Azerbaijan's Trade Future: Why No Wto Membership?

Azerbaijan is not a member of the World Trade Organization (WTO) despite having applied for membership in 1997. The country has been pursuing opportunities to expand its foreign trade, which some believe would be facilitated by WTO membership. The accession process involves negotiating an accession package with WTO members, which includes a working party report detailing the applicant's membership terms and commitments on tariffs and market access. Azerbaijan has been working with the WTO to develop legal arrangements and amend existing laws and rules to align with WTO requirements. However, there have been concerns and challenges regarding the potential impact of accession on Azerbaijan's economy, particularly regarding agricultural subsidies and trade liberalisation. As of 2023, Azerbaijan is still in the process of negotiating its accession to the WTO.

Azerbaijan's low import tariffs

Azerbaijan has been seeking to join the World Trade Organization (WTO) since it submitted its application in June 1997. The country has been an observer country at the WTO since 1997 and has been in negotiations with the organization's member countries since 2004.

One of the reasons why Azerbaijan is not yet a member of the WTO is its low import tariffs, which are significantly lower than those of neighboring countries. Azerbaijan's import customs duties range from zero to 15%, with an average of about 10%, and the country has committed to lowering this average to a range of 5-6%. In comparison, other countries have much higher tariffs, such as Turkey, which imposes a 200% duty on seasonal agricultural products. Azerbaijan's low tariffs may reduce the potential increase in trade that could be expected from WTO membership.

In addition to its low import tariffs, Azerbaijan has faced other challenges on its path to WTO membership, including procedural problems and a lack of understanding of the requirements among some Azerbaijani officials. The country has also had to address issues related to agricultural subsidies, as it starts with a very low amount compared to other countries, which could make it challenging to protect domestic agriculture against massive imports from countries with high agricultural subsidies.

WTO's tougher line on new members

Azerbaijan has been seeking to join the World Trade Organization (WTO) since 1997. The country has been working with the WTO to develop legal arrangements and amend existing laws and rules on tariffs and services to align with WTO requirements. However, there are concerns about the implications of accession for Azerbaijan, particularly regarding its low tariffs on imported goods compared to neighbouring countries. This raises questions about the potential increase in trade that Azerbaijan can expect from WTO membership.

The WTO is taking a tougher stance on countries seeking membership, including Azerbaijan. This is despite the Doha Round's suggestion that the countries now applying are those that need the benefits the WTO can provide, as long as their domestic industries are protected from the exports of countries that have already benefited from earlier development. The tougher line on new members can be attributed to the following factors:

• Protecting Existing Members: The WTO aims to protect its existing members' interests, particularly regarding agricultural subsidies. For instance, developed nations like the EU and the US maintain agricultural subsidies that function as trade barriers.
• Balancing Rights and Obligations: WTO membership entails a balance of rights and obligations. The organization ensures that the benefits of membership are balanced with commitments and concessions on tariff levels and market access for goods and services.
• Bilateral Market Access Talks: Azerbaijan has been urged to advance bilateral market access negotiations with WTO members. These talks are crucial for securing membership, and the WTO has expressed that progress in this area has been slower than desired.
• Complex Negotiations: The final phase of accession involves intricate bilateral negotiations between the applicant nation and other working party members. These talks cover tariff rates, market access commitments, and policies in goods and services. They can be as complex as an entire round of multilateral trade negotiations.
• Transition Periods: While the WTO may offer transition periods to allow countries some flexibility in complying with its rules, these are determined on a case-by-case basis and are not guaranteed.
• Domestic Challenges: Azerbaijan faces domestic challenges, such as low agricultural subsidies and the need to amend existing laws to align with WTO rules. Additionally, some Azerbaijani officials have a limited understanding of the requirements of the WTO accession process, which could hinder their ability to negotiate effectively.

The WTO's tougher line on new members, like Azerbaijan, reflects the organization's focus on protecting existing members' interests and ensuring a balanced approach to rights and obligations. The complex and lengthy accession process, which can be further prolonged by political issues, underscores the high standards and rigorous evaluation that applicant countries must undergo to join the WTO.

Azerbaijan's domestic industries need protection

Azerbaijan has been in the process of joining the WTO since 1997, but it is still not a member. One of the reasons for this is that Azerbaijan's domestic industries need protection. Azerbaijan's tariffs on imported goods are quite low compared to other countries, and it has committed to lowering them even further. This means that it may not see as many benefits from joining the WTO as other countries with higher tariffs.

Azerbaijan's domestic agriculture sector, in particular, will need protection from massive imports from countries with high agricultural subsidies, such as Sweden, where farmers receive an average of $33,000 in government aid each year. To join the WTO, Azerbaijan must also amend some of its existing laws, including those related to agricultural subsidies, to bring them into line with WTO rules. This could be challenging, as Azerbaijan currently has very low agricultural subsidies compared to other countries.

In addition, Azerbaijan's low tariffs could lead to increased competition from foreign producers, which could negatively impact local producers. This increased competition is a common outcome of WTO accession, as countries are required to reduce or eliminate import tariffs on goods. While this can have positive effects, such as improving the competitiveness of local producers, it can also lead to negative consequences such as downscaling or even closure for local businesses.

Furthermore, as part of the accession process, Azerbaijan must review all its international trade arrangements and train local specialists on the WTO. This process can be complex and time-consuming, and it requires a clear division of responsibilities between the WTO and Azerbaijan and among various Azerbaijani institutions, government, and private entities. There have also been some procedural issues, with some officials in Azerbaijan not fully understanding the requirements of the WTO process.

Overall, while Azerbaijan has expressed a strong desire to join the WTO and has taken steps towards achieving this goal, the need to protect its domestic industries, particularly agriculture, from increased foreign competition is a significant factor that must be carefully considered and addressed during the accession process.

Azerbaijan's laws need to be amended

Azerbaijan has been seeking to join the World Trade Organization (WTO) since 1997. However, to achieve WTO status, Azerbaijan must amend some of its existing laws to align with WTO rules. Here are some key areas where Azerbaijani laws and regulations need to be amended or adjusted:

Tariffs and Customs Duties

Azerbaijan's tariffs on imported goods are relatively low compared to other countries. To join the WTO, Azerbaijan has committed to lowering its average customs duties, which currently range from zero to 15%, to a target range of 5-6%. This reduction aims to increase trade and bring Azerbaijan's tariffs closer to those of other WTO members.

Agricultural Subsidies

Azerbaijan's agricultural sector faces the challenge of competing with countries that provide high levels of government aid to their farmers. To address this, Azerbaijan must amend its laws and regulations related to agricultural subsidies. This includes finding a balance between protecting domestic agriculture and complying with WTO rules on trade liberalization.

Bilateral Market Access Negotiations

Azerbaijan needs to proactively engage in bilateral market access negotiations with WTO members. This involves one-on-one meetings and exchanges with each interested member to negotiate commitments on tariffs and market access terms for goods and services. Azerbaijan has been urged to focus on these bilateral negotiations as they are crucial to securing membership.

Legislative Reforms

Azerbaijan has acknowledged the need to implement the necessary legal reforms to align its domestic trading regime with WTO requirements. This includes amending existing laws and regulations related to tariffs, services, and other trade-related areas. Azerbaijan has been working with the WTO to develop legal arrangements and amendments to ensure compliance with WTO rules.

Economic Diversification

Azerbaijan's economy is heavily dependent on the oil and gas sector. To join the WTO, Azerbaijan must demonstrate efforts to diversify its economy. This includes promoting the development of the non-oil sector and fostering socio-economic growth in other industries. Azerbaijan has expressed its commitment to economic diversification and has engaged in negotiations with WTO members on this topic.

Transparency and Governance

While not specifically mentioned as a requirement for WTO accession, good governance and transparency are important principles that Azerbaijan should embrace. This includes ensuring that draft technical regulations are publicly available and that all relevant stakeholders have the opportunity to provide input and feedback. Embracing these principles can enhance Azerbaijan's overall economic and social development.

In summary, Azerbaijan's journey towards WTO membership involves comprehensive amendments to its laws and regulations. By addressing tariffs, agricultural subsidies, bilateral negotiations, legislative reforms, economic diversification, and good governance, Azerbaijan can bring its policies and practices in line with WTO requirements and enhance its position in the global trading system.

Azerbaijan's high corruption ranking

Azerbaijan has been in the process of joining the WTO since it applied for membership in June 1997. However, it is not yet a member. One of the reasons for this may be the country's high levels of corruption.

Azerbaijan is ranked 154th out of 180 countries in the 2023 Corruption Perceptions Index, with a score of 23. This indicates that the country is perceived to have a serious corruption problem. The index reflects the perceived level of corruption in the public sector and is compiled using various reports and criteria that impact the effectiveness of anti-corruption policies. Azerbaijan's score of 23 is significantly lower than that of its neighbours, Georgia (53), Armenia (47), Russia (26), and Iran (24).

Azerbaijan's economy is characterised by corruption and inequality, with the country's oil wealth enriching ruling elites. Corruption is prevalent in education, healthcare, and business, with bribery, nepotism, and cronyism being commonplace. The country is also involved in international corruption scandals, such as the Panama Papers, and has been accused of bribing foreign officials.

The country's anti-corruption legislative framework is considered strong, but its implementation is weak. The government has established various institutions to combat corruption, such as the Commission on Combating Corruption, the Anti-Corruption General Directorate, and the Azerbaijan service assessment network (ASAN). However, despite these efforts, corruption remains a significant issue in Azerbaijan.

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