Domestic Economy

The Long Journey to WTO Accession

The Long Journey to WTO AccessionThe Long Journey to WTO Accession

Iran has been seeking to join the World Trade Organization (WTO) for nearly two decades now – a long wait by WTO standards. The country has been WTO observer member since 2005 when its application was accepted and examined by WTO General Council but the process of full membership in the organization is still ongoing.

“Correspondence has been made with all the ministries in order to pave the way for accession into WTO and we hope to advance work with the efficient councils as soon as possible,” Minister of Industry, Mine and Trade Mohammad Reza Nematzadeh announced last week, as reported by Persian daily Ta’aadol.

He also noted that the ministry’s decision to bring down the average import tariffs by 1% was in line with the WTO requirements.

“The average import tariff was reduced from 19.7% to 18.7% after rates for certain commodities were lowered.  For example, a 75% import tariff on saffron was lowered as the country hardly imports any saffron,” said the minister.

In a bid to facilitate Iran’s membership in the WTO, the council of ministers also reduced the number of import tariff categories from 14 to 10 in the current Iranian year (started March 21). According to Nematzadeh the number of the categories will be further lowered to six within the next two years.

The minister cited intellectual property rights as a key aspect in Iran’s accession to the WTO, saying: “We are trying to devote more attention to intellectual property policies following the removal of sanctions [imposed against Iran by the West over its nuclear energy program].”

Nematzadeh ruled out concerns that joining the WTO could harm domestic production, saying: “The law has envisaged some leeway and if we feel that a certain production sector is being harmed we will resort to anti-dumping policies.”

  Regulation Stability, Strategic Plan

Observing that joining the WTO is essential for Iran, a member of board of directors at Tehran chamber of commerce, industries, mines and agriculture, Mehdi Pourghazi, believes lack of stability in the business and trade regulations is a major impediment to Iran joining the WTO.

“The approved legislations and regulations pertaining to business and trade change abruptly, creating an array of obstacles for traders and business-owners,” he noted.

Acknowledging that the country could go through some difficulties and pressures immediately after its accession to the WTO, he expressed confidence that the move will benefit the economy in the long run and lead to economic prosperity.

Hossein Raghfar, an economist and faculty member of Al-Zahra University, emphasized the need for drafting a strategic plan for gradually reducing the import tariffs to avoid harming the domestic industries. “In the absence of a comprehensive and detailed program, domestic industries would be faced with serious challenges with Iran joining the WTO,” he noted.

  WTO Membership

The WTO is an intergovernmental organization which regulates international trade. The member states account for approximately 98% of global trade. The organization was officially launched on January 1, 1995, replacing the General Agreement on Tariffs and Trade (GATT) which was established in 1948. The WTO deals with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements.

The WTO has 161 members and 23 observer governments. Seychelles – an archipelago of 115 islands in the Indian Ocean off East Africa – is the most recent member, having joined in April 2015.  The process of becoming a WTO member is unique to each applicant country, and the terms of accession are dependent upon the country’s stage of economic development and the current trade regime.

The process of accession can be broken down into four major stages: a country wishing to accede to the WTO submits an application to the General Council. The government applying for membership has to describe all aspects of its trade and economic policies that have a bearing on WTO agreements. The application is submitted to the WTO in a memorandum which is examined by a working party open to all interested WTO members, and dealing with the country’s application.

  Iran’s Accession

Iran officially submitted an application to join the WTO on July 19, 1996. From July 1996 to May 2001, Iran’s application had not been considered, mainly as a result of US objections and the US veto power in the WTO Council. From May 2001, Iran’s application for WTO membership was brought up several times before finally being approved by the organization’s members on May 26, 2005. Once Iran’s application was accepted and examined by WTO General Council, Iran became WTO observer member and started the process of full membership in the organization.

The process of accession entered a new phase in November 2009 when Iran submitted the Foreign Trade Regime Memorandum. In 2011, Iran answered the 700 questions raised by WTO members, but nearly 10 years after establishing a working group to examine Iran’s application on May 26, 2005, the working party has not met yet and no chairperson has been appointed for the party, according to WTO website.