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Iran abandons hope for WTO accession

Although many thought Iran might finally be able to join the World Trade Organization following the nuclear deal, the Islamic Repubic appears to have lost hope of becoming part of the influential body.
World Trade Organization (WTO) Director-General Roberto Azevedo talks to the audience during the International Poultry and Pork show in Sao Paulo, Brazil August 29, 2017. REUTERS/Nacho Doce - RC1D9C8ECA60

Hope for Iran’s long-overdue accession to the World Trade Organization (WTO) appears to have disappeared. The July 2015 Joint Comprehensive Plan of Action, signed between Tehran and six world powers, has done little to bring about a consensus within the organization to proceed with Iran’s membership bid. Meanwhile, on the domestic front, the Iranian government has little to show in terms of practical action to realize its stated aim of liberalizing the economy.

The WTO’s consensus rules are such that a single opposing, influential member can be enough to reject a country’s accession bid. Iran first applied for membership in the important world body 21 years ago, but its repeated efforts to accede to the organization have long been stalled by the United States.

It was only in 2005 — when Washington decided to use its influence as an incentive for Iran to stay in its then-collapsing nuclear talks with European states — that the country’s accession bid made any progress, and the WTO accepted it as an observer member. A similar opening was expected in the aftermath of the landmark nuclear deal that was signed in 2015. However, this opening was apparently closed with the election and coming into office of Donald Trump as president of the United States.

Iran has not hidden its deflated hopes of joining the world body. Last month, the country’s deputy minister of industry, mine and trade, Mojtaba Khosrotaj, said joining the WTO is no longer a priority for Tehran. This showed the Iranian government’s clear shift away from its optimistic tone in the aftermath of the signing of the nuclear deal.

Trump’s aggressive stances against Iran more broadly, and especially against the nuclear deal, are well-known. His posture is in line with some members of the US Congress, who wrote a letter last year to the US trade representative that lobbied against the Islamic Republic’s accession to the WTO. The legislators said Iranian WTO membership could remove Washington 's ability to impose further sanctions on the Iranian economy.

Meanwhile, a WTO working group tasked with examining Iran’s foreign trade regime continues to await a chairman. The group has not been able to meet since 2005, directly due to the politically motivated veto of Iran’s political adversaries. But even if the working group did meet, Iran’s trade regime would not have much to offer to the WTO, particularly as it does not specify a reliable road map for turning the state-dominated Iranian economy into a free and competitive one.

Al-Monitor discussed the current situation with Mohammed Mehdi Behkish, the secretary of the Tehran office of the International Chamber of Commerce. He said, “Iran has submitted its foreign trade regime to the WTO. In fact, the government has submitted it quite a few times.” Yet in Behkish’s telling, this will in reality not make much of a difference under the present circumstances. “The trade regime will not yield any result if the country does not make a final decision regarding the liberalization of the economy,” he said, adding, “The government should specify under what process it will undertake the liberalization.”

He said that despite the government's rhetoric favoring policies that promote a free market, deregulation, transparency and broader economic reform, the decisions made in the past four years indicate that the administration of President Hassan Rouhani has done little to realize those objectives. “Rouhani speaks about creating competitiveness in the economy, but in practice we see no sign that this is going to happen,” Behkish, a well-known economist who advocates free trade, said. “A few steps have been taken, but perhaps they have been too small and lacked strategy. There should be a process and the process should be clear.”

The forces and interests that have been pushing against the government's seeming desire for economic liberalization have been strong. And the president has clearly been too moderate to resist these pressures, failing to sufficiently push back and engage in a radical change in policies. As previously explained in Al-Monitor, Iran has gigantic economic entities run by actors outside the purview of what one would call traditional government or private sectors — the “quasi-state” sector. If genuine economic liberalization is to take place, the full extent of the oftentimes shady operations of these entities should be made known to the public; transparency would reduce opportunities for corruption and personal gain.

But the additional twist in this saga is that quasi-state economic giants are not the only beneficiaries — and lobbyists — of the opaqueness of the Iranian economy. Even the private sector has been pressuring policymakers to preserve the muddied status quo. Private sector players have been actively working against a reduction in regulations and a lowering of tariffs. This, according to Behkish, is demonstrated in the government’s inability to efficiently implement preferential trade agreements.

For instance, ever since Iran started to implement a preferential trade agreement with Turkey in early 2015, the agreement has faced criticism from domestic industry. Similar concerns, Behkish told Al-Monitor, have challenged Iran’s plans to clinch regional trade deals, including with the Economic Cooperation Organization, of which it is a founding member. As such, absent tangible action to open up the Iranian economy in a serious manner, WTO membership will remain a mirage for Iran — even under Rouhani.