Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
16
reports, certificates and marks of conformity issued by the conformity assessment bodies of
the compliance of the different standards. This reduces the possibility of introducing barriers
in the form of limitations on the bodies that can certify the compliance of standards.
Additionally, the existence of agreements, that introduce disciplines on the treatment of
investments and/or limit the effect of legislation that discriminates against foreign products or
reserves portions of markets to domestic producers or providers, implies the establishment of
what are sometimes also termed "thick" integration spaces. Similarly with regard to
regulations on the rules for the government procurement of services and purchases which put
local and foreign firms on a level playing field.
The presence of some or all of these elements might characterize an agreement as an economic
union. It is clear that, based on the presence of agreements that introduce disciplines in all
these elements as well as liberalising factors markets, the EU is a prime example of an
economic union. However, there are other cases with less or more depth and compliance. In
the case of Mercosur, there have been important agreements on deep integration aspects as
well as on the liberalisation of the factors markets that follow the trend established by the
European Union. However, the delay in their implementation, the introduction of (sometimes
ex professo) cumbersome procedures for its effective compliance or a complicated complaints
procedure have led to smaller integration and economic effects than those seen in the
European case.
Monetary Unions
The last element that could be added is the adoption of a common currency within the
economic space. The creation of Monetary Unions supposes an ultimate degree of integration
where the transaction costs and instability in trade associated to the movement of currencies
is eliminated. When Monetary Unions are adopted, members can no longer use national
monetary policy to adjust the trade balance via devaluations.
It is outside the scope of this report to analyse the conditions and requirements for the
formation of monetary unions. They have been extensively studied under the Optimal Cur-
rency Areas (OCA) literature building on the work of Mundell (1961) and Frankel & Rose
(1998) among others. Particularly the latter have suggested that as trade is increased and the
economic structure of members becomes more compatible, members might exhibit the
conditions for the formation of OCAs; implying that monetary unions might be endogenous to
the integration process.
The EU constitutes the most significant example of a Monetary Union. When the Euro was
adopted, existing members had the option not to adopt it, and the United Kingdom, Sweden
and Denmark did not sign the treaty that constituted the Monetary Union. However, recently
acceding members must adopt the Euro once they meet the fiscal, macroeconomic and
institutional conditions. Another example of monetary union can be found in the West African