Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
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TPS-OIC System is in reality likely to be small. Considering that for some of their members the trade
has been already liberalised, the consequent trade effects of the TPS-OIC will be even smaller.
Members could also avoid any meaningful reductions by placing in their coverage lists those
products whose tariffs, by the design of the tariff schedule, are expected to not suffer any reduction.
Of course this may not necessarily happen, but if the objective is to meaningfully strengthen the
regional integration process in the future, it is important to be aware of some of the in- built
weaknesses of the agreement. For example, although members are encouraged to increase their
commitments, a simpler inspection of the base tariffs reveals that some members might not need to
make any concession at all. Hence, the GCC common external tariff limits the MFN to no more than
5%. Less than 20 products have tariffs greater than 10% and they are all alcoholic beverages, which
are likely to be put in the respective negative lists. This means that, according the principles of the
agreement and as long as the GCC Member States do not decide to make concessions that go beyond
the agreement, none of their members would need to make any concession to the rest of the Parties
of TPS-OIC System.
On the other hand, the situation of Turkey is slightly more complicated. Turkey is part of a customs
union with the EU, implying that Turkish trade policy needs to be designed in accordance with the
EU’s trade policy. This includes any preferential agreement that Turkey desires to be part of, or any
preferences that Turkey wants to grant to any other trade partner. This implies that any Turkish
preferences have to be compatible with the EU’s GSP or with the EU’s free trade agreements.
However, this does not mean that Turkey cannot negotiate and sign FTAs on its own (Turkey has
negotiated and implemented an FTA with Georgia with the EU’s authorisation), but they need take
into consideration that the preferential regime Turkey is granting must be compatible with the trade
regime of the EU. This issue of compatibility also leads to obligations for Turkey, whereas according
to the EU-Turkey customs union provision, Turkey has to negotiate similar FTA agreements with any
partner engaged in an FTA with the EU.
This linkage between the EU and Turkey, combined with the MFN clause in the TPS-OIC could lead to
some complicated scenarios. As discussed above under the EU-Turkey Customs Union agreement if
the EU signs an FTA with a third country - e.g. Mexico, then in principle Turkey is also supposed to
sign an equivalent free trade agreement, but in practice this of course depends on the willingness of
both parties. If Turkey does not sign an agreement with Mexico, then Turkey is not obliged to match
the preferences the EU has offered Turkey. However, goods could enter Turkey using the preferential
tariffs provided that they entered via another EU country (ie this is trade deflection), and provided
the correct documentation is in place. In this instance Turkey is also entitled to invoke an exception
clause to prevent trade deflection but in practice has been reluctant to do so. Hence, suppose for
example, the EU negotiates and signs an FTA with Indonesia. Under the CU agreement with Turkey,
Turkey would also be obliged to sign a similar compatible agreement with Indonesia. Suppose also
that Indonesia by then was a member of the TPS-OIC. If Turkey negotiated an EU compatible FTA
with Indonesia, Turkey would then be obliged under the TPS-OIC MFN clause to offer all the other
Contracting Countries of TPS-OIC the same degree of preferential access. Similarly Indonesia would