Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
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The concessions presented here are well below this benchmark value and on the face of it therefore
represent a limited degree of ambition with regard to the level of integration. However, it is worth
noting the diversity of countries involved in terms of size, structure and economic developments.
This potentially makes it harder to achieve more ambitious outcomes, and the agreement could be
seen as an important stepping stone in the direction of more substantial and more meaningful
liberalisation. A more ambitious approach is possible under the fast-track element of the agreement.
The voluntary fast track reductions have a much broader product coverage of between 85% and 70%
(LDCs 70%) for tariff reduction, which would be achieved by increasing the margin of preference by
50% on the current MFN applied rate at the HS level of National Tariff Codes, within 5 years (7 years
for LDCs). Furthermore, LDCs should be granted the marginal preference from the developing
countries in 3 years instead of 5. After the fifth year of the implementation of the fast track
liberalisation, the participating states can choose to negotiate further liberalisation. So in principle,
the voluntary fast track procedure allows for a more considerable degree of liberalisation, however
in practice this is voluntary and depends on the willingness of the participating states. We return to
this later in this section of the report. For now we focus more on the obligatory commitments and the
implications therein.
It is not the purpose of this report to assess the legal compatibility of this agreement. Indeed under
the Enabling Clause, it is permissible for developing countries (and least developed countries) to
negotiate and implement partial scope agreements as many pre-1994 FTAs or the General System of
Preferences among Developing Countries (GSTP) reveal. However, it is worth noting that the
agreement departs in this sense, from what has been the trend since the end of the Uruguay Round as
more agreements have been negotiated and implemented under GATT’s Art.XXIV than under the
Enabling Clause.
Although the level of coverage is modest, Art.3.2 of PRETAS guarantees that the products covered by
the agreement will have initial tariffs greater than 10%. This is important as it should secure an
effective reduction in the MFN tariffs and also put in the covered list those products with, at least a
certain level of protection. Therefore, it is expected that all the products covered would, in principle,
be affected by the reduction.
In terms of the schedule, Art. 3.3 established that:
• tariffs above 25% should be reduced to 25%
• tariffs between 15% and 25% should be reduced to 15%
• tariffs between 10% and 15% should be reduced to 10%.
This implies that, depending on the initial value, the tariff reduction could be sizeable (with a
hypothetical 100% tariff, the reduction would be 75%), or null if the original tariff was at the
minimum level of any of the three threshold ranges (this is 10%, 15% or 25%). However, it would
also be possible to avoid any reduction in tariffs by placing in the covered lists products whose tariffs
are at these levels. Given the limited product coverage and the potential minimal reduction (where a
zero reduction is possible), the potential effects on the bilateral trade flows between the Parties of