Economy, Domestic Economy

Accession to WTO: Better Late Than Never

Accession to WTO: Better Late Than Never Accession to WTO: Better Late Than Never

Iran’s accession to the World Trade Organization has always been the subject of heated debate in the domestic arena throughout the past decades.

Those in favor have iterated the numerous benefits of membership in this international organization, such as facilitation of exports, reduction of transaction costs in trade, better access to international markets and modernization of customs procedures.

On the other hand, those in opposition stress the downsides such as obligation to reduce customs tariffs on imports and eliminate subsidies for domestic products, which will in turn facilitate imports and lower the finished cost of imported goods, thereby reducing the competitive edge of domestic producers and putting their future in jeopardy.

Regardless of these pros and cons, it can be argued that membership of countries in WTO has become inescapable, and each day that membership of a country is delayed, that country becomes more and more irrelevant in the international trade arena.

The WTO, with its 161 members (28 European countries participate jointly as one member in the EU), represents 96.4% of global trade and 96.7% of global GDP. Iran is the economy with the largest GDP and trade outside the WTO, but why has it failed to join WTO? In addition to the purely commercial concerns, there’s also a political aspect to this issue.

During former president Akbar Hashemi Rafsanjani’s administration, and despite intense domestic criticism, Iran submitted its official request for accession to the WTO in 1995. Due to a long lasting tradition, all decisions in the WTO framework, including the accession of new members, is taken on the basis of unanimity, and as a result of certain political motives, the US has always opposed the membership of Iran in WTO, therefore single-handedly blocking Iran’s accession. During the last years of ex-president Mohammad Khatami’s administration, intense negotiations led to US agreement on Iran becoming an observer member in this organization in 2005.

According to WTO provisions, observers must start accession negotiations within five years of obtaining observer status, but again due to political opposition from the US, negotiations for accession of Iran were never initiated during the past 10 years. In light of the comprehensive nuclear agreement reached in Vienna between Iran and the P5+1 countries and the atmosphere of cooperation and enhancement of relations, now could be the right time for the Iranian government to pursue full membership in WTO.

During the past couple of months, much has been said and written about the necessity of restructuring Iran’s trade for the post-sanctions era, and adaption to WTO requirements is itself a major evolution for Iran’s trade regime. It must be noted that even if political negotiations succeed in removing the obstacles, Iran’s accession will not happen overnight. It is a time consuming, rigorous and complex process which, even in the most favorable conditions, will take several years to complete. Therefore further delay in starting this process will not be in conformity with national interests, nor the interests of the private sector that is set to flourish in the new atmosphere.