19 December 2016 Institute for Trade Studies and Researches(ITSR) In The Name of God Current Status and Main Challenges of Trade Policy in Iran (Findings and Results of the Trade Policy Research Project) 19 December 2016 Institute for Trade Studies and Researches(ITSR)

The main scope of the project The theoretical foundations of trade policy and its evolution(chapter 1) A comparative study of the experiences of other countries in the area of trade policy(chapter 2) The review of the fundamentals of Iran’s trade policy and its results and achievements in the last five decades(chapter 3) Pathological study of Iran’s trade policy and some solutions proposed(chapter 4)

The theoretical foundations of trade policy Inward oriented strategies Import substitution strategy Infant industry protection Government intervention via direct investment in production and distribution trade controls Strategic Trade Policy Strong linkage between industrial policy & trade policy Outward oriented strategies Export development strategy Overcoming the limitations of the domestic market scale Benefiting from the economic advantages Enhance economic efficiency Exchange rate devaluation, trade liberalization, Attracting FDI Efficient allocation of resources and prices Global Value Chains(GVCs)

Findings of Comparative Studies Scope 10 countries ( US, EU, Japan, China, Mexico, Brazil, India, Russia, Turkey and Vietnam ) Results Good function of trade policy needs : Coordination and coherence of macro economic policies Good relation and trust between people and government public and private sectors, professional communities and policy makers

Findings of Comparative Studies All studied countries have experienced a period of high level of protectionism. Successful cases used protections: Only for targeted industries with limited time Unsuccessful ones: Untargeted protection prolonged protection All countries gradually have lowered: Non tariff barriers via tariffication Average tariff rates, Except for sensitive products

Findings of Comparative Studies Recent experience shows that: Governments are investing in horizontal sectors than vertical ones( educations, training, improving basic infrastructure,…) let the new technology to choose the promising sectors More attention to Global Value Chains Via membership in RTAs Regional Enhancing trade facilitation

Pathological scope of Iran’s trade policy study Targets strategies Tools

Diagnostic problems in Iran’s trade policy targets & strategies No clear definition among: Policy makers Legal documents Trade administrators Lack of a documented evident for trade policy & strategies Lack of coherence between trade policy and other macroeconomic policies Fiscal, monetary and budget policy Foreign exchange policy Political relations Domination of political visions over economical ones Ambiguities about industrial & technological policies and their priorities Instability of policies due to fluctuations of resource based economy and external shocks Failure coordination between various governmental bodies and organizations

Diagnostic problems in trade policy tools Institutional weakness Lack of knowledge and professional expertise in the field of trade policy issues Contradictions between laws and regulations No Unity in trade administrations & managements Lack of modern trade procedures & tools Tariff policies High tariffs Instability of rates and laws Weakness of structure and organizations Non transparency Lack of predictability General inactive protection in many sectors Non-tariff policies frequency of non tariff barriers Lack of transparency Weakness in pre-notification of new rules and regulations and its changes

SOME FACTS AND FIGURS OF RECENT TRADE REGIM

Average tariff rates:(2005-2015)

Average tariff rates in the region

Average tariff rates in the region: Agriculture

Average tariff rates in the region: Industrial

Simple & weighted averages)2015) Simple Average Products 7.8 29.04 Agriculture 10.47 17.9 Industry 9.86 19.68 All

Comparing Iran's Average Tariff Rate with Average Tariff Rate of the World( 143 Countries) منبع: كتاب مقررات صادرات و واردات 1394 ج.ا. ايران و گزارش World Tariff Profiles سازمان جهاني تجارت.

Non-tariff barriers situation Temporary import bans Import licensing for most products Standards :National treatment compliance problem Dual exchange rate

Challenges of Trade Policy In Iran Lack of clear concept of national benefits and trade policy roles among the stakeholders Disintegration of trade policy and development plans Persistent mentality of Import substitution versus export-promotion and GVCs approach.

Challenges of Trade Policy in Iran 4. Weakness in Regionalism 5. Lack of Coordination among different stakeholders 6. Barriers of active participation in Global value chains(sanctions)

Challenges of Trade Policy in Iran 7. Agreeable selection for Sensitive products 8. Neglect of Role of services in the whole economy 10.Lack of a planned program as a Prerequisite for accession to the WTO

Thank You for Your Kind Attention