Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
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crease economic activity and welfare. Each of these channels are likely to be present both with
unilateral, multilateral and regional trade liberalisation. Hence, even if it is the case that the net
effect of trade creation and trade diversion suggests that the welfare gains may be low, this
may be offset by the other gains. These gains are sometimes, somewhat loosely referred to in
the literature as "dynamic gains" from integration.
These additional gains are often more closely associated with deeper integration. The
liberalisation we have been discussing above focuses on the impact of the liberalisation of
tariffs, and not surprisingly tariff reduction schedules are the core element of all
bilateral/regional processes of trade liberalisation. However, in addition to tariffs impeding
trade between countries, there may be a range of barriers or measures which are behind the
border which also negatively impact on bilateral trade. A classic example of this relates to the
use of technical standards. Suppose A and B sign an FTA, with zero tariffs on product k. In
principle A can export the good duty free to B. However, suppose B has (or introduces) a
technical standard which A either cannot match, or cannot prove that it can match, then
despite the fact that tariffs are zero, exports may not occur. The NAFTA agreement (US,
Canada, Mexico) in 1990 was one of the first FTAs which addressed such issues. The EU in its
trade agreements increasingly pushes hard for the inclusion of elements of deep integration,
and this can be seen in the current negotiations on the Transatlantic Trade and Investment
Partnership (TTIP). The difference between shallow and deep integration naturally leads us on
to a discussion of the different types of regional trading agreements.
2.2. TYPES OF AGREEMENTS
This section is devoted to defining and establishing working definitions as to different types of
agreements, as well as proving examples of the most common types. Agreements tend to take
different forms depending on the degree of commitment in terms of coverage and depth of the
liberalisation efforts; but also with respect to additional disciplines introduced. Therefore, the
increasing degree of commitment and the existence of additional provisions is a natural way of
presenting them. It is important to note that there are not always unambiguous clear limits or
boundaries between the different types of agreements. This means that some agreements
might belong simultaneously to more than one category or that it can be placed between two
categories.
Preferential Trading Agreements (PTAs)
The term preferential trading agreement is sometimes used very loosely in order to cover any
sort of regional trading arrangement. However, it is also sometimes used in a much more
specific way in order to distinguish a partial element of regional trade liberalisation from more
complete liberalisation. Used in this way, this type of agreement is the least ambitious in terms
of liberalisation commitments. In a PTA, two or more countries agree to introduce bilateral
partial preferences in some products. Preferences are partial in the sense that the bilateral