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June 2021, No. 97


Trade & Business

Prospect of Trading with Neighbors Not Good!


We are a country with 15 land and water borders and we can connect East Asia to Europe. We can connect the countries of northern Iran to the Arab countries.


Mohsen Jalalpour says he has never regretted choosing trade as his main business, and if he goes back in time, he will still choose the same path because trade is a phenomenon beyond economics. He adds free to the word trade and believes that free trade can eradicate poverty in society. According to Jalalpour; if a country, by being in the right position, has the opportunity to develop trade and thereby improve its economic variables, if it does not do so, it has persecuted the rights of its society and deprived it of the possibility of development and poverty eradication. We talked to him about the difficulty of doing business with our neighbors.

The idea of ​​free trade is very simple; Some do some things better than others. Accordingly, we all put aside tasks we are not skilled at and choose tasks in which we are more proficient. David Ricardo has proven that even if others are better than us at producing everything, we will still benefit from the trade. There is no form or structure of business that can make us poorer than we would not trade. All of this shows how important free trade is. Even countries that were once at war with each other for the development of trade, put aside hostilities and resumed relations.

Japan was once destroyed by the US nuclear attack but rose to prominence, and today Japanese goods have many customers in the US market. As well as Vietnam, Turkey, Singapore, etc., there are many such examples, and it can be said with certainty that free trade is a priority for countries because it guarantees their economic growth and development. This policy, however, has not been accepted in our country yet, and it seems that the policy aimed at free trade and the free trade aimed at economic growth and prosperity has not been defined in our country. As a private sector businessman, why is our foreign policy not in the service of economic growth?

This question is very important and needs an introduction. Some may think that these words are repetitive and you want to delete them, but this is a fact that will never be repeated. In the last few decades, this fact has been ignored in our policy and its results are more visible today than ever. A fact that has been overlooked in our economy is the politicians disregard for the benefits of free trade. Free trade has been the driving force behind many economies to break the poverty trap. You cannot cite a country that has developed but that development has taken place without trade. When we talk about business, we are talking about a phenomenon beyond economics. Trade is the engine of the economy, and even production without trade will not work.

There is no country that is on the path to growth without interaction with the world. If it were not for trade, Tuyserkan walnuts would not have been taken to Tehran and Kerman pistachios would not have improved the taste of Tabriz sweets. If the trade route was not smooth, coffee would not go from Brazil to Russia and cars would not reach Japan from the United States, we would not have a porcelain plate on our table and the British would not wear Turkish clothes. Someone in Kerman might look at a Toyota RAV4 and say to himself, I am looking at a Japanese car. But he is definitely wrong because the car in front of him consists of 15,000 pieces, each made in different factories and in different countries.


Foreign trade statistics for the past eight months show that we have had the largest volume of trade with Iraq among neighboring countries.


The car may have been designed in Europe, but parts came from East Asia and North America or China. The car was eventually manufactured in Japan or Toyotas production line in the United States and is the result of the interaction of tens and perhaps hundreds of manufacturing companies, but in the end these parts are transported and connected to one point by free trade magic from different parts of the world. It is a feature of free trade that encourages communities to do what they are good at and also encourages us to do what we are more skilled at. If we allow people to do our jobs that are more productive, then free trade will happen. This is the main advantage of trading.

For example, suppose I do not have the necessary facilities or skills to grow mangoes. So I buy mangoes from someone who is good at growing them. At the national level, more trade with other countries of the world means increasing the number of different people with unique specialties and more skills in doing things that can be used to experience different abilities and talents. If we find people who are better than us at growing mangoes or anything else, we can actually get this product from there. This rule applies to everything. Another point is that the welfare and economic health of the society improves with the improvement of the business environment and the countries that have the highest level of trade freedom have higher per capita incomes and the poverty rate in these countries is lower.

If a country, by being in the right position, has the opportunity to develop trade and thereby improve its economic variables, if it does not do so, it has persecuted the rights of its society and deprived it of the possibility of development and poverty eradication. I think we have suffered such oppression in Iran and instead of increasing the welfare of the society by expanding free trade, we have increased the welfare of our generation by spending natural resources and oil, which is a kind of encroachment on the rights of our children. We are in an area that is unique to trade. Irans geographical location is unique for trade. I think this situation is even more valuable than the wealth of oil, because oil is not more than a century old, and eventually will be out of the cycle of wealth creation in another decade or two, but trade is a possibility that has always existed and will continue to exist. Iran is located in one of the most important commercial centers in the world and this position should be taken advantage of.

We are a country with 15 land and water borders and we can connect East Asia to Europe. We can connect the countries of northern Iran to the Arab countries. If the worlds strategists, economists and businessmen have the power to choose three important countries for trade development from the map, I have no doubt that Iran will be one of the three choices of the majority. Iran has a world of capacity for trade. If in the past trade was given importance, today production was prominent in Iran and agriculture was flourishing. 

And of course, as you mentioned, over the last five decades we have lost almost every opportunity to expand our business. It may have been possible to count on trade with neighbors until a month ago, but recent developments have been both rapid and unprecedented. These events can have many consequences that we have nothing to do with, but the playing field makes the economy smaller and the game more difficult. One of these events was that the UAE made a friendship plan with Israel and a flight was established between the two countries in a short period of time. If you want to update the analysis of the past with new developments, do you still believe the trade route with neighbors is smooth?

Lets look at the statistics first; Foreign trade statistics for the past eight months show that we have had the largest volume of trade with Iraq among neighboring countries. Our traders have exported 5.3 billion dollars worth of goods to that country. It is followed by the United Arab Emirates with $2.7 billion, Turkey with $1.6 billion and Afghanistan with $1.5 billion. Now let me be clear as a businessman; While our relationship with the countries around us is constantly fluctuating, we are surrounded by countries that are no longer our neighbors. With its proximity to Israel, the UAE is not just a neighbor to us, it is a refuge for a country that has been hostile to Iran for many years.

In the Karabakh war, we saw that Azerbaijan went to war with Armenia with Israeli military weapons, and after the end of the conflict, Israeli flags were circulating in the streets of that country. Armenia is also offended by us. Afghanistan is under US control, and the Taliban play a deterrent role in that country by inciting other countries against Irans interests; Therefore, we cannot open a special account for trade with this country. Turkey is pursuing its dream in the region, and we must understand that we have no special place in its perspective. Iraq is our most important trading partner right now, but the reality is that it is under US military occupation and we cannot fight for more markets. Although Pakistan is not our enemy, it has not been a good friend to us.

Turkmenistan is not an important country in foreign trade and does not have good relations with us. These are countries that share a land border with us. The situation with the countries with which we have a maritime border is even worse. The beacon of relations with Qatar, Kuwait and Oman is flickering, but as you mentioned, the UAE, Bahrain and Saudi Arabia have formally allied with Israel against Iran. The UAEs open relations with Israel indicate a major turning point in its foreign policy, but Saudi Arabias secret relations with Israel should be considered a decisive event. All these developments show that the outlook for trade with our neighbors is not good, and if this situation continues, we will probably become a country surrounded by neighbors. 

What do you see as the solution?

The solution is to improve interaction with the world and free trade. When we talk about interaction with the world and free trade, some people immediately get angry and say we will never have a relationship with the United States. It is not a matter of America at all. It is not a matter of Israel. The point is that we do not have an economic relationship with even one country according to diplomatic rules and we are not a member of any international union or organization. The Iranian society is constantly losing its welfare and, unfortunately, is getting poorer day by day. Investment in our economy has become a worrying trend, and all this has caused great damage to the country.

We must move the cycles of the economy to preserve the country and the survival of society. The government must allow people to trade freely. The mental boundaries of trade must be removed and people must be free to trade. Not all loopholes are closed, including trade with major economies such as India. We should not trade exclusively with one country; The optimal balance for us is not rolling toward the East or the West.

We must get out of this trap and use our national interests as a criterion. Countries like India, Qatar and Iraq are opportunities for us. Trade with Iraq must be liberalized and people can trade freely in the border markets with Iraqi traders.

 

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  June 2021
No. 97