Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
1
EXECUTIVE SUMMMARY
 Regional trade liberalisation can stimulate increased bilateral trade between member
states. This can occur through shallow integration which usually involves the reduction in
tariffs between countries, as well as through deep integration which is concerned with
reductions in non-tariff barriers and behind-the-border measures.
 The increase in trade arising from regional integration can boost economic welfare for the
economy in question if it promotes improved specialisation on the basis of a countries
comparative advantage (trade creation). However, reductions in tariffs can divert trade
away from more efficient suppliers in countries who are not party to the agreement. This
reduces the extent of the gains (trade diversion)
 Regional integration can take many forms ranging from Preferential Trading Agreements
(PTAs), to Free Trade Areas (FTAs) through to Monetary Unions. As you move from a PTA
to further integration this involves increasing the number of products covered by the
agreement, deepening the degree of tariff reductions, broadening the scope of the
agreement beyond goods trade to allow for services liberalisation and investment, as well
as dealing with a range of other behind-the-border measures.
 The key behind-the-border measures which some agreements increasingly include are
standards and technical barriers to trade, competition policy, investment, services,
government procurement, trade facilitation and rules of origin.
 Regional trade agreements can have significant impacts on countries which are excluded
from the agreement. Those third country effects can involve either (a) reductions in
exports to the partner countries which is a consequence of trade diversion or trade
reorientation, or (b) reductions in the price of their exports in response to declining
market shares.
 Greater openness to international trade can increase the rate of growth of an economy
through various channels. This covers (i) the impact of trade on investment and
improvement in the quality of the workforce, (ii) improvements in the allocation of re-
sources - for example, countries specialising in what they do best, or within an industry
from more efficient firms increasing their market share and less efficient firms decreasing
their share or exiting, (iii) increases in productivity and efficiency through technology
transfer, innovation, and improved access to intermediate goods.
 Regional integration seen as part of the process of greater openness can therefore
increase economic growth for developing countries. However, while trade is likely to be
an important part of any process of higher economic growth, there are other factors
which are equally important such as the quality of the physical and institutional