Yesterday (Jan 02) started the first of three (3) stages in the implementation of the Custom Tariffs of Iraq.
All border crossings are now taxing up to 20% of all Luxury Goods being imported into Iraq.
What does this all mean?
This means that additional revenue is now being added to the yearly budget which will help insure yet another surplus for Iraq in 2014.
It also means that all border crossings are now linked directly with the Central Bank of Iraq for accountability which means that Iraq has taken its first real step into a Free Market Economy.
Read More Link On Right
It means that the other two stages, tariffs on non-essential and essential goods will be next and the Central Bank of Iraq will need to adjust the value of their currency if they do not want to experience inflationary problems going forward.
It is just logical that if they tax these goods at the border the adjustment needed in pricing once the goods reach the market place will be increased by at least the same, by 20%.
It is also logical that this increase will be much higher than 20% because of all the other hands that the goods pass through just getting them to market.
The point being, the Iraqi’s cannot afford that kind of change without inflation taking place.
There must be a balance going forward and it is the responsibility of the Central Bank of Iraq to control inflation through Iraq’s Monetary System.
The Arabic side of the CBI Website:
“Proposals to amend the Central Bank Law No. (56) for the year (2004) and the Banking Law No. (94) for the year (2004) and the law of money laundering and financing of terrorism No. (93) for the year (2004) provided by the Directorates and Departments Iraqi Central Bank and the banks licensed in Iraq”
Link: CBI http://cbi.iq/?pid=Home&lang=ar
All of these topics, Banking Laws, Money Laundering and Financing of Terrorism No. (93) are some of the most important things that we have read about for stability and security prior to any change accruing in Iraq.
With this post on the CBI Website it is obvious that the CBI is taking actions now to amend all these laws.
This is why for this blog I have focus on the Tariffs and this Central Bank Law No. (56) for the year (2004) and why these are so important.
The cost of goods directly reflect the value of the Iraqi dinar!
Here is just a few paragraphs of this Law No. (56), that should help you understand it:
COALITION PROVISIONAL AUTHORITY ORDER NUMBER 56
CENTRAL BANK LAW
Acting in a manner consistent with the Report of the Secretary General to the Security Council of July 17, 2003, concerning the need for the development of Iraq and its transition from a non-transparent centrally planned economy to a market economy characterized by sustainable economic growth through the establishment of a dynamic private sector, and the need to enact institutional and legal reforms to give it effect,
Having coordinated with the international financial institutions, as referenced in paragraph 8(e) of the U.N. Security Council Resolution 1483,
I hereby promulgate the following:
Section 1 Purpose
This Order establishes a safe, sound, and independent Central Bank for the purposes of achieving and maintaining domestic price stability, fostering and maintaining a stable and competitive market-based financial system, and promoting sustainable growth, employment, and prosperity in Iraq.
You can read more (LINK), the reason for the CBI to be linked directly with the tariff system is simple, they control the economics of Iraq through the ability of changing the monetary system as needed.
Now what is the Coalition Provisional Authority (CPA)?
The Coalition Provisional Authority (CPA) was established as a transitional government following the invasion of Iraq by the United States, United Kingdom and their allies, members of the Multi-National Force – Iraq which was formed to oust the government of Saddam Hussein in 2003. Citing United Nations Security Council Resolution 1483 (2003), and the laws of war, the CPA vested itself with executive, legislative, and judicial authority over the Iraqi government from the period of the CPA's inception on 21 April 2003, until its dissolution on 28 June 2004. (LINK)
These same CPA Orders apply to the Custom Tariffs as well and why we have read about them overseeing the implementation of the laws to protect Iraq’s domestic products.
The reason I am bringing this all together is because how important the subject of domestic product protection and the implementation of tariffs are to the World Trade Organization when it comes to Iraq’s Full Accession.
The CPA in an effort to balance the war torn economic condition of Iraq took the tariffs away in 2003 so Iraq could take advantage of the low cost of import goods due to the low purchasing power (value) of the dinar. So now you can see how important that it is that they both, implement the tariffs and give the dinar more purchasing power (value) at the same time.
Quote: 2003 - CPA Order 12, amended by Order 54, suspended all tariffs, thus removing the advantage that domestic Iraqi producers had over foreign producers. (LINK)
Now to have a Free Market Economy based off building the private and public sector where the locals can produce products they must take the advantage away from foreign importers, hence the implementation of the custom tariffs once again.
With the fight against terrorism underway, with the help of the US and Russian militaries and the ability for Iraq to gain stability once again gives credence to the rest of the important news moving forward into 2014.