Copyright © CC-BY-NC 2019, CRIBFB | AFBR Asian Finance & Banking Review; Vol. 3, No. 1; 2019 ISSN 2576-1161 E-ISSN 2576-1188 Research Article Published by Centre for Research on Islamic Banking & Finance and Business, USA 24 Effects of Iran's WTO Accession on the Cement Industry: A Dynamic Disequilibrium Adjustment Model (DDAM) of Simultaneous Equations Bijan Bidabad 1 Nahid Kalbasi Anaraki 2 Abstract Many companies around the globe are re-examining their business operations to explore profitable growth in international markets.The attractiveness of the membership in WTO can be recognized not only in the growing number of its members but also as a result of increasing access to potential markets around the world. Iranian economy suffers from huge inefficiency in its trade relationships with other countries due to import compression policy and strict import controls. Iran's import profile is heavily skewed towards those tradable that are not strongly under the effects of WTO, indicating protectionism policy in the industry sector. Besides the need for easing protectionism, the emphasis placed on the growth of non-oil exports and reducing oil dependency as an objective in the five-year development plans provides a strong argument for joining WTO. Measuring technical efficiency in the cement industry in Iran suggests that companies with export-orientation policy have potentials to succeed in increasing their technical efficiency.The new discovering realm of WTO for Iran's trade policy has been evaluated in this paper. The pros and cons for joining induced us to investigate the effects of Iran's membership on the cement industry. By designing a dynamic disequilibrium adjustment model (DDAM), we use annual data for the period 1963-2002 to estimate a simultaneous system of econometric equations including cement supply, exports, imports, and consumption functions in order to quantify the effects of joining on the cement industry of Iran. One of the main challenges confronting the Iranian cement industry is to improve the competitiveness of the industry by reducing the subsidies, removing restrictions, and price controls. Indeed, the experience of other counties after joining WTO portrays a conflicting profile on the effects of accession on domestic economies. While some countries have developed important trading partners, others have suffered due to the loss of domestic industries. In this paper, we intend to examine the hypothesis of whether reducing the tariff rates will promote Iranian cement industry. The results reveal that joining WTO has negligible effects on consumption, production, and exports, though, will raise imports substantially. Keywords: Cement Economics, Dynamic Disequilibrium Adjustment Model, DDAM, WTO, Econometric Model 1. Introduction Iran has a special geographical advantage regarding mining products international trade due to locating in the Persian Gulf region with high potentials since mineral products have been among the top ten imports of the Persian Gulf region. Due to import compression policy and strict import controls, Iran's import as a share of GDP is relatively low. Moreover, her import profile is heavily skewed towards bulk foodstuffs and essential capital goods, reflecting recent currency shortage, import bans on many products and heavily protected industrial base. However, higher oil revenue since 2000 has eased pressures on Iran's 1 - (B.A., M.Sc., Ph.D., Post-Doc.) Professor Bijan Bidabad, Fars-o-Khozestan Cement Co. economic advisor. This paper has been prepared by the order of Fars-o-Khozestan Cement Co. and the authors acknowledge financial support of this company. The views expressed herein are those of the authors and not necessarily those of Fars-o-Khozestan Cement Co. presented at the 4th European Cement Conference Barcelona, Spain 14-17 March 2004. 2 -Dr. Nahid Kalbasi Anaraki, Fars-o-Khozestan Cement Co. economic consultant.