WORLD TRADE  
ORGANIZATION  WT/L/560 
23 January 2004 
 (04-0236) 
 Original:   English 
  
 
IRAQ – REQUEST FOR OBSERVER STATUS 
 
Communication from Iraq
 
 
 
 The following communication, dated 21 January 2004, has been received from the Minister of 
Trade of Iraq.   
_______________ 
 
  On behalf of the Government of the Republic of Iraq, I have the honour to request observer 
status in the General Council of the Worl d Trade Organization (WTO) and its bodies. 
  The Government of Iraq was a signatory to the 1947 Havana Agreement and consequently 
held observer status in sessions of the Contracting Parties of the General Agreement of Tariffs and 
Trade until the formation of the WTO.   Observer status should help us to acquire a better understanding of th e Organization’s rules 
and procedures, and to facilitate our prepar ation of a request for accession to the WTO. 
 
 In accordance with the Rules of the Genera l Council, I have the pleasure of submitting 
herewith our report on the econom ic and foreign trade policies of the Republic of Iraq. 
  I would be grateful if you would submit our  request to the General Council as soon as 
possible. 
 
_______________ 
 WT/L/560 
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 OVERVIEW OF THE  ECONOMIC POLICY AND FOREIGN TRADE REGIME 
OF THE REPUBLIC OF IRAQ 
 
 
COUNTRY 
 
 The Republic of Iraq is situated in the northw est end of the Arabian Gulf, covering an area of 
438,446 square kilometres. Iraq is bordered on the north by Turkey, on the east by Iran, on the 
southeast by the Arabian Gulf, on the south by Ku wait and Saudi Arabia, and on the west by Syria 
and Jordan.  Its highest point of elevation is an unna med peak of 3,611 meters, and its lowest point is 
at sea level. 
  The population of Iraq is approximately 25 m illion, of which about six million inhabit the 
capital, Baghdad.  Other major cities, and their 2000 estimated populations, include Basra (1.5 
million), Mosul (1.2 m illion), Karkuk (535,000). 
 
 In 2001, Iraq had $15.8 billion of exports, pr edominantly crude oil, and US$11 billion of 
imports, chief among which were basic food items, medicine, and machinery. 
 
GOVERNMENT 
  Since May 13, 2003, Iraq has been administer ed by a Coalition Provisional Authority (CPA), 
whose authorities, responsibilities, and obligations are recognized in UN Secu rity Council Resolution 
1483 of 22 May 2003.  The CPA is a transitional, interim administration set up to restore conditions 
of security and stability in Iraq, to help develo p national and local institutions for representative 
governance in which the Iraqi people can freely dete rmine their own political future and maintain 
their freedom and security within the rule of law, and to facilitate economic recovery and sustainable 
reconstruction and development.   Since 13 July 2003, a 25-member Iraqi Gove rning Council (the “Council”), representing the 
religious, ethnic and political spectrum of the Iraqi  people, has also been a principal body for the 
interim administration of Iraq.  The Council has appointed Iraqi ministers, arranged for Iraq’s 
international representation, and determined the na tional budget for 2004.  There are twenty-five Iraqi 
ministries, of which the Ministry of Trade has gene ral responsibility for trade policy, and the Ministry 
of Interior has responsibility for customs enforcemen t.  The Ministry of Finance has had responsibility 
for most of Iraq’s assessment and collection of taxes.  
 On 16 November 2003, the Council announced that, on 30 June 2004, the CPA will dissolve, 
and a new Iraqi Transitional Administration (ITA) w ill assume sovereign authority.  Further, the 
Council has committed to democratic elections and to the drafting of a constitution.  Presently, regional government in Iraq is divided for ad ministrative purposes into eighteen governorates. 
  There are civil trial courts throughout the country for civil matters, including commercial 
disputes.  From these trial courts, there is a right of  appeal to regional courts of appeal.  Appeals from 
the regional courts of appeal are heard by the national Court of Cassation.  
ECONOMY 
  Iraq’s economy is dominated by the oil sector , which has traditionally provided about 95 per 
cent of foreign exchange earnings.  Iraq’s 112 billi on barrels of proven reserves are the second largest 
in the world after those of Saudi Arabia.  It’s 1 10 trillion cubic feet of natural gas reserves are the 
tenth largest in the world.  Iraq is also rich in  other minerals including sulphur and phosphates.  
Approximately 12 per cent of Iraq’s land is arable.  The work force is estimated to have been 4.4  WT/L/560 
 Page 3 
 
 
 million in 2000.  It is estimated that, in 1989, approximately 44 per cent of the workforce  was 
engaged in agriculture, 26 per cent in industry, and 31 percent in services. 
  Gross Domestic Product (GDP), measured by purchasing power parity, was estimated in 2002 
to be some US$58 billion.  Real GDP growth in 19 92 was estimated to be (-) 3 per cent, and GDP per 
capita was estimated to be some US$2,400 in 2002.  The inflation rate was estimated in 2002 to be 
some 70 per cent, and the external debt to be so me US$120 billion.  Industry is estimated to account 
for less than 13 per cent of GNP, and ag riculture less than 6 percent.   
  Most economic sanctions against Iraq were  lifted by the United Nations in May 2003. 
 
INFRASTRUCTURE AND PORTS-OF-ENTRY 
 
 Through the end of 2003 Iraq had 46 thousand kilometres of roads, two thousand kilometres 
of railways, and a thousand kilometres of navigabl e waterways.  The country also had over eight 
thousand miles of pipeline, including more five thou sand of which are for oil, nearly two thousand for 
gas, and over a thousand for refined petroleum product s.  At the end of 2003, Iraq had three seaports 
(Umm Qasr, Khawr az Zubayr, and Al Basrah), and 77 airports with paved runways.  
DEVELOPMENT STRATEGY 
  It is hoped that the recent changes in trad e, economic, leadership and political policy will 
move Iraq forward towards stable economic growth , development, and grea ter integration in the 
international trading system in the medium term.  Iraq intends to use international trade, including 
export promotion, to encourage economic diversifi cation and growth.  In addition to macroeconomic 
stability, positive economic growth over the next fe w years will require greater development of the 
private sector, and changes in publicly owned an d managed  commercial enterprises.  Thus, one 
priority is to pursue economic policies that build macroeconomic stability and facilitate private sector 
development.  The ultimate goal is to provide fo r the people of Iraq a prosperous economy supportive 
of free enterprise, fair compe tition and rewards for hard work. 
  Iraq also hopes to develop other promising areas besides the oil sector.  The country has 
opportunities for private sector development in agri culture, tourism, health, communications, and in 
other areas.  Iraq also plans to encourage forei gn investment and partnership in these areas.  As 
discussed in greater detail below, 100 percent fo reign ownership of Iraqi enterprises has been 
authorized.  
  
TRADE POLICY 
 
 The Republic of Iraq became an observer to the General Agreement on Tariffs and Trade 
(GATT) in 1948, and participated in sessions of the Contracting Parties.  Iraq did not, however, seek 
accession to the GATT 1947.  Since 1945 Iraq has b een a member of the Arab League and has 
participated in the Arab League  preferences for agricultural goods. 
 
Regional Arrangements 
 
 Prior to the war, Iraq had implemented, or completed negotiations for, bilateral free trade 
agreements with most of the countries of the Arab world.  Now, the Greater  Arab Free Trade Area of 
which Iraq is a member, has completed 80 per cent of  its staged reductions, and will complete those 
reductions by 1 January 2005.  Outside the Arab wo rld, Iraq has bilateral fr ee trade agreements with 
Turkey and Iran.  Jordan, Kuwait and Saudi Arab ia have also expressed interest in negotiating 
bilateral free trade arrangements. WT/L/560 
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Investment 
 
 On September 19, 2003, the Coalition Provisi onal Authority issued Order No. 39 permitting 
foreign investors from any country wholly to ow n and to manage business entities in most Iraqi 
industry sectors.  In particular, Order No. 39 perm its 100 per cent foreign ownership and management 
of Iraqi business entities, except in natural resourc es sectors, including oil, banking and insurance.  
Foreign ownership in the natural resource sector is prohibited.  In banking, six fully foreign-owned 
banks are permitted, and 50 per cen t foreign ownership is permitted for all others.  Order No. 39 also 
provides for equal treatment of foreign investors wi th respect to opening of foreign trade offices, 
branch registration, methods of investment, and dispute settlement. 
 
Currency and Payments 
 
 In October 2003, Iraq put the New Iraqi Dinar into circulation, and full conversion of the 
currency was achieved on 15 January 2004.  The Cent ral Bank of Iraq conducts auctions of New Iraqi 
Dinars daily.  Pursuant to this managed float, on  13 January 2004, the NID was valued at NID 1,485 
per USD.  
Tariffs and other taxes on Imports and Exports 
  Iraq has suspended all tariffs and charges on go ods entering or leaving Iraq including customs 
duties, customs fees, and similar levies through 31  March 2004, under CPA Order No. 12, as revised.  
The same Order prohibits the exportation from Iraq  of certain types of animals, foodstuffs, 
manufactured goods and other articles, which are set out  in Annex I, hereto.  These are items that go 
into the food ration basket of the Iraqi people and for which consumption has traditionally been 
subsidized, as well as scrap metals , machinery, and other items that are in short supply and are 
susceptible to smuggling.   Under CPA Order No. 38, as revised, beginning on 1 April 2004, a customs duty of five percent ad valorem  (referred to as the “Reconstruction Levy”) is scheduled to be imposed on most 
types of goods.  Goods exempted from this im port duty include food, medicines, clothing, 
humanitarian assistance, and Oil-For-Food program imports.  Also exempted are articles imported by 
the Iraqi Governing Council, CPA, Coaliti on Forces, and reconstruction contractors. 
 
Taxes 
  Under CPA Order No. 37, Iraq has maintained a pre-existing hotel and restaurant tax, real 
property sales tax, car sale fee, and petrol excise dut y.  These taxes are collected by the Ministry of 
Finance.  They are not assessable on certain foreign participants in national rebuilding efforts.  Order 
No. 37 suspended, through the end of 2003, all other taxes including income tax and property rental taxes.  The same Order permits the eventual re-im position of individual and corporate income taxes at 
rates no higher than 15 per cent.  It is anticipat ed that a 15 per cent corporate income tax, and a 
graduated personal income tax up to  15 per cent on individuals employed in the private sector, will be 
implemented this year.  
Trade Finance 
  The Trade Bank of Iraq (TBI) has been establis hed as a separate Iraqi Government entity and 
export credit bank to facilitate the import and expor t of goods and services to and from Iraq, pursuant 
to CPA Order No. 20.  The TBI reports to the Coun cil.  Its role is to bolster confidence between 
trading partners that funds will be received in ex change for goods delivered.  The TBI will work with 
Iraqi commercial banks and the Operating Consorti um, led by J.P. Morgan Chase & Company, with  WT/L/560 
 Page 5 
 
 
 the participation of 15 countries.  TBI will also cooperate with other export credit banks, such as the 
Export-Import Bank of the United States (Ex-Im) a nd the Export Credit Guaran tee Department of the 
United Kingdom, and is prepared to establish si milar relationships with  other export credit 
institutions.   Law Reform Strategy 
 
 Revision of a broad range of laws currently in  effect will be necessary to ensure compliance 
with WTO requirements, including the customs regi me, laws governing the protection of intellectual 
property rights, company, taxation, foreign investment  laws, and other laws.  To this end, a thorough 
review of Iraqi customs laws and regulations has been completed, while a comprehensive review of 
Iraqi commercial law, company law, civil code an d other relevant laws an d regulations is being 
undertaken with a view to removing unnecessary restri ctions to local and international trade and to 
assessing where Iraq’s laws and regulations need ch ange or development become consistent with 
WTO.  It is hoped that Iraq will soon have in  place a legal structure for domestic commerce and 
international trade that can provide scope for the re alization of the economic aspirations of the Iraqi 
people and a solid foundation for a prosperous economic future. 
 WT/L/560 
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 ANNEX I 
 
Products Whose Exportation is Prohibited under Order 12, As Revised
 
  Subsidized Foodstuffs and Health Essentials in the Public Food Distribution System 
 
sugar tea rice  (imported articles only) 
vegetable oils (imported articles only) 
vegetable fats (imported articles only) lentils chickpeas dried beans 
milk power 
infant formula wheat  (imported articles only) wheat flour bar soap and detergents  Subsidized Goods Vital for Reconstruction Efforts 
 
vehicles (imported articles only) machinery (imported articles only) iron 
iron reinforcing rods 
ferro-concrete galvanized iron plates steel sheets and plates wood and wood products mineral water pipes and fittings 
ceramic and other bathroom furnis hings including taps and sinks 
plain and coloured window glass copper and lead  
Other items 
 
date palm seedlings and shoots historical artefacts yellow corn (for animal feed) female camels goats 
cows 
sheep buffalo donkeys horses 
 
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