Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
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means that a key part of the design of the policy tool is giving it enough power to achieve the
desired objective.
In the context of the TPS-OIC, this leads to several recommendations that derive from this
report. The first set of recommendations is related to the level of membership, coverage and
liberalisation contained in the provisions of the TPS-OIC.
1. Membership: Currently out of 57 OIC member states, there are 10 countries which are
Contracting Countries of TPS-OIC with diverse levels of development, economic structure and
a lack of geographical contiguity. Clearly, one way forward for the TPS- OIC is to encourage
more members to join. We would argue that one of the key benefits from regional integration
for developing countries derives from agreements which are "bloc creating" and enable the
development of more competitive regional markets often through the establishment of
regional value chains. Given the geographical diversity of the OIC member states, it is logical to
think of the development of regional blocs within the group of OIC countries. In order to build
upon the existing membership of the TPS-OIC we would therefore encourage countries, which
are contiguous to existing countries to participate. For example, the inclusion of the agreement
of countries such as Afghanistan, Iran, Iraq, Kuwait and Egypt already with strong trade links
with current members. It is worth emphasising this is likely to enhance the benefits to both the
existing and the new members. This, of course, should not prevent non-neighbouring members
from joining, and from benefiting from their participation.
2. External tariffs As countries retain control over external tariffs, it is important to
emphasise that the intra OIC liberalisation is more likely to lead to welfare gains where those
external tariffs are kept lower. As documented in this report the obligatory scope and depth of
the TPS-OIC is somewhat limited. We recognise that this derives in good part from political
economy considerations and that in its current formulation the TPS-OIC can be seen as an
important move forward and stepping stone towards a desired objective of closer integration
between the OIC countries. Nevertheless as argued above if the tool applied to a given policy is
weak, it is hard for that policy to be effective. Hence if the objective is more than political, but
also economic with a desire to materially impact on trade, integration and development then
the tool itself needs strengthening.
3. Coverage: A key priority should be to increase the coverage regarding the number of
product lines to be liberalised by the participating member states. As the agreement is
currently constituted, this is possible via the voluntary Fast Track option. The ad- vantage of
the Fast Track is that it requires a minimum level of coverage of 70% of tariff lines. A potential
disadvantage is that currently countries can therefore choose between 7% coverage or 75%
coverage, but nothing in-between. This may serve as a strong disincentive to choosing Fast
Track. At a minimum we recommend that countries are encouraged to adopt Fast Track.
However, we recognise that on political economy grounds, as this is voluntary, this maybe
harder to achieve. Art.X of the PRETAS allows for the possibility of revising the agreement. We