint Economic Commission to be held on April 17-18. Commerce Minister Khurrum Dastgir will lead Pakistan’s side.

Pakistani banks still shy away from carrying out transactions with Iranian banks. The absence of banking channels is the single largest obstacle to enhancing the trade.

Nonetheless, State Bank of Pakistan and the Central Bank of Iran are also in talks for payment arrangements through banking channels.

The Preferential Trade Agreement stipulates that Pakistan extends tariff concessions to Iran over 320 tariff lines and Tehran grants concessions on 309 tariff lines.

Pakistan alleges that the PTA is being flouted by Iran by increasing unilateral tariffs on Pakistan products, saying Tehran has increased tariff on textile and clothing by up to 121%. It has also imposed the increase in import duty on leather, footwear, fruits, vegetables and rice.

According to the Pakistani side, Iran has slapped about 90%% duty instead of 44% duty agreed in PTA on Pakistani kinnow while it has maintained a ban on fruit imports from Pakistan since 2012.

Iran has yet to react to the Pakistani allegations.

Last year, Iranian President Hassan Rouhani visited Pakistan in March and agreed on a five-year strategic trade expansion plan with the aim of promoting bilateral trade to reach $5 billion.