Impact Of International Trade Law On The Development Of Trade In Iran: Important issues and legal responses in Nigeria

Background

The international trade law as embodied in the World Trade Organisation (WTO) was formulated to promote the stability and predictability of the multilateral trading system in the global capital system (Carmody, 2017). The issue of whether the international trade law contributes to the development of trade in a particular nation is one that has attracted a fair amount of academic interest (Blomstrom, 2014). It is also an issue that is beset by considerable controversy, especially in the context of developing countries because there is a perception that international trade law works more to the advantage of the developed countries (Agosin & Mayer, 2000).

International trade law is a part of public international law and it is related to international economic law (Chow & Schoenbaum, 2017). As such, an understanding of international trade law also involves an understanding of international business, which may be related to trade in goods, services, and technology (Chow & Schoenbaum, 2017). How international trade in goods, services, and technology in Iran is impacted by the international trade law, is the primary focus of attention and research in this research project.

Iran has had a tumultuous relationship with international trade law, with it submitting the application to join the WTO in 1996, but being rejected due to the United States’ role as a veto wielding member of the WTO (Manghutay, 2008 ). Till 2005, Iran submitted 22 applications to join the WTO, but met with little success due to American objections to Iran’s membership. In 2005, Iran was granted Observer status in the WTO (Manghutay, 2008 ). Full membership of the WTO has eluded Iran so far due to the American resistance to such status for Iran at the WTO (Manghutay, 2008 ). Iran’s goal of joining the WTO is necessitated by the impact of non-membership has on its economy because in the absence of membership of WTO, Iran has tried to bridge the gap left by the non-membership by concluding a significant number of bilateral trade agreements and regional agreements as non-membership has been thought to have the effect of marginalization (Manghutay, 2008 ). It is argued that the non-membership of WTO has a negative impact on the economy of Iran as Iran is affected by the functions of the WTO (Manghutay, 2008 ). Literature indicates that the non-membership of the WTO has the impact of non-oil exports being adversely affected by the trade barriers and discriminatory tariff rates, imposed by the WTO on non-member countries (Manghutay, 2008 ).

Iran also has a controversial past with regard to international investments since the revolution of 1979, which saw the overthrowing of the then government and the takeover by the new government, in the aftermath of which many of the international investments were expropriated (Dixon, 2013). This led to the case of Short v Iran, wherein the Iran-US Claims Tribunal decided that the new revolutionary government did not have international responsibility for the expulsion of Short from Iran as it was not proved that the new government had expelled Short and that the new government was not in control when Short was expelled (Short v Iran (1987) 16 Iran-US CTR 76, 1987).

Although Iran is not a full fledged member of the WTO, some of its principles are in harmony with the international trade law, whereas there are some principles that are not in consonance with the international trade law (Manghutay, 2008 ). These non-conforming principles include government monopoly over foreign trade, presence of discriminatory treatment with trading countries, and exemption of exports from customs duties (Manghutay, 2008 ).

Literature review

International trade law is defined as the international law in the public international law treaties, and the legal institutions like WTO, which are related to the multilateral trading system. To a great extent, international trade law is contained in WTO, which is the principal legal institution at the international level responsible for facilitating and regulating international trade law (Chow & Schoenbaum, 2017). The WTO seeks to reduce barriers, facilitate trade, business and economic development as a part of the multilateral trading system (Chow & Schoenbaum, 2017). International trade refers to activities of economic and commercial nature that are conducted across borders, or are transnational in nature (Chow & Schoenbaum, 2017). There are four channels of international trade, which are, trade in goods, trade in services, trade in technology, and foreign direct investment, with trade in goods being the oldest form of international trade and others being newer in origin and practice (Chow & Schoenbaum, 2017). It is also noteworthy that international trade often works in progression, with international trade for an entity commencing with trade in goods and services, further advancing to trade in technology and finally culminating into foreign direct investment (Chow & Schoenbaum, 2017). Foreign direct investment comes at the end of the spectrum because it involves the highest level of financial commitment on the part of the entity involved in international trade. Therefore, when the impact of international trade law is to be seen in the context of a specific jurisdiction, like Iran in this case, the impact has to be seen across all four components of international trade.

International trade law aims at easing conditions that lead to more foreign investment in countries (Blomstrom, 2014). Literature indicates that foreign investment and economic development are linked in a positive manner, with this link indicating more trade and development in context of developing countries (Blomstrom, 2014). Foreign investment is linked to spill-over effects for the economy of the developing country that relate to technology transfers, trade inflows, and a more developed employment market (Blomstrom, 2014). These spill over effects are usually posited to counter criticisms of the possible ill effects of the international trade system, which can be related to the developing countries (Blomstrom, 2014). These ill effects may be linked to the possible impacts on the environment and domestic industries (Blomstrom, 2014). On the other hand, there are positive impacts of international trade law that can be seen in the increased investments by multinational enterprises (MNE), new downstream and upstream investments, trade development and investment opportunities (Blomstrom, 2014).

Literature set in other developing countries indicates that there are some areas of concern that are generally posited with respect to the impact of international trade law on the development of trade in developing countries. For instance, in a research set in Bangladesh, it has been noted by the researchers that foreign direct investment, which to a great part is encouraged and facilitated by the international trade law, and the actual trade of a country are both important components of economic growth and therefore, developing countries like Bangladesh should make laws that are in conformity with international trade law (Hussain & Haque, 2016). Such laws will be aimed at eliminating barriers to capital flows, so that there is more encouragement of international trade and investment inflows (Hussain & Haque, 2016). The law of international trade is important because in a global capital system, this law aims to universalise certain concepts, which will be inappropriate for settling individually by each state as this would lead to lack of universality for the law applicable in this area (Chow & Schoenbaum, 2017).

In the case of Iran, literature indicates that there are specific implications for Iran not being a full-fledged member of the WTO. As noted by Manghutay (2008 ), the WTO is based on the principle of comparative advantage or the relative efficiency principle, which provides that in order to gain maximum benefit, nations should specialise in the production of goods in which they have a comparative advantage, and export them to nations in exchange for goods in which they lack comparative advantage. Applying this to Iran, it has been noted that Iran would have to restrict its exports and production to crude oil, petrochemicals, carpets and dried fruit once it joins WTO, and would have a “difficult duty to bring its trade policy in harmony with WTO rules” on accession to that body (Manghutay, 2008 , p. 73).

In order to prepare for its joining the WTO, Iran has already adopted some principles of international trade law within its domestic laws. An example can be seen in Section 115 of the Third Socio-Economic and Cultural Development Plan of the Islamic Republic of Iran 2000-2004, which requires removal of non-tariff and non-technical trade barriers, in order to take necessary action in order to prepare for reforming the par exchange tariff, and determination of the customs tariffs (Manghutay, 2008 ). Indeed, trade liberalisation in a liberal sense has been started in Iran since the 1990s; however, literature does indicate that Iran has not been able to always get support for trade liberalisation from its trade partners due to the lack of membership of the WTO (Gilanpour, 2006).

Impact on trade can be felt in the area of trade in goods, services and technology as well as foreign direct investment, as these are the areas that are included as part of international trade (Blomstrom, 2014). With reference to trade in services, this is one of the fastest growing areas of international trade in the global economy (Manghutay, 2008 ). The international trade law, which is specific to this area is contained in the Agreement for Trade in Services, which is also called GATS, adopted under the aegis of the WTO. There are certain provisions of the GATS that are contradictory to the law in Iran. For instance, Article I of GATS provides that the Agreement applies to measures by Members affecting trade in services, including at all levels of government activity, such as, laws, regulations, rules and decisions of courts and administrative authorities, as well as practices and actions of governments or non-governmental bodies with delegated governmental powers (Manghutay, 2008 ). This is applicable to insurance, banking and other financial services. These services are to be liberalised as per the GATS, but Iran has some regulations that would contradict the liberalisation of these services. An example can be seen in Article 6 of the Export-Import Regulations Act 1993, which restricts foreigners from carrying on local transportation services (Manghutay, 2008 ). Once Iran becomes a member of the WTO, it may have to permit foreign companies into this sector. Another example can be seen in Section 44 of the constitution of Iran, which exclusively allocates banking, insurance, large-scale and mother industries, foreign trade, mines, dams, post, telegraph and telephone services, aviation, shipping and roads and railroads to the government (Manghutay, 2008 ). Continuing to bar foreigners or private investment in these sectors by the Iranian government, once it becomes a part of the WTO, would be contrary to the GATS.

Therefore, at this time, there are several areas of disharmony between the international trade law and the domestic law of Iran with respect to foreign trade in Iran. The effect of this disharmony has meant that countries who want to trade with Iran have to do so outside the formal mechanisms of the WTO. Moreover, foreign direct investment may be restricted because the country has a protectionist approach to international trade. This is not to say that Iran has not tried to open itself up to liberalisation as encouraged under international trade law. Accordingly, there has been liberalisation in some sectors, predominantly the banking sector, which saw liberalisation from 1993 onwards; in 1993, the Expediency Council of Iran has approved of establishing three foreign trade zones in Kish, Gheshm and Chabahar (Manghutay, 2008 ). Once these zones are completely established (some are established), entry of foreigners without visas, sale and purchase of foreign currencies at market rates, and the establishment of branches of foreign banks will all be done in Iran (Manghutay, 2008 ). The Bylaw for implementation of monetary and banking operations in free zones 2000 allow establishment of banks and institutions with Iranian or foreign capital or foreign partnership to be registered in these zones. Therefore, efforts are being made to increase international trade in Iran. However, unlike many other countries that allow establishment of such institutions in mainland areas, Iran is allowing such operations in certain approved zones only. For example, under the Regulations on the Establishment and Operation of Insurance Institutes in the Free Trade– Industrial Zones, foreigners are allowed to have stakes in the Iranian insurance corporations operating in zones but not in the mainland areas (Manghutay, 2008 ).

The literature review indicates that there is limited international trade in Iran at this time. Iran is not yet a party to the WTO, which may be one of the reasons why there is a discrepancy in its free trade laws and the laws that are established under the WTO. Therefore, it may be noted after this preliminary literature review that there is a significant interlink between international trade law and international trade in Iran. This link is to be further explored in this research.

Research question

The research question is significant because as of now Iran is not a full fledged member of the WTO. This has meant that international trade law is its entirety is not applicable to Iran. Iran has so far applied some principles of international trade law and not applied the others. At the same time, the preliminary literature review shows that WTO does impact trade of Iran. The research question seeks to explore the effects of international trade law on Iran in these contexts and against this background.

Research method

The research will be conducted with qualitative research methods. Qualitative research methodology is appropriate for this research because it is suitable for research areas that are under researched and where an inductive method may lead to theory building (Opoku, Ahmed, & Akotia, 2016). This is not to say that qualitative research may not involve a deductive process, because it is amenable to both inductive as well as deductive research (Collis & Hussey, 2009). The present research proposes to use deductive method. The deductive method sees the researcher starting with the general theory on the area of research, and then applying this general theory to the specific case or context, thus moving from theory to case or from general to specific (Perrin, 2015). Following the deductive process of research, the researcher will first identify the general theory that is applicable to the impact of international trade law on international trade of nations, then collect the data with reference to impact of international trade law on international trade in Iran and then finally confirm the theory after analysis of the data collected (Perrin, 2015, p. 81). The researcher chooses to use a deductive approach because instead of wanting to create a new theory, the researcher aims at using existing theoretical frameworks to study the given area of research.

Qualitative research is chosen for this research study because it is appropriate for studies that demand greater focus on in depth insight (Creswell, 2013). As this is a qualitative research, the researcher will not have to create any fixed hypotheses or create a pre-specified methodology to be followed in this research (Willis & Jost, 2007). It is expected that in order to answer the research questions posed in this research, there will be a need to delve into multi-layered information from different sources, like government or non governmental reports, books and journals (Walliman, 2015). As such, qualitative research is appropriate for this research study.

The researcher will be guided by the research philosophy of positivism, which is based on objectivism, as an approach that is scientific and adopts scientific methods of enquiry (Easterby-Smith, et al., 2002). Positivism research philosophy sees the researcher making certain assumptions about the way he views the world, which become the basis for creation of the research strategy (Collins, 2010). The present research is concerned with exploring the impacts of international trade law on the international trade of Iran. As such, the focus of the research is on the exploring impacts of the phenomenon of international trade law on international trade of a specific country. It is considered that positivism will provide a good basis for the research because the researcher will collect, and analyse the available resources on the subject matter in an objective and scientific manner. Therefore, positivism will form the basis for the research methodology in this research.

The data will be collected through a desk-based research method, which involves the researcher in the task of searching appropriate scientific literature on the subject area. Desk based research can be done with the help of a literature review. This is data that is also called secondary data, or data collected through secondary methods. This will see the researcher searching for the data from amongst the existing literature available on the area of international trade law and is impact on international trade in Iran.

Within the qualitative research methods, this research will also use the case study method, which is one of the key methods that can be employed to collect data in a qualitative research method (Myers, 2013). Case study as a method is concerned with studying the characteristics of an individual unit in great depth (Bryman & Bell, 2015). The single individual unit being studied in a case study can be a person, a specific phenomenon, or even a country (Bryman & Bell, 2015). In this case study, Iran will form the individual unit which is being studied in great depth in the specific context of international trade law. The case study will be conducted to examine the effects of international trade law on the international trade of Iran. The purpose of this methodology will be to gain in-depth information with reference to the impact of international trade law on Iran (Bryman & Bell, 2015). Case study will be conducted in conjunction with the method of desk-based research under qualitative research. Therefore, data for the case study will be derived from scientific and academic literature collected from articles in peer-reviewed journals, books, reports, and other material that is related to the subject matter.

As qualitative data is subjective in parts as well as multi-layered in terms of information, an appropriate method of data organisation and analysis will be followed in order to organise the data and analyse it properly. The method of thematic analysis will be followed for the purpose of organisation and analysis of the data collected through the literature review. In following the thematic analysis method, the researcher will read the texts and refine the findings into specific themes that are observed in the readings (Bearman & Dawson, 2013, p. 252). This will allow the researcher to organise and analyse the data in a systematic manner and also present the findings of the research in a systematic manner. In order to avoid ethical problems in this research, the researcher will ensure that the sources that are not credible are avoided and only the academic sources or material from government reports or credible non-governmental sources are selected for data collection. All sources used for the research will be credited and referenced throughout the written report of the research.

At this stage, it is not possible to report on what the expected findings or conclusions will be. It may however be noted that findings of the data analysis will be honestly reported in the written report and the conclusions will be based on the findings with respect to the research questions posed at the proposal stage.

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