Why WTO membership for Iran makes sense

The Congressional Sanctions Agreement making its way through both houses of Congress this week will do little to change the behavior of the Iranian regime. There is, however, a better way to promote lasting and permanent political change in the Islamic Republic of Iran. The United States should strongly encourage and actively negotiate the accession of Iran to the World Trade Organization (WTO).

For years, the U.S. has tirelessly promoted the notion that trade liberalization reforms support greater market freedoms, which in turn pave the way for enhanced political liberalization. Indeed, it was precisely this reasoning that led America to support the WTO applications of China, Saudi Arabia, and Vietnam, three countries with troubling human rights records.

That same argument applies as much, if not more, to Iran. WTO accession can be a catalyst for the liberalization of Iran’s economy. WTO reforms would require Iran to broaden and deepen the integration of its economy with the world trading system. It would demand true non-discriminatory treatment through adherence to the most-favored nation (MFN) and national treatment obligations of GATT Articles I and III, and their re-incarnations in other WTO Agreements, plus reductions in tariff and non-tariff barriers. It would necessitate privatization of state-owned and state trading enterprises (SOEs and STEs), which would lead to increased openness to foreign direct investment. And it would impel greater respect for intellectual property rights, specifically patents, trademarks, copyrights, and semi-conductor mask works, pursuant to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).

Such economic reforms, which Iran would be compelled to implement and enforce before formally acceding to the WTO, would prove a watershed for the country. Not only would they result in a less isolated country with a more empowered middle class, they also would enhance the rule of law in Iran and make the country a more responsible member of the international community. That is because, as a WTO member, Iran would be obligated to submit to adjudicatory proceedings under the Dispute Settlement Understanding (DSU) in its trade disputes with other WTO Member countries. Since 1995, this mechanism for solving trade disputes has been an integral and successful feature of the international rule of law.

These obligatory interactions with the global market would foster an Iranian economy that is dependent on free trade and good relations with the rest of the world. That would make it far more costly for Iran to persist in dangerous, irresponsible behavior on the international stage. It would also make it more difficult for Iran to get away with human rights violations at home. Why is it that the U.S. appreciated this logic with respect to China, Saudi Arabia, and Vietnam, but not when it comes to Iran?

Insofar as the WTO accession process emphasizes the commercial rule of law, it just as well could strengthen the rule of law in Iran when it comes to non-commercial matters. For example, as a WTO Member, Iran would have to make the manner in which domestic courts and administrative agencies adjudicate trade and investment cases more transparent. That process, more than any sanctions regime, would help chip away at the power of the Iranian Revolutionary Guards (IRGC) over the economy. By most estimates the IRGC controls one-third of Iran’s annual budget and almost all of the country’s black market. In fact, Iran’s economic isolation has allowed the IRGC to take control over every aspect of the country’s economy. The IRGC controls 51 percent of Iran’s telecommunications industry, and was just awarded the rights to develop the vast gas fields of South Pars because of the hesitancy of global firms like Royal Dutch Shell and Repsol YPF to invest in Iran. WTO accession would entail cutting back on the power of SOEs and STEs, requiring them to operate on a commercial basis and honor the non-discrimination principle so that foreign competitors would be treated in a like manner with Iranian entities.

To be sure, WTO accession would not be a panacea for all of Iran’s economic and political problems. It could, however, breathe new life into the long-suffering private sector of Iran and enhance the rule of law in Iran, just as it has in other countries. Iran, which first applied to join the WTO in July 1996, is desperate for membership and eager for robust international commercial relationships. Yet by blocking the formation of a working group to discuss Iran’s accession application, and by dithering on appointment of a chairman of that group, the U.S. is willfully ignoring an opportunity to gain some measure of leverage over the Islamic Republic (something it sorely lacks). Worse, it is playing into the hands of Iranian officials who argue that America bears a deep-seated, anti-Iranian bias.

Reza Aslan is a contributing editor at The Daily Beast and author most recently of Beyond Fundamentalism: Confronting Religious Extremism in the Globalized Age.

Raj Bhala is the Rice Distinguished Professor at the University of Kansas School of Law and author of Understanding Islamic Law (Shari’a) (forthcoming) and International Trade Law.