Share the blame
WTO's rejection of Iran's membership application
By Tagi Sagafi-nejad
July 20, 2001
Iran's knee-jerk reaction to the most recent setback, being rebuffed
in its quest to gain membership in the World Trade Organization, is predictable.
Most likely Iranian officials will cry foul, and blame the United States
for the set back. This outcome should, instead, provide an opportunity for
Iranian leaders and policy makers to reflect on the entire spectrum of reasons
for this outcome, political and economic, internal and external, and to
own up to their share of the blame.
Instead, when visitors bring shortcomings to their attention, authorities
are annoyed. When visiting Japanese oilmen, in Iran at the invitation of
the Ministry of Oil, point out weaknesses, the official Iranian radio shows
its annoyance by saying: "Finding faults with the laws of Iran, as
an investment-attracting country, is unacceptable". This is ostrich
WTO has approximately 140 members now, and no country, even the United
States, can veto another country's application for accession without reason.
The basic pillars of WTO are free trade and distortion-free economic systems
and policies that make such a system possible. WTO is also a forum where
common rules of engagement are hammered out collectively after arduous negotiations
between member states.
There is give and take; and there is a system for settling disputes through
a mechanism everyone agreed to. The US has won some disputes and lost others,
as have other members. But in the interest of the greater good, if a country
loses an argument, it takes it on the chin and continues on.
Imperfect as it is (lack of adequate transparency, unequal distribution
of gains among members, insufficient sensitivity to the plight of the poorest
nations, and to labor and the environment) WTO is, nonetheless, the closest
we have to a multilateral and civilized approach to common economic issues.
Moreover, this organization is bound to expand both in depth and breadth;
it is to govern over a broader range of issues (such as those related to
foreign direct investment) and more members are continue to be added.
So, why has Iran's membership application been turned down? Politics
has played a role, no doubt. However, Iran's political and economic leaders
as well as the general public, should reflect on some of the internal obstacles
that must be overcome before Iran can be welcome in this community of nations.
They must acknowledge the internal shortcomings and proceed to remedy them.
To become a WTO member, a country has to adhere to a basic paradigm,
namely the primacy of the market. To say that the market in Iran is imperfect
is a gross understatement.
Today Iran faces a mountain of internal challenges, from the complicated
exchange rate regime to subsidies, from the dominant role of the state in
private sector activities to the parastatal foundations and economic fiefdoms,
from a hostile attitude toward trade and foreign investment to contradictory
and stifling laws concerning working conditions, labor laws, operating permits,
from corruption and a lack of transparency to multiple and overlapping institutions
working at cross purposes and with overlapping or contradictory mandates.
Trade and manufacturing sectors are both encumbered and skewed by mismanagement
and inefficiency. There are success stories and showcase projects, such
as the automotive and petrochemical sectors, but Iran's manufacturing sector
has been too protected for too long, and has not been able to develop competitive
products at internationally acceptable standards. Successes have included
some one hundred companies that have obtained International Standards Organization
(ISO) certification. But these are few and far between.
Economic distortions have crippled the Iranian economy, and the sooner
they are faced head-on, the better for the country.
These are some of the internal problems that Iran must face and remedy
before it can become a full-fledged partner in the global economy. And join,
it must. There is no choice and the sooner the better, because global competition
continues unabated. The longer Iran waits on the sidelines, the further
behind its slumbering economy will fall.
Having been handed his second victorious mandate by an overwhelming majority
of Iranians, President Khatami must reign in not only the wayward judiciary
but also the economic entities and policies that remain unaccountable and
out of control.
Tagi Sagafi-nejad, Ph.D., is a professor of international business
at Sellinger School of Business & Management, Loyola College, Maryland.