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

With Special Emphasis on the TPS-OIC

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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