Iran's Terms of trade in the Trade of Chemical Products

Iran has a competitive advantage in the production of chemical and pharmaceutical products due to its oil and natural gas resources, as well as the support of scientific centers and the educated people. These industries play a significant role in Iran's manufacturing production and trade. From a trade point of view, the products of these industries, due to the country's advantage, have a large share in Iran's non-oil exports, and on average, about 30% of the country's total exports in recent years have belonged to chemical industry products. The share of chemical industry products in the country's importing commodity is also high, so that the average share is about 15%. So identifying the leading sectors and researching their role in the country's economy can play a significant role in the effectiveness of limited resource allocation and subsequent growth and development According to what was said, it is not enough to export and import trends to evaluate export performance. One of the tools for examining business performance is terms of trade. Terms of trade is a very important issue that development economists use it to examine the relationship between economic development and country's trade. By definition, terms of trade is the relative price of exports in terms of imports. This term is obtained from the ratio of the price of exported products to the price of imported products. This means that for each unit of purchase of chemical products from the outside world, several units of the same products must be exported to the outside world.

The results of the present report show that:

  • Although according to statistics, the country's exports of chemical products have grown positively in recent years (average annual growth of 1.5 percent), but Iran's terms of trade in these products has been significantly deteriorating since 2014. So that the numerical value of its index has decreased from 1 (in 12014) to 0.67 (in 2018); in other words, every year for a certain amount of weight of imported chemical products, more weight values of the country's chemical products it has been exported.
  • This situation of the terms of trade, in which the country sells chemical products cheaper (earing  of foreign currency) and buy them more expensively (to give of  foreign currency), indicates the need to review and reform industrial policy and trade strategies in these industries. In this situation, according to products price levels and the growth in the world, we should move towards chemical products with higher levels and growth, in order to improve the terms of trade and, as a result, further development and welfare.
  • The positive impact of technology content in the products on the terms of trade improvements stems from the fact that more complex products are typically produced by fewer countries, so there is no doubt that moving toward producing and exporting these products requires more precise policies. So it is recommended for investing in manufacturing firms, in addition to subjects such as job creation, unfinished projects, etc., the impact of products on the terms of trade also be considered.
  • According to the report, the priority of investing in manufacturing products "Basic Production of Chemicals (ISIC Code 2411)" should be considered organic compounds such as citalopram, Simvastatin, Active Pharmaceutical Ingredient of Clopidogrel Hydrogen Sulfateand and Copper Acetylide as well as Salts of Oxometallic or Peroxometallic Acids.
  • Also in the pharmaceutical and chemical manufacturing products using in Manufacture of pharmaceuticals, medicinal chemicals and botanical products (ICIC code 2423), priority is  to invest in the production of products such as alkaloids, natural or reproduced by synthesis, and their salts, ethers, esters and other derivatives and Hormones, prostaglandins, thromboxanes and leukotrienes, natural or reproduced by synthesis; derivatives and structural analogues thereof, including chain modified polypeptides, used primarily as hormones.
  • In order to improve the country's term of trade, investment in the chemical products industry (with the exception of high-tech products) should be monitored closely by the global price and its growth trend of the products.
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