Pakistan and Iran have agreed to accelerate negotiations on a long awaited Free Trade Agreement as both countries seek to strengthen bilateral economic relations and increase their trade volume to $10 billion. The agreement was reached during the 10th meeting of the Pakistan Iran Joint Trade Committee held in Islamabad, where Commerce Minister Jam Kamal Khan and Iran’s Minister of Industry, Mine and Trade Dr Mohammad Atabak jointly reviewed opportunities to expand trade, investment, logistics and private sector cooperation. Both sides emphasized the need to conclude the proposed Free Trade Agreement at the earliest, with officials identifying the removal of trade and logistical barriers as an important step towards achieving the targeted increase in bilateral commerce.
During the meeting, Jam Kamal Khan said the longstanding relationship between Pakistan and Iran should be translated into a stronger economic partnership through increased commercial engagement. He stressed that finalizing the Free Trade Agreement would provide a framework for expanding bilateral trade and creating greater opportunities for businesses in both countries. The minister also highlighted the need to address obstacles affecting border logistics, customs procedures and cargo movement, which continue to influence the ease and cost of trade between the two countries. According to Jam Kamal, improving these areas would be essential for creating a more reliable trading environment and supporting the private sector’s readiness to expand cross border business activity.
The Pakistani commerce minister also identified the establishment of joint border markets and the introduction of electronic data interchange as measures that could significantly improve bilateral trade. Joint border markets could provide additional channels for commercial activity in border regions, while electronic exchange of trade and customs information could improve coordination and reduce procedural delays. Jam Kamal said the private sectors of Pakistan and Iran were prepared to increase trade activity and that governments should focus on providing a conducive and reliable business environment. He added that the Joint Trade Committee meeting was expected to establish a practical roadmap for expanding economic cooperation and moving the bilateral relationship towards greater commercial integration.
Iranian Minister Dr Mohammad Atabak described Pakistan as a long term strategic trading partner for Iran and expressed a desire to expand regional trade and logistics cooperation. He specifically highlighted the potential role of the ports of Karachi and Gwadar in strengthening regional commercial connectivity. Greater use of these ports could provide additional opportunities for trade and logistics cooperation while connecting businesses and markets across the region. Dr Mohammad Atabak also expressed hope that negotiations on the Pakistan Iran Free Trade Agreement would be concluded soon, reflecting the two countries’ shared interest in moving beyond existing preferential trade arrangements towards a broader framework for bilateral commerce.
The two sides also identified electricity trade and regional connectivity as areas with potential to create new economic opportunities. In addition to merchandise trade, greater cooperation in energy and transportation could broaden the economic relationship between Pakistan and Iran. Both governments reaffirmed their commitment to strengthening cooperation in trade, investment, connectivity and private sector participation. The latest Joint Trade Committee meeting therefore covered a wider range of economic issues, with the proposed Free Trade Agreement forming a central part of efforts to establish stronger and more predictable commercial ties.
The 10th Pakistan Iran Joint Trade Committee meeting builds on a process that has been ongoing for several years. Nine previous meetings have already been held, with the ninth meeting taking place in Tehran on November 6 and 7, 2021. The latest discussions indicate that both countries are seeking to revive momentum around formal trade negotiations and address longstanding barriers that have limited the expansion of bilateral commerce. The target of $10 billion in bilateral trade places greater emphasis on resolving these practical issues, particularly those related to tariffs, border infrastructure, customs procedures and transportation.
Pakistan and Iran currently operate under a bilateral Preferential Trade Agreement that has been in effect since September 1, 2006. Under this arrangement, Pakistan has provided Iran with tariff concessions covering 338 tariff lines, while Iran has extended concessions to Pakistan on 309 tariff lines. The average tariff concession under the agreement is around 18 percent. However, the existing arrangement has not eliminated differences in market access between the two countries, with Pakistan facing comparatively higher duties on its exports to Iran due to Iran’s restrictive tariff regime.
The tariff imbalance remains an important issue as Pakistan and Iran work towards a more comprehensive Free Trade Agreement. Lower and more balanced tariff barriers could provide Pakistani exporters with greater access to the Iranian market while encouraging increased movement of goods in the opposite direction. Addressing these differences alongside customs and logistics barriers could be important for both countries if they are to substantially increase bilateral trade and move closer to the $10 billion target.
The proposed Free Trade Agreement could also provide greater certainty for businesses considering investment and long term commercial relationships between the two markets. Improved connectivity through Karachi and Gwadar, combined with more efficient border procedures and electronic data exchange, could strengthen the infrastructure required to support increased trade. The emphasis on private sector participation by both governments further indicates that businesses will play a central role in converting the proposed economic framework into higher trade and investment volumes.
Pakistan and Iran have therefore reaffirmed their intention to expedite the FTA negotiations while pursuing broader cooperation in trade, investment, energy and regional connectivity. The outcome of the latest Joint Trade Committee meeting is expected to provide a roadmap for further discussions and address the practical barriers currently affecting bilateral commerce. With both sides targeting $10 billion in trade, the progress of the Free Trade Agreement negotiations will remain an important factor in determining the future scale of Pakistan Iran economic relations.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.