The Forum for Partners in Iran's Marketplace
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     

June 2018, No. 87


Q & A

Lack of Strategic Business Partners


Iran has many business partners, but does not have a strategic business partner. In the international jargon, business partner refers to a country that has business relations with us.


Dr. Pedram Soltani believes that the level of authority and power of our government in diplomatic engagements with the world is lower than the usual limits of other countries. The government is engaged in diplomatic interactions with its hands tied. See what happened to the JCPOA (Joint Comprehensive Plan of Action)!

Soltani who is Vice President of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), says all the roads lead to political impasse. “From every direction we want to examine the causes of our failures in the economic arena, we see the footsteps of wrong policies. The same policies which must serve the economy for many years now have backfired and harmed the economy. It now seems to be the time to take some firm decisions in this area to bring about change in the economic policies of the country through a broad consensus among various institutions.

“We failed to work with our neighbors and join them in a strategic agreement and constructive, long-term economic engagement. As long as we do not change the political approaches of the country, we cannot hope to improve the situation; our political approaches have shown that we have not been able to maintain the stability of our relations with the neighboring countries and the world; there is hardly any country in our neighborhood to have maintained a stable and progressive economic relationship in the past decade. The world says I give you a point, and you give me a point, but we want them to give us concessions without compensating; this is not the way to enter into regional and international business agreements. 

Why Iran has no business partner?

Iran has many business partners, but does not have a strategic business partner. In the international jargon, business partner refers to a country that has business relations with us. We work with neighboring countries such as China, India, and Europe, as well as many other countries, and they are listed in our annual foreign trade statistics, or are present in our other economic interactions. Our problem is that we have no strategic business partners; countries with which we could define long-term business and economic interests and maintain convergence and synergy in our business interests. Furthermore, the weight of our business interactions with these partners should be to a degree that political considerations would not undermine and marginalize it. This is our problem! 

Then why Iran has no strategic partners?

Unfortunately we are not part of any serious and strategic regional and international business or economic agreements. Defining common strategic interests or the framework for these strategic interests in the first place requires effective and durable bilateral and multilateral agreements, while engaging in sustained and constructive interactions with these countries in political engagement. This is not the case, and we are nominally in a number of agreements, such as “ECOTA”(Economic Cooperation Organization Trade Agreement), the “D-8” Agreement or deals with Islamic countries. These agreements are symbolic and none of them have been enforced partly due to conflict of interests among the countries .These agreements are formal and mostly politically motivated. 

The question that follows is why so far we have not concluded any effective regional agreements?

What happened to us after the (1979) revolution is that in a certain period in order to safeguard the revolution and maintain new frameworks it was natural to enter into bilateral suspicion with many countries, from the United States to Europe and neighboring countries. At different junctures other countries and basically the influential countries developed strategic conflict with our country for various reasons in the political arena. Both sides were guilty but in my opinion we were guiltier because we were skeptical of almost everything or were extremely political-minded which prevented us from improving interactions and constructive economic relations with these countries.


The first point to note is that the level of power and authority of our government in diplomatic engagement with the world is lower than the standard of other countries.


In some cases, due to this approach and perspective, we made strategic mistakes like the question of our accession to the World Trade Organization. We were among member states which joined the General Agreement on Trade and Tariffs which is the mother of WTO. If we had kept moving in the same direction, we could have been among the WTO founding members but this suspicion and this false international strategy made us miss this golden opportunity. Now we have been waiting behind the WTO doors for long years and have deprived ourselves of many rights, including privileges and benefits of easier and cheaper interaction with other countries. As the largest economy that has not yet joined the organization, we would be forced to join the WTO under very hard conditions and receiving little privileges and giving more concessions. Unfortunately, our strategic thinking at the international level has not succeeded in securing economic benefits for our country. Accordingly, the main obstacles to our pursuit of effective trade agreements with the region are political issues and a clear gap that exists between the political approaches of Iran and other countries or regional blocs. 

To what extent do you believe the World Trade Organization is losing its importance, especially after the coming to power of Tramp in the United States?

I cannot say with the taking office of a person like Trump, the role of WTO is diminishing, and then assume it as a rule, saying that the role of this organization is declining throughout the world. The new president of the United States is a phenomenon in terms of thinking and attitude, and in the sense of restoring protectionist policies; this is while the United States itself has been a pioneer in establishment of the body.

But what has happened over the past few decades and gained strength over the past two decades is that with the rise of the Chinese economy, followed by other emerging economies such as Brix and the next generation of emerging economies, the WTO equilibrations have somewhat been disturbed. This was because industrial justification for manufacturing industrial goods and exports in the emerging economies was far higher in China and other countries than industrialized countries. The industrialized countries could not afford to keep pace to the extent they expected with China’s rapid growth and emerging economies. The globalization trend in the past 20 years has served the interest of emerging economies more and has not served the interests of the United States and other Western countries like it did in the previous decades. For the same reason, some intellectual currents in the United States and in developed countries have become suspicious of the World Trade Organization.

This is not specific to the United States; in some European countries we see that some of the right-wing parties, especially the extreme right, have targeted a course quite opposite to globalization in their slogans and their statements. For example, the case that occurred in UK and the country came out of the European Union, was another indication of the fear of countries from linking economies and the fall of tariffs and non-tariff and trade barriers.

I think this is a new generation of equations of balance of power in the global economy for the benefit of emerging economies and developing economies that are expanding their own pace and gaining good economic growth over the past decade; so naturally, the European and American response to this issue has not been positive. But I do not believe that WTO is going towards dissolution or effective economies are leaving it. 

To what extent do you accept the analysis that Iran, rather than bargaining to join the World Trade Organization, should enter into the phase of commercial contracts?

I myself am among those proposing this idea; our accession to the organization in the current unfavorable political conditions is virtually unknown, and it is not clear under what conditions will we join this organization. For nearly eight years now, the formation of the Working Group on Iran’s accession to WTO has stopped. The chairman of the Iranian working group too has not yet been determined, and it is not clear when it will be determined considering the approach of the United States. So we should not sit idle until this process begins, which will take at least five to six years to complete. The right way is to conclude bilateral and multilateral free trade agreements, especially with neighboring countries and countries of the region, which are main export markets of our own, as we try to begin accession negotiations.

A relatively good work that has been done over the past few years is the process of full membership of Iran in the Eurasia Customs Union, which consists of Russia and the states of the former Soviet Union, which is potentially a good market for us. I hope that the accession process will be accelerated. However, unfortunately, there is no good news about the approach adopted by the relevant ministries about our accession to Eurasia. In other words, by adopting a very conservative and narrow stance, they are trying to minimize the scope of Iran’s presence in this union. They have also dropped many Iranian goods from the membership list of Iran or from the tariff account of free trade.

This is misconduct. If we want to join a multilateral free trade agreement and make our sensitive list so long that our white list or supplementary list would include a small amount of our business dealings with these countries, this would dismantle the effects of that agreement. So if we want to move that way, it will be symbolic and formal work. But if we do this with maximum interactive outlook, it is a good move, and we must work with other countries in the region to enter into bilateral and multilateral trade agreements. Iran is the only obstacle in the way of implementation of a preferential trade agreement with ECO or ECOTA. ECOTA has been ratified by all member countries except Iran and this shows that there is no intention on behalf of the relevant ministries and their respective authorities to enter into these commercial blocs. Actually we are isolating ourselves with our own hands. 

What are some practical steps in providing the conditions for joining trade agreements from your perspective?

The first point to note is that the level of power and authority of our government in diplomatic engagement with the world is lower than the standard of other countries. The government is engaged in diplomatic interaction with its hands tied. See what happened to the JCPOA (Iran Nuclear Deal)! This deal was perhaps the only case in the last decade and perhaps over the past 15-16 years where the government was able to create a high-level consensus for diplomatic engagement. When this was achieved see how much obstruction has been made in the government’s work.

Now, as you see we make no progress in other diplomatic approaches where we do not have such consensus. The main issue is that the level of government authority and decision making power should be the same as other governments, so that it could have an outlook and maintain policymaking power. The second point is that, unfortunately, we do not have any strategic economic development plans so that we could determine which sectors of the economy need production and investment and in which areas we should work slowly; since we do not have these strategies, we cannot succeed and concentrate in the negotiations. We want to support all our industries and not give any concessions. Obviously this is not the way you should deal with the world!

The world says I give you a point, and you give me a point, while we want them to give us concessions without compensating; this is not the way to enter into regional and international business agreements. Why do you think we have this problem? Because we even do not know how to deal with ourselves. For example, we want to support both steel industry and auto manufacturing; we want to support both petrochemical industries and textiles. We should make it clear what industries we intend to support and what industries not to support so that our partner economies would know that we have made up our mind and that these 10 industries are our strategic industries where we would give less concessions and want more concessions from you. And the rest are not important and we would give you more points.

On the other hand, we have a strategic gap in economic development, and the government, unfortunately, has not dealt with this issue professionally. Even we as the chamber proposed that we are ready as the private sector and with the help of internationally acclaimed advisers to formulate strategic economic development plan for the country but the government has not expressed its consent to this issue and has not welcomed the idea.

The next point is that we, as the private sector and, on the other hand, the government’s economic apparatus, and in particular the Ministry of Industry, Mine and Trade and the Ministry of Agriculture, stand on the two sections of the trade policy. We must sit down and draw the boundaries of bilateral and multilateral agreements and assign the missions. After that, we must create the resolve in these two ministries in coordination with the Foreign Ministry, so that we can proceed firmly and resolutely to close these agreements within a certain time and enter Eurasia. We must proceed towards institutionalization of our free trade agreement with Pakistan; try to sign a free trade agreement with Iraq and Afghanistan. In the meantime, we need to forge an interactive approach with the Persian Gulf states.

I am an advocate of interaction with the countries of the southern Persian Gulf. We should also take advantage of the existing conditions and kick off economic negotiations with the European Union. We are not in a good position now, but we have the conditions to start the negotiations.

 

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