Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
181
• 20% of all HS tariffs lines for members whose average tariff is 15% and 20%
• 15% of all HS tariffs lines for members whose average tariff is below 15%.
Least Developed Countries can define a negative list with at most 30% of the HS tariff lines,
regardless of the average height of the tariff. It is also worth pointing out that the criteria above imply
a lower level of liberalisation for those countries with higher initial tariffs.
In addition to increasing the number of tariff lines to be covered, the Fast Track also increases the
margin of preference given to the beneficiary country. Instead of the tiered approach of the normal
track, a 50% margin of preference is established for all goods outside the negative lists. Therefore,
except for those products defined in the negative lists, tariffs would be cut by half.
If we take the first of these, this article means that if countries choose to liberalise under fast track,
they are obliged to liberalise at least 75% of their tariff lines; and the second and third of these imply
reductions of at least 80% and 85% respectively. On the one hand this indicates that the Fast Track
route really does represent a much more significant degree of liberalisation - and this could be seen
as encouraging member states to liberalise more extensively with each other. On the other hand,
member states are faced with a choice of either liberalising 7% of tariff lines, or of liberalising more
than 75%. There is no in-between option. It is impossible to predict how this will be treated by the
countries concerned. It could be argued that the lack of flexibility may prevent countries from going
beyond the obligatory 7% coverage level as they are not prepared / willing to switch to 75% or more.
Alternatively, countries may feel that 7% is far too insubstantial and hence they will desire to
liberalise more and will choose the fast track option. It remains to be seen which route countries
take.
Given the average MFN tariff applied (as seen in Table 30), all the current Contracting Countries of
TPS-OIC (except Bangladesh in virtue of being LDC) would be allowed to define a list not exceeding
15% of all the tariff lines. This implies that incumbent members will need to make larger
liberalisation efforts and would be required to liberalise at least 85% of their tariff lines.
This particular liberalisation schedule, by reducing the requirement on those members with average
high tariffs, seems to be defined to encourage or invite current and future members to adopt the fast
track of liberalisation. The idea seems to be that if the liberalisation schedule is particularly stringent,
OIC members might be reluctant to join the TPS-OIC. However, besides the benefits from the own
liberalisation discussed above in this report, there is little in the agreement that creates incentives to
adopt this particular track. This means that the Fast Track would be adopted if the member finds it
convenient in order to increase efficiency by introducing competition in the respective domestic
market. However, if this is the case, the member might find it more effective to generate a general
unilateral reduction on its MFN tariffs.
Therefore, the Fast Track includes a larger coverage list (that for the current members would be of
85%) and a higher preference margin. This is a significant increase in the ambition of the agreement