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

With Special Emphasis on the TPS-OIC

198

Services In this report, services have been mentioned several times. Services are not

currently included in any of the agreements that constitute the TPS-OIC. However, not only are

services growing in importance in world trade as we have seen, but are also becoming of

increasing relevance in the constitution of regional value chains. This is because value added in

exports being increasingly generated in the services sectors in the form of financial, business,

transport and communications and logistic services. It is therefore important that the list of

compulsory sectors to be liberalised should include sectors associated with / linked to trade in

goods (e.g. transportation, logistics, business and financial services) and which can have a

significant impact on competitiveness, and possibly on the development and integration of

value chains. A supplementary agreement that liberalised trade, in such sectors, could deliver

important economic effects for the member countries. With regard to services it is important

to establish more friendly rules and disciplines in terms of the modes of provision associated

with these sectors, particularly modes associated with cross border provision and commercial

presence. In this sense, the inclusion of a multilateral investment treaty within the TPS-OIC

that guarantees protection for investments but that also increases the flexibility of the

investments in areas such as communications and the financial sector could be significant.

A final policy area, and set of policy recommendations is focused on the role of firms in

the economy. In the setting of policy it can often be overlooked that ultimately it is the

firms that engage in trade, and there is considerable evidence to suggest that within sector,

firm-level reallocations are an important source of productivity growth in an economy. We

recognise that these policy recommendations are not only ones which would be formally part

of the TPS-OIC. Nevertheless it is worth highlighting these as they are likely to be significant in

supporting the objectives and successful realization of the TPS-OIC:

Improving the quality of the business environment. This covers a range of possible

areas ranging from access to financial and business services to the quality of the physical and

institutional infrastructure. Some of these areas could be covered by deeper integration

elements in an agreement, some require domestic action.

Identifying and dealing with supply chain barriers Successful engagement in value

chains increasingly creates additional demands: with respect to information, co- ordination

and traceability between producers across countries, production to different standards in

different markets, the need for certification etc. These barriers may be more significant for

small and medium sized enterprises. This heightens the importance of regulatory cooperation

/ coordination and possibly mutual recognition of standards. In addition, as goods cross

borders several times, this raises the importance of customs procedures and efficiency of port

logistics (trade facilitation), as well as the importance of the barriers along the supply chain:

transport, logistics, finance, communication, business and professional services needed to

move goods and coordinate production (which again emphasises the role of services inputs).

Here again we see the importance of rules of origin where allowing for full cumulation would

make it easier for firms to engage in regional supply chains.