Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
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infrastructure, stability, lack of corruption, quality of education and the work. Trade
liberalisation can help promote reforms in support of improvements in these other
factors.
 The last 15-20 years have seen a substantial rise in supply chain fragmentation - where
goods, parts of goods and services embodied in the production of goods, are increasingly
sourced from a wider range of countries. This vertical fragmentation can be seen as
providing increased opportunities for developing countries to specialize in parts of the
supply chains, and to stimulate greater investment and technology transfer. At the same
time they raise challenges to do with producing goods and services consistently and
flexibly to the required standards. The role of supply chains heightens the importance of
tariff liberalisation as it is increasingly likely that a tariff on imports, or barriers to
services integration may increase domestic firms’ costs and make it harder for them to be
competitive in export markets.
 Intra-OIC trade shares have been gradually rising for the last few years 2010-2012
reaching around 17% on the side of imports and 10% on the side of exports. A rise in
intra- OIC trade shares can be observed whether one includes petroleum exports or not.
The highest share of intra-OIC trade can be found in African and Middle East countries
neighboring several other OIC countries. In some cases relatively large oil imports are
among the driving forces of the high share of intra-OIC imports. The countries with the
lowest share of intra-OIC trade are often either located far from other OIC markets, or are
strongly economically integrated with non-OIC economies or have non-diversified export
structures supplying non-OIC markets.
 Around 40% of intra-OIC imports are mineral fuels (mainly oil and oil products). While
mineral fuels account for more than half of total OIC exports to the world, they play a
much less pronounced role in intra-OIC exports with a share of around 20%.
 On average, OIC countries have made substantial trade liberalisation efforts for the last 15
years or so with the average MFN tariffs for the OIC members declining substantially from
almost 20% during 1990s to between 10-12% more recently. Current average MFN tariff
levels range from below 5% in some countries to above 20% in others. This provides an
upper limit of preference margins available to RTA partners, although a multiplicity of
RTAs implies that effectively applied tariffs, at least in some countries, are significantly
below MFN averages.
 Ten regional trade agreements involving a total of 28 OIC countries are analysed in depth.
The relative importance of these ten agreements as proxied by intra-RTA trade share
varies considerably ranging from around 1% to above 20%. There remain significant
differences in the RTA shares within individual members’ trade. Where the share of trade
is low, there is greater scope for trade diversion and a lower likelihood of welfare