COMCEC Trade Outlook 2019
38
Regional Trade Agreements (RTAs) is another approach for trade liberalization. Two or more
countries initiate trade arrangements to liberalize trade
among themselves. Members of RTAs get the advantage
of exporting to the other parties to the RTAs than the
others. The European Union which was first initiated in
1950s made a domino effect on the expansion of the
RTAs worldwide. Today, many countries, including the developed ones are party to one or more
RTAs.
Most of the OIC Member States also took part in one or more RTAs over time. The number of
RTAs, which include one or more OIC Member States, has reached 113 by October 2019. Most of
these RTAs are in the form of FTAs. Most of the RTAs signed by the OIC Member States are
bilateral and concluded with the developed countries.
Figure 44: Number of RTAs including one or more OIC Member States
Source: WTO
There are also other approaches for liberalizing
trade. Some of the countries which realized that
freer trade boosts economic growth also
liberalized their trade unilaterally especially the
ones who previously experienced the generation
of exports from a less restricted trade. Many countries have diversified their economies and
enriched the goods subject to export in their countries. To export, countries do not need to
produce all the inputs within their borders any more. Imported inputs which are cheaper than
domestically produced ones are used by the firms to compete in export markets. For example
Nordas, Groli and Grosso (2006) state that in 2001 the import content of export value in the
electronics sector was 32% in China, 55% in Ireland, 65% in Thailand and 72% in the
Philippines. In many cases countries apply lower tariffs to these kinds of goods.
Application of high tariff rates is common in many OIC Member States. Countries apply high
tariffs for various reasons such as protecting domestic industry, preventing unemployment,
providing government revenue through customs duties etc. Figure 45 illustrates the highest
simple average tariff-applying WTO Members in 2018. As shown in the figure, 7 out of these 20
countries are OIC countries.
113
0
20
40
60
80
100
120
0
1
2
3
4
5
6
7
8
9
19731975197719791981198319851987198919911993199519971999200120032005200720092011201320152017
Total Number of RTAs
Annual Number of RTAs
“Many OIC countries apply
higher tariffs than the WTO
average”
“OIC Member States have
still a growing interest on
the RTAs”