Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
42
establish free trade agreements between themselves without violating the provisions of the
GATT.
A key feature of the Enabling Clause is the complete flexibility it provides for to contracting
members with regard to the design and shape of the agreement. There are no constraints and
restrictions on the coverage and depth of the preferential agreements. This contrasts sharply
with the more demanding provisions of Art.XXIV, which requires that substantially all trade
must be covered and/or that an agreement should imply a complete elimination of tariffs
between contracting parties. Hence, the Enabling Clause allows for the signature of
agreements with low levels of coverage. In practice this has often been reflected by
agreements being based on positive lists; where members list the products that will be
included. This is in contrast to, what is typically seen as a more liberalising approach, which is
based on negative lists, where members only list the products that are to be excluded from the
agreement. Frequently also agreements negotiated under the Enabling Clause are less
ambitious in the extent of the tariff reductions even for those products that are included.
Tariffs may reduced as opposed to completely eliminated (as would be the case of an FTAs
under Art. XXIV). Agreements notified under the Enabling Clause are typically therefore
referred to as Preferential Trade Agreements (PTAs), whereas agreements notified under Art.
XXIV are referred to as Free Trade Agreements (FTAs). It is also worth noting that while the
TPS-OIC does not appear to have been formally notified to the WTO it is in the spirit of the
Enabling Clause
In Table 1 we provide some summary information with respect to the main PTAs notified to
the WTO under the Enabling Clause, as well as the TPS-OIC. For comparative purposes we have
focussed on certain key criteria such as the implementation period and the number of tariff
lines which are included. In certain cases information was not available and this is indicated
by N/D (not determined). This analysis allows us to compare the key features across a range of
agreements. At the end of this section we also provide a much more de- tailed comparative
table with regard to each of the agreements. Table 1 below covers 28 PTA agreements. From
the table it can be seen that while there is a wide range with regard to the date of
implementation, the implementation period is typically between 5-10 years (which is
consistent with GATT Article XXIV). Indeed it is only the EAC agreement which has a longer
implementation period.
There is much greater variation with regard to coverage. There are some agreements which
clearly have limited coverage, and this is often the case when the agreement involves India
(e.g. India-Afghanistan, India-Bhutan, or Mercosur-India), or when it is bilateral (e.g. Pakistan-
Malaysia). Most agreements containing multiple countries have relatively high coverage ratios,
which range from 70% for ASEAN-India, to 95% for Mercosur. It is of course worth noting that
these coverage ratios represent what was included in the agreement, and implementation can
sometimes take longer. Finally, we see that nine of the agreements include some element of
services liberalisation.