Bilateral Trade: Terms of FTA to be shared with Iran soon

Countries will then formally start negotiations on details

ISLAMABAD: The initial text of the proposed Free Trade Agreement with Iran will be shared by Pakistan by the end of this month, which would formally initiate the agreement with the neighbouring country, said an official in the Ministry of Commerce.

The official told The Express Tribune that both sides have agreed to initiate the FTA to promote bilateral trade.

“In this regard, the commerce ministry will soon share the initial text with the Iranian authorities during this month,” the official added. He said that after exchanging the document, both countries will formally start negotiation on the agreement and will discuss tariff lines and duty structures.

“Hopefully, we will agree on some point by the end of this year on the FTA”, said the official.

It was further said that Pakistan has to exclude certain clauses related to the World Trade Organisation (WTO) to avoid complications as Iran is not a member of the WTO.

Pakistan and Iran agreed to push forward the proposed FTA during the recent visit of Iranian president to Pakistan. The two countries have already signed a Preferential Trade Agreement (PTA) back in 2006 and trade is carried out under the framework of this PTA.

Moreover, the two countries also signed a five-year bilateral trade roadmap during the Iranian president’s visit along with the commitment to enhance bilateral trade up to $5 billion annually by next five years.

Both sides were interested in signing the FTA for a long time, but international sanctions on Iran were a key hurdle. However, recent steps promoting bilateral trade are being taken in the backdrop of lifting of most sanctions on Iran after a successful nuclear deal.

Moreover, the Trade Development Authority of Pakistan (TDAP) has also planned to organise a single-country exhibition of Pakistani products in Tehran by the end of July or start of August. Certain business delegations including Rice Exporters Association of Pakistan have also visited Iran recently in a bid to promote bilateral trade.

Commerce ministry officials said that there are still certain challenges in the way of moving ahead on bilateral trade, especially the absence of formal banking channels and transactions as Letter of Credits (LC) could not be opened in dollar terms.

Keeping in view the issues, Pakistan authorities have already issued advisories to the businessmen to open the LCs in euros instead of dollars.

Published in The Express Tribune, May 12^th, 2016.

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