Different dimensions of tension in Iran’s foreign policy have been discussed a lot over the past few decades. With the passage of time, the negative effects of these tensions on our economy and society have become clearer.
These tensions come at a time when, unlike before, foreign trade is often the most important requirement for the economic development of countries and accounts for a big share in the gross domestic product of global countries.
Kourosh Ahmadi, a former diplomat, prefaced his write-up for the Persian daily Shargh with this note. A translation of the text follows:
Given the accelerated pace of globalization in the past few decades and the revolution in communication, information and transportation, countries have no other option but to rely on their relative advantages to exchange goods and services to achieve development goals.
The experience of emerging economies is right before our eyes. These economies could never reach their current status without having access to foreign markets to sell goods and import essential items, without attracting foreign investment, expertise and technology, and without linking up with the global supply and demand chain. The failure of countries that followed a different path is not a secret.
We are bearing witness to the ills afflicting Iran’s economy; the poor state of economic indicators, including GDP, inflation, domestic and foreign investment, has a direct relationship with Iran’s fragile role in world trade and the low ratio of foreign trade to GDP.
According to the World Trade Organization, Iran’s share of international trade has been declining over the past 40 years, reaching 0.24% in 2022, whereas at its peak in 1974, it accounted for 1.1% of global trade. More importantly, just like the decrease in Iran’s share of world trade, the country’s gross national income per capita has also fallen. According to the World Bank numbers, Iran’s income per capita decreased from $7,490 in 2012 to $3,530 in 2021.
International Status
Iran’s international status would become more clear when compared with other countries, especially the regional and neighboring ones. The country’s main concern should be the fact that as a middle power, it is falling behind its neighboring and regional countries.
Take the example of Turkey and Saudi Arabia, Iran’s main rivals in the region. Turkey’s share of world trade in 2022 was 1.2%, i.e. five times bigger than Iran’s. Note that according to the World Bank, the GDP of Iran and Turkey in 1978 was $78 billion and $65 billion, respectively.
In 2021, the two countries’ GDP was $359 billion and $815 billion, respectively. Saudi Arabia’s GDP increased from $80 billion in 1978 to $1 trillion in 2022. The per capita income in Turkey was $9,900 in 2021 and that of Saudi Arabia was $21,540 in 2020.
Iran’s meager share in world trade is not the only drawback; failing to attract foreign investment and carrying out joint projects are also a grave problem that have made access to technologies and indigenization of modern management approaches difficult. In addition to contributing to the development of public welfare, cooperation with and contribution to world trade have another important function, i.e. protecting the economy against unexpected shocks. Statistics on the share of countries in world trade have a direct and significant relationship with the level of public welfare in different countries. When it comes to international economic cooperation, the weakness of an economy is one of the main reasons behind their underdevelopment.
Paving the way for international trade and investment is one of the main differences between today’s world and the world before the first and second world wars. If a country deprives itself of this great opportunity to develop its relative advantages and benefit from the relative advantages of others, it loses one of the main levers to prevent the poverty of its people and to gain an appropriate share of power on the international front.
Tension in foreign policy and sanctions are not the only reason restricting Iran’s access to global economy. Rather, the introduction of some misguided management policies such as import substitution, self-sufficiency schemes, agricultural development at any cost, the administration of the government to provide the minimum needs of the people and the adverse effects of these policies, including the land-based development model instead of the sea-based one, smuggling, destruction of water resources and the environment and the migration of the elite have inflicted huge losses on the Iranian economy and society.
At present, delaying the formation of ties with the global system by reforming strategic policies and ending the crisis in foreign policy give rise to huge losses, as it has a direct relationship with the country’s security.
