Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States

With Special Emphasis on the TPS-OIC

destination country. This rule-based approach benefits from its simplicity but it might present

problems particularly dealing with special cases, in particular if the imported products receive

some transformation in one of the member countries. This approach is the one that is followed

currently in the revenue sharing arrangements in Mercosur. An alternative approach is the

creation of a common pool or fund composed of the revenue obtained from tariffs applied to

third countries, regardless of where the imported good has first landed. This common fund can

be distributed using an agreed formula, as in the case of the South African Customs Union

(SACU); or it can be used to finance a supranational budget, as in the case of the EU. This

approach has the advantage that it can be used to address regional imbalances, such as the

development component in the SACU revenue sharing formula; or finance supranational

institutions that could support development in some of the members with the objective of

reducing internal imbalances.

Although the general characterization of a CU assumes that they are built upon full FTAs

(100% of products covered), the reality suggests that CUs might not be full in this sense. CUs

might present exceptions on both the CET and the FTA element. Mercosur, for example,

presents exceptions on the free trade of automobiles and some flexibility on the CET in the

case of capital goods. The EU, on the other hand, would constitute an example of a full CU.

Other examples of full or partial customs unions involving developing countries are the

Caribbean Community and Common Market (CARICOM), the Common Market for Eastern and

Southern Africa (COMESA), the Gulf Cooperation Council (GCC) and the Russian Federation-

Belarus-Kazakhstan CU.

Economic Integration Agreements and Economic Unions

As we have seen, disciplines on trade in services entail the reform and liberalisation of the

domestic markets in the provision of services, and in the form of non-discrimination in favour

of domestic providers. Although these agreements (governed by Art. V of GATS) are stand-

alone and could be negotiated in the absence of an FTA or CU, given the degree of economic

integration that members could achieve as a result of them, they tend to be associated with

existing agreements on goods. The EU, Mercosur and the EAC, for example, are CUs that

include liberalisation of trade in services; whilst many FTAs also include service provisions

such as Pakistan-China or the US-Peru to name just a few.

On the other hand, economic integration can take a deeper form either when the agreement

allows for the elimination of non-tariff barriers between countries; and/or when liberalisation

in factor markets (i.e. allowing for movement of labour and flows of capital) is introduced. The

establishment of rules for the elimination of non-tariffs measures (see also next section),

together with the elimination of the restrictions on the movement of labour and capital can

lead to the creation of true economic spaces between members. For example, common tech-

nical (TBT) and Phytosanitary (SPS) standards eliminate the possibility of discrimination

between domestic producers and those in partner countries. Alternatively mutual recognition

agreements establish the conditions under which the countries concerned would accept test