Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
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7. CONCLUSIONS AND RECOMMENDATIONS
In this part of the report we draw together some of the key messages which emerge from the
preceding analysis and on the basis of this make certain observations and recommendations.
We start with some of the key messages:
7.1. CONCLUSIONS
• The key benefits from liberalisation arise from domestic liberalisation, which allows
the economy to source goods from relatively more efficient suppliers than was the case
previously. As this is likely to increase competition for certain domestic producers, achieving
concessions from the partner country (or countries) and improved access to their markets is
then often needed for domestic political economy reasons. Improved access to export markets
however can also have a positive impact on productivity and growth for the domestic economy
- either as a result of intra-sectoral reallocation effects (the emergence and growth of more
productive and therefore more competitive domestic firms), or as a result of positive spillover
effects (for example arising from technology transfer) between firms.
• In addition the process of liberalisation and integration can have a positive impact on
in- vestment - both domestic and foreign - which can increase productivity, competitiveness
and the rate of economic growth of the economy.
• Shallow integration involves the removal of tariffs and is likely to result in both trade
creation and trade diversion, and possibly also trade reorientation. The extent of this will, in
the first instance, depend on the height of the tariffs to be liberalised and the amount of tariff
lines to be liberalised. There is considerable empirical evidence which shows that tariff
reductions do impact on trade, and through this can impact on economic growth - but that this
is not necessarily the case. It does depend on the nature of the agreement and on the
underlying structures of trade. The discussion in Section 4 showed that in the context of the
OIC countries, there is prima facie evidence that regional liberalisation may have stimulated
intra-regional trade. However as also shown by the discussion in Section 5, even with Fast
Track liberalisation, the existing structure of trade and tariffs suggests that certain countries
are more likely to gain from further liberalisation. In contrast others, notably those with
already low tariffs, may have less to gain. In the context of the TPS-OIC it is clear that if there
are no Fast Track reductions then the limited extent of liberalisation which is obligatory means
that the agreement is unlikely to have much of an aggregate effect on trade and economic
activity. It is, nevertheless, of course possible that particular sectors in particular countries
may be affected to a greater degree.
• Much bigger effects on trade, investment and economic welfare can potentially be
achieved via deeper integration and trade facilitation. These are important but typically much
harder to agree upon. For example, there have been difficulties with regard to services