Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
41
Nevertheless, there are some exceptions to this rule. Art. XXIV of the original 1947 GATT, for
example, allowed for the possibility of the formation of customs unions and free trade areas
between members. Similarly the so-called Enabling Clause allowed developing country
members to grant mutual preferential regimes under less restrictive conditions than those
required under Art. XXIV.
The Enabling Clause: At the time of the signature of the GATT in 1947, a number of existing
developing countries (notably in Latin America) were not participating members, some of
today’s developing and least developed countries did not exist as independent states, and in
many cases trade relations for these states were determined as part of the colonial trade
system with their respective colonial powers. The 1947 GATT was not particularly well
directed, therefore, at the interests of developing countries.
As countries gained independence the complications of adjusting to the non-colonial trading
system became more apparent. Arising from the colonial free trade regimes which had
previously been in existence, for many countries, trade depended heavily on their
relationships with former colonial powers. A substantial share of their imports and
particularly their exports had the former colonial power as origin or destination. A key issue
was the difficulty of the former colonial powers continuing to grant duty free or preferential
access without violating Art.I of the GATT. Had duty free access been extended to the rest of
the GATT, to ensure compatibility, this would mean that the preference margin that the former
colonies had, would have vanished.
A waiver for ten years with respect to Art. I was approved in 1971, enabling Developed
Countries to grant preferential access to Developing Countries. This allowed for the creation of
the Generalised System of Preferences (GSP) which a number of Developed Countries adopted.
However, there was also a perception that domestic trade liberalisation by developing coun-
tries could also be beneficial in terms of growth and economic development, in particular if
that liberalisation was focussed on trade with other developing countries as opposed to with
developed countries. Therefore, establishing free trade agreements between developing coun-
tries was encouraged.
In 1979, the waiver was made permanent under the provisions for Differential and more
favourable treatment reciprocity and fuller participation of developing countries also known
as the Enabling Clause. However, in addition to allowing for unilateral preferences to be given
by developed countries to developing countries, the clause also provided the legal framework
for the establishment of free trade agreements between developing countries themselves. In
this sense, paragraph 2c of this decision established that differential and more favourable
treatment applies also on Regional or global arrangements entered into amongst less-
developed contracting parties for the mutual reduction or elimination of tariffs and, in
accordance with criteria or conditions which may be prescribed by the CONTRACTING
PARTIES, for the mutual reduction or elimination of non-tariff measures, on products imported
from one another. Developing countries were, therefore, permitted under this decision, to