Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
65
Table 7: Intra-regional Trade Flows (as % of Total Goods Exports, av. 2012-13)
Origin N America S & C America Europe CIS Africa M East Asia
N America 53.5 9.0 15.4 0.7 1.8 2.6 17.0
S & C America 20.9 27.2 19.4 1.4 3.3 1.9 26.0
Europe 7.8 2.1 73.3 3.3 3.4 1.9 8.2
CIS 3.2 1.5 61.4 13.7 1.6 0.6 18.1
Africa 8.5 2.1 43.7 0.4 24.0 3.5 17.7
M East 2.9 1.3 11.2 0.1 10.4 24.9 49.2
Asia 20.5 4.6 16.7 2.6 4.5 4.6 46.4
Source: Comtrade
Many factors are behind the organisation of GVCs in regional factories. The existence of
regional infrastructure and compatible local infrastructures can help notably in increasing the
intra-regional trade and boost the communication and transportation links between stages or
fragments of the regional factory. However, it is also likely that the existence of regional
agreements that eliminates tariffs is instrumental in the development of GVCs. It would be
much harder to establish such fragmented production networks if intermediate products
travelling between stages of productions were subject to duties. Equally importantly, the
existence of deep integration provisions within agreements is also perceived as important for
the development of GVCs. Agreements that harmonise standards of quality between members
can help to diminish the complications and costs associated to the compliance of different
standards as well as facilitate the operation of GVCs by facilitating the design and production of
parts and intermediate products. On the other hand, the existence of provisions and disciplines
on trade and investment and competition policy allow the smooth operation of multinational
firms in and across countries.
Moreover, these deep agreements have also allowed for the operation of competitive and
quality services that are essential to the smooth operation and coordination of the different
stages of the production chains, such as telecommunications and transport services. The
liberalisation in trade in other services, particularly those associated to businesses, such as
accountancy or engineering; as well as financial services have also contributed to this process.
It is perhaps, therefore, not a surprise that these regional factories have been located in
regions with RTAs with deeper integration provisions such as the EU, NAFTA and
ASEAN+. In addition these regions present either good transportation or communication built
networks such as the EU, which serves to underline the importance of infrastructure and trade
facilitation; or present geographical advantages that reduces transportation costs such as
ASEAN+.
As can be seen, the need to introduce liberalisation with regard to behind the border measures
to secure of the benefits of tariff liberalisation, (which was proving more difficult within the