Try Something Different: Iraqi WTO Membership

♠ Posted by Emmanuel in ,,, at 3/08/2009 10:39:00 AM
What's a petrostate to do when oil is not quite so dear? It is with great interest that I note Iraq's trade minister wants to hasten Iraqi WTO membership. For a country that was on the verge of--if not actually engaged in--civil war, this is quite a turnaround--or at least some say. Skeptics view the lull in violence as a temporary ploy tacitly agreed to by warring factions to speed up American departure. Once that happens, all bets are off as they again vie for turf. Since Iraqi officialdom is a decidedly more optimistic lot (outwardly at least), let's consider their motives. Although the subprime debacle has wiped Iraq off the headline pages, it may be driving Iraq to seek WTO membership nonetheless.

This Reuters article suggests Iraq wants to safeguard oil exports during a time when it's being badly hit by the over $100 fall in the price of a barrel. In this version, Iraq needs to ensure a remunerative oil price to afford basic state functions such as paying police, maintaining roads, and ensuring electric power. There's also the matter of creating jobs to arrest civil unrest:
Iraq, whose plans to rebuild after years of war have been undermined by a collapse in oil prices, could get a boost from joining the World Trade Organisation (WTO), a top official said. "Iraq has all the components to be able to accede" to the Geneva-based multilateral body, Trade Minister Abdul Falah al-Sudany said in a statement after a meeting with U.S. officials in Baghdad.

Violence has dropped sharply in Iraq, but Prime Minister Nuri al-Maliki's government is increasingly alarmed about the impact of a drop in oil prices on plans to provide essential services and create jobs. The price of oil, which accounts for more than 90 percent of government revenues, has fallen by more than $100 from a record $147 per barrel last July.

A steady stream of oil dollars will be key to paying police, paving streets, boosting power supplies -- all crucial to ensuring Iraq does not return to the horrific violence of the years since the 2003 U.S.-led invasion. According to the WTO, Iraq applied to WTO membership in 2004, and the last meeting of a working group on joining it was held in April 2008.
Surely, I understand the part about (relative) economic prosperity being central to Iraq's security. However, I doubt whether safeguarding oil revenues is what's compelling Iraq to join the WTO. If a higher price of oil is what Iraq wants, then it's better of arguing for lower production targets in OPEC. That Afghanistan and Iraq established accession working parties at the same time is indicative of American influence. Yet, Iraq seems keener at the current time. Instead of what Reuters suggests, I believe that WTO membership is aimed at old-fashioned portfolio diversification by Iraq branching into other industries rather than concentrating further on oil exports.

What other industries can Iraq offer? The fertile crescent which allowed many civilizations to thrive between the Tigris and Euphrates is largely no more. So, scratch agriculture. Off the top of my head, then, I come up with tourism. Iraq occupies territory known as a cradle of civilization. As such, it contains plentiful important architectural sites such as the Babylonian ruins and ziggurats in Ur, Nineveh, and Nimrud. Religious tourism is growing given numerous pilgrimage sites, though accommodation is not up to par. Indeed, religious fervor may still be a travel requirement at the current time, though one hopes that improvements allow more secular motivations to flourish. You also have the macabre phenomenon of disaster tourism. The Iraq invasion offers many opportunities here, from Saddam Hussein's palace to the bridge where they hung American military contractors. It is difficult to foresee what sort of industries the Iraqis can come up with to pick up the slack from oil exports, but it does indicate a willingness to explore other opportunities even if they're not entirely clear at the moment.


If you're of the opinion that it's just a temporary lull in oil prices, then maybe pressures on diversification should ease pretty soon.