Economy, Business And Markets

Challenges Ahead For Iran’s WTO Accession

Challenges Ahead For Iran’s WTO Accession
Challenges Ahead For Iran’s WTO Accession

Many believe that for a country like Iran, which is the 18th largest economy in the world in terms of GDP, unimpressive international trade rankings come as a surprise.

Iranian policymakers, however, have been striving for years to improve the country’s trade status. As part of that, around a quarter of a century ago, they came to the conclusion that their country should join the world’s largest pro-trade entity: World Trade Organization.

More than 19 years have passed since WTO received Iran’s application for accession on July 19, 1996. It took the organization nine years to accept Iran as an observer member. In 2005, WTO eventually established a working party composed of a group of representatives tasked to assess Iran’s accession bid. However, the chairman of the party has not yet been elected.

Iran submitted a memorandum on its foreign trade regime in 2009; and in 2011, the country took another step closer to obtaining the organization’s membership by replying to a set of questions posed by WTO members based on the information provided in the memorandum. The next step will be for Iran to hold meetings with the working party. Those meetings await a final decision by Iranian authorities who also need to take a long series of actions to overcome tough challenges in the way of joining WTO.  

  External Challenges

There have been many arguments supporting and some opposing Iran’s accession to WTO since the notion came to the fore. There have also been some factors helping and many hindering the accession talks; nonetheless, one of the main stumbling blocks in the way of Iran was the United States’ objections.

According to many experts, unprecedented joint efforts by Iran and the US leading up to the July 14 deal, which ended a lengthy dispute over Iran’s nuclear program, could be considered a thaw in decades of ice-cold relations between Tehran and Washington; which in turn opens up a window of opportunity for the government to realize its ambition to join the WTO.

Esfandiar Omidbakhsh, head of Iranian Scientific Commerce Association, says resolving political issues between Iran and the United States is a prerequisite to resuming Iran’s accession talks, pointing out that even Iran’s accession as an observer member in 2005 happened as a result of an international political interaction amid negotiations over Iran’s nuclear program.

“At that point, Iran’s request had been rejected 22 times by the US. Eventually our request passed through Jacques Chirac, former French president, to the then president of the United States George W. Bush. The move was effective in changing the Unites States’ stance.”

This is while Mehdi Karbasian, head of Iran Customs Administration, believes that the United States’ role in Iran’s accession process should not be overestimated as WTO membership “is not a political process.” He argues that if the organization was so much influenced by Washington, many member countries would not have been able to gain membership.

Furthermore, Omidbakhsh refers to negotiation skills as a crucial factor in Iran’s accession.

“In WTO, negotiations are all that matter; and that is not because of the diversity of [the nationalities of] negotiating parties, but for the profundity of the topics. There are currently 105 subjects to be discussed with the organization. The government should bear in mind that, presence of individuals capable of holding talks on such a wide range of topics with 160 WTO member countries is of utmost importance.”

Omidbakhsh also criticized the government for calling off the Ministry of Industries, Mining and Trade’s Plenipotentiary Trade Office, a body acknowledged by WTO and tasked to train skilled negotiators. He stressed that Iran is currently in need of savvy negotiators who could serve to overcome challenges in accession talks.

  Internal Arguments

WTO objectives entail raising living standards, full employment, expansion of production and trade, sustainable development and protecting the environment in member countries. However, in Iran many oppose the idea of accession to the organization.

Concerns mostly revolve around domestic industries with low competitive capabilities due to poor manufacturing infrastructures. Critics believe that trade deregulations, tariff cuts and generally compliance with global free trade rules will harm domestic manufacturing industries.

Nevertheless, Mohammad Reza Nematzadeh, minister of industries, mining and trade, believes that those concerns are baseless, as there are certain exceptions included in WTO regulations regarding insecure domestic industries.

“In case a manufacturing sector is exposed to any damage, corresponding antidumping and countervailing operations could be performed by the government to prevent or recoup such losses,” he said.

A recent poll conducted by Iran Chamber of Commerce, Industries, Mines and Agriculture also supports the notion of joining WTO. According to the poll, the private sector believes that WTO accession is a necessity. They also see many advantages in gaining WTO membership, including economic growth, increasing foreign investments, rising market share for both domestic and foreign industries as well as transparency and predictability of end markets in and outside Iran.

Karbasian, however, believes that the main challenge in WTO accession talks is an array of redundant regulations in Iran that should be drastically reduced so that the country could “talk with the same language as the world” in global trade system.

Experts believe that the government has to diminish its 25,000-30,000 regulations regarding foreign trade down to 2,000 to prepare the economy for global interactions that, along with other preparations for WTO, would take the government years to implement.