Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
54
regarding investment policies relates to the guarantees that, once foreign firms have been
established, they will not be subject to discrimination or discretionary measures. One way that
developing countries may attract more FDI is by increasing the costs of breaking such
commitments. Although commitments may exist, it is their enforcement which ties the hands
of local policy maker rather than the commitments themselves. Therefore, important here also
is how disputes would be settled and who would be the independent party that would resolve
the dispute. For example, to what extent would a foreign investor be able to bring claims
against countries for breaches in international arbitration mechanisms and, eventually, seek
compensation for damages?
NAFTA was the first RTA to incorporate this type of provision, previously only available in
bilateral investment treaties. Many agreements signed by Latin American, Japan and other
Asian countries also tend to include provisions on these grounds. However, this has not been
the case for the European Union, where supranational institutions have been established that
oversee the competition and investment rules within the economic union. Berger et al, (2009)
find important evidence in favour that less restrictive market access rules (national treatment)
promotes bilateral FDI; however, they find that strong enforcement mechanisms of
commitments play a less important role, possibly as a result of high discount rates on investors
decisions.
These elements of deep integration can have important effects on the establishment of global
value chains and production networks. Orefice and Rocha, (2011) found that signing deeper
agreements (in the sense of including elements of investment and competition policy)
increases trade within production networks, particularly in automobiles and information and
technology products between members. Moreover, they also found a reverse relationship
where existent intensive trade in production networks tends to increase the depth of the
agreements. This resonates with the work of Baldwin (2011) in the sense that the regional
factories by which "global value chains" seem to be organised, tend to be located within trade
agreements with important deep integration elements such as the European Union, NAFTA
and ASEAN.
Intellectual Property Rights Another increasing aspect of negotiations of free trade agreements
are those provisions associated with intellectual property rights, particularly with respect to
the enforcement of the rules and their administration. The general disciplines are stated in the
WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) that was
negotiated as part of the Uruguay Round package. TRIPS provides mini- mum standards of
intellectual property protection and also provide a systematic settlement of disputes. Although
the TRIPS agreement establishes the minimum standards of compliance of IPRs, it requires as
well that WTO members ensure that IPRs can be enforced by their laws and that penalties can
effectively deter violations.