Preferential tariff refers to tariff favoring the products of one country preferential to another. Under a Preferential Trade Agreement (PTA) the customs duties for selected imported goods are lower or totally eliminated.

As one of the strategies to promote the competitiveness of its products both in domestic and international markets, Iran has put signing PTAs with other countries on its agenda.

On October 18, Mojtaba Khosrotaj, the head of Iran’s Trade Promotion Organization (TPO), mentioned Malaysia, Indonesia, Pakistan and India as the four countries with priority for PTA, with them Iran is conducting related negotiations. He had also previously announced Iran’s readiness to ink PTAs with some countries including Afghanistan and Oman.

Meanwhile, in the seventh round of Iran-Eurasian Economic Union (EAEU) meetings, which was held at the deputy level in Tehran in mid-June, Iranian officials discussed preferential tariff on agricultural and industrial products with deputy industry and agriculture ministers from five EAEU member countries.

Iran Export Confederation Chairman Mohammad Lahouti is of the opinion that Iran should compensate for the lack of membership in the World Trade Organization (WTO) through signing PTAs.

In a meeting between officials from industry and agriculture ministries, which was held last week at the place of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), Lahouti supported the idea by saying that a country like China once it was not a member of WTO, compensated its absence in the international body through inking some PTAs and balanced its trade in this way.

A good example of preferential trade effect on the expansion of Iran’s exports is what we see in the country’s trade with its neighbor Turkey.

In an interview with ISNA in late October, Reza Kami, the Iranian chairman of Iran-Turkey Joint Chamber of Commerce, said that Iran’s exports to Turkey has increased to $5 billion during the past nine months from $2 billion in the same period of time in the past year as the result of preferential trade.  

And it is why Khosrotaj says signing PTAs with the neighboring countries is on the agenda.

Preferential tariffs also boost competitiveness among domestic producers and they also could play significant role in averting products smuggling.