Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
49
Deep Integration Provisions in FTAs
So far the discussion has focussed on the different provisions seen in FTAs with respect to
Market Access, frequently referred as shallow or soft integration. However, there are other
elements included in many free trade agreements that might have important effects on trade
and they tend to be more associated with how foreign products or investment competes in a
market once the tariff barrier has been removed. Associated with this type of provisions are
the disciplines with respect to trade in services where rather than tariffs, it is the regulations
within each country which are likely to impede or promote trade in services. As seen earlier,
there have been some attempts at quantification of the impact of deep integration provisions
such as competition and investment policy, government procurement rules, as well as the
general assessment on the role of trade facilitation in trade. However, given the inherent
complication involved in the measurement of these barriers, their analysis has been more
qualitative rather than quantitative.
WTO legislation establishes the minimum elements and disciplines that should be included in
an FTA; however, it is muted with respect to the disciplines or provisions that could be
included once the minimum requirements are met. For example, it is not compulsory to
include services liberalisation schedules in FTAs. However, if they are included, there will be
specific provisions that will need to be met as stated in the GATS. These deep integration
disciplines could include, but are not limited to, services provisions, competition and
investment policy, government procurement rules, rules of origin, intellectual property rights
provisions, and disciplines on Phytosanitary-sanitary measures and technical barriers to trade.
Nevertheless, deep integration provisions are becoming the norm rather than the exception in
many FTAs. As the benefits from deep integration tend to be substantially larger than the
benefits from the tariff reduction elements, it is common to observe provisions and disciplines
that attempt to ensure that the other barriers that discriminate against imported products are
also brought down. Effectively, the effect of the elimination of tariffs may be null if regulations
that favour local firms in the domestic market or in the government purchases are still in place.
Services provision: As it can be seen from Figure 2, trade in services (in red) is growing faster
than trade in goods. Although it still represents no more than 25% of total world trade,
services are becoming more important in the respective domestic markets and it is frequently
seen that the share of services in a given countries’ GDP (including developing countries) is
above 50%. As a consequence, some trade agreements tend to include provisions on the
liberalisation on trade on services as well as disciplines in order that the national regulations
do not discriminate in favour of national providers. According to (Latrille and Lee, 2012) 41%
of RTAs have a services component.
In contrast to trade in goods where the supplier of the good is always located in a different
country than the consumer. Providers and consumers of services can also travel to provide or
receive the service. Exports are not just limited to the cross border flows of the service. It is
possible now to define exports of services provided in the destination country or being