Principles and Instruments of Islamic Economic Co-operation

Although the ideas of free trade area, customs union and common market have been there for quite some time, the idea of economic co-operation is of much more recent origin. In the industrialised economies it can be traced back to the formation of the Bretton Woods institutions, following the Second World War, which started the tradition of multilateral negotiations and participation in the political economy of trade and development.1 The multilateral approach meant keeping track by member countries of the concessions they would receive under the terms of the ‘most favoured nations clause’ (MFN) and those it would get in exchange for offering its own concessions to others. The formation of Bretton Woods institutions was followed by the International Trade Organization under the United Nations Charter, which, however, was not acceptable to the member states, friends and foes of international co-operation. In 1947, the General Agreement on Tariffs and Trade (GATT) was formed as a co-operative institution to look into collective rules for setting up and reducing tariffs in international trade. The heart of the GATT charter is the principle of the ‘most favoured nations clause’, under which each tariff agreement made in GATT is extended to all members. GATT also looks into non-withdrawal of concessions by members, prohibits predatory pricing and dumping, reduces protectionist measures and discourages import quota restrictions and export subsidies.