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Iran: Various Obstacles Prevent WTO Membership

The ministerial meeting of the World Trade Organization in Seattle last week may have been widely regarded as a failure, but that does not deter non-member countries like Iran from trying to join the body. RFE/RL analyst William Samii looks at the self-imposed obstacles that may make it difficult for Iran to liberalize trade.

Prague, 6 December 1999 (RFE/RL) -- As protesters and pundits alike heaped scorn on the World Trade Organization (WTO) in Seattle last week, decrying its alleged callousness and its demonstrated indecisiveness, Iran was among a group of countries asking to join.

Iran's deputy trade minister, Mohammad Nahavandian, announced last week that Iran wants to pursue what he called its fair share of international trade. He said Tehran must negotiate with the WTO to ensure the country's national interests. Nahavandian said Iran has been trying to join the WTO for three years.

Iran is seeking to boost its trade in order to reduce reliance on revenue from its huge oil reserves. WTO member states from the Middle East include Bahrain, Djibouti, Egypt, Israel, and Kuwait. Countries in the region that have observer status include Jordan, Lebanon, Oman, Saudi Arabia and Yemen. Iran, however, is neither a member nor an observer.

Iranian officials lament their country's absence from the group. Commerce Minister Mohammad Shariatmadari said last month: "Our exclusion from the WTO is like staying outside the United Nations." And the foreign minister, Kamal Kharrazi, said last month: "We hope to be accepted as a member of this major international organization in view of the support which has been offered by the current and the next chairman as well as by the current members of the WTO."

Iran could benefit, in particular, from the WTO's training program for transition economies. Ali Naqi Khamoushi, president of Iran's Chamber of Commerce, outlined some of the problems Iran faces in trying to cut down on state control of the economy last month in an interview with Reuters. "We have both good laws and cumbersome laws," Khamoushi said. "Our problem is that they are not in tune. It takes much energy to get through the maze of paperwork."

If Iran understands the benefits of WTO membership, and if it wants to be a WTO member, what is the delay? Deputy Trade Minister Nahavandian said last week that "certain countries" are blocking Iran's application. Nahavandian as well as his boss, Commerce Minister Shariatmadari, have referred in the past to the United States' opposition as the main obstacle to Iranian membership. But others say it is the Iranian government itself that is the obstacle.

There are government-imposed obstacles to Iran's membership in the WTO. Although it applied for WTO membership three years ago, Tehran still has not completed the protocols of association, which determine the actual tariffs and regulations for trade. Nor does it seem in a hurry to do so. Commerce Minister Shariatmadari told an Iranian newspaper (Akhbar-i Eqtesad): "The more concessions we can extract from the WTO in the protocol we will certainly be in a better position to secure the country's interests."

Other state-imposed barriers, Iranian economists say, include government interventionism in the economy. Subsidies for industries, for example, do not increase Iran's export potential. Other problems relate to currency markets, mobility of labor, insurance, banking, and customs regulations.

There also are those who would stand to lose their privileged economic status if Iran joined the WTO. When Iran applied for WTO membership in September 1996, the government stayed quiet about it. This was because although technocrats in the government, as well as a minority in the parliament, recognized the need to increase international trade, they faced considerable opposition. Ranged against these economic reformers were leftists who favored a state-run economy, conservative merchants, and hardline isolationists. The traditional merchants wanted to maintain import controls because they had favorable licensing arrangements and were well-connected. Their allies in parliament include the speaker, Hojatoleslam Nateq-Nuri.

Those who control state monopolies -- who reportedly include many relatives of political leaders and government officials -- stand to lose money and influence if trade is opened up.

It would seem, therefore, that the main obstacles to Iran's WTO membership are self-imposed. If Iran does not overcome these problems, they could have a serious effect on the country's economic performance. This is because, some Iranian economists say, the WTO was set up by its founders in such a way that membership will be increasingly important in the future. Not joining the organization will isolate a country.

In the case of Iran, it could prevent the country's non-oil goods -- such as minerals and carpets -- from making a substantial contribution to export revenues.