tariffs and removing barriers to imports in order to help domestic manufacturers avoid foreign competition.
The intervention put Kha-menehi on the opposite side of the issue from both President Ahmadi-nejad and former President Rafsanjani, who in one of their rare areas of agreement both believe Iranian manufacturers would improve the quality of their products if they were faced with competition from imported goods in the Iranian marketplace.
It isn’t known why Kha-menehi chose to intervene on this topic, one on which he would appear to be in the minority.
Khamenehi usually intervenes publicly on issues that have incensed members of the clergy. For example, after clerical uproars, Khamenehi intervened publicly to overrule Ahmadi-nejad’s decision to allow women to enter stadiums for soccer matches and later overruled an Ahmadi-nejad order to put the Hajj Organization under a political appointee.
His only major public intervention on an economic issue in recent years was to order the Ahmadi-nejad Administration to speed up the privatization of state-owned businesses. Many clerics also feel strongly about that issue.
Khamenehi announced his new policy in a speech last Monday. “Excessive imports will definitely be detrimental,” he said. “Low prices and an abundance of goods are very good things, but it is more important to allow domestic industry to grow and thrive. It is not right for us to open our doors to imports.…
“If the justification for importing foreign goods is to improve the quality of domestic products, government officials can easily pressure domestic producers to do so. There are policies that can oblige domestic industries to improve their quality.
“The worst strategy for improving the quality of domestic goods is to open our doors to foreign predicts. That is the worst option,” Khamenehi said.
He spoke only days after the Majlis lowered the import duty on foreign-made cars, as proposed by Ahmadi-nejad, from 100 percent to 70 percent. Kha-menehi specifically mentioned the auto industry at a couple of points in his speech, but added, “I mention the auto industry just as an example. What I am saying applies to all industries.”
It was not clear why Kha-menehi chose to raise this issue now. Allowing more imports to boost quality was first raised at the presidential level two decades ago when Ali-Akbar Hashemi-Rafsanjani became president. His successor, Mohammad Khatami, also advocated import competition, although he did not press the issue as Rafsanjani did. Since becoming president in 2005, Ahmadi-nejad has also argued the benefits of import competition, and under him auto tariffs have been cut from 200 percent to 70 percent in recent years despite objections from Iranian carmakers.
Khamenehi’s new policy pronouncement also flies in the face of the standards set by the World Trade Organization (WTO), whose raison d’etre is to reduce barriers to trade, including tariffs. Iran applied to join the WTO in 1996, but was blocked by the Bush Administration until May 2005. Iran did nothing about its application for more than four years after that until finally submitting the paperwork to get its application moving last fall.
Khamenehi’s new policy could effectively spike Iran’s application.
On Sunday, at the first post-holiday session of the Majlis, Speaker Ali Larijani pledged that the legislature would be a leading institution in “barring the easy import” of foreign-made products. Larijani did not, however, say if he would push legislation to boost auto tariffs back up.
The standard view among most economists holds that high tariffs are good for industry but doubly shaft the public because shoppers then must pay more money for lower quality products.
