Covid-19 and ASEAN: Facilitating Trade in Perishable Goods
Fulfilling their WTO obligations will expedite perishable goods trade among ASEAN member states.
The prolonged Covid-19 outbreak and emergence of several more transmissible Covid-19 variants continue to disrupt regional trade flows and highlight the importance of facilitating perishable goods trade among ASEAN member states. In November 2020, the ASEAN Secretariat published the ASEAN Comprehensive Recovery Framework (ACRF) and its implementation plan, which set out broad strategies and identified measures for recovery in line with sectoral and regional priorities. The ACRF is regarded as a consolidated regional exit strategy from the Covid-19 crisis.
The trade facilitation measures in the ACRF implementation plan focus on behind-the-border measures rather than at-the-border ones. These behind-the-border measures, including the harmonisation of standards for essential goods and the expansion of the ASEAN Single Window to ASEAN dialogue partners, aim to reduce regulatory compliance costs and procedural obstacles for traders.
However, when goods arrive at the customs border checkpoints, traders and transport operators face delays due to physical inspections and complex regulatory requirements set out by different border agencies. These agencies include customs, plant and animal quarantine, and health. ASEAN member states can address these problems by ensuring the expedited release of perishable goods at border checkpoints under the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) that focuses on at-the-border measures.
An analysis of the 2019 data on trading across borders from the World Bank’s doing business database reveals why this latter focus is needed. The efficiency of administering trade-related procedures at border checkpoints varies significantly across ASEAN member states. The average number of hours for importers to comply with all border requirements ranges from 8 hours in Cambodia to 33 hours in Singapore, 56 hours in Vietnam, 120 hours in the Philippines, and 230 hours in Myanmar. The average number of hours for exporters to comply with all border requirements ranges from 9 hours in Laos to 10 hours in Singapore, 55 hours in Vietnam, 117 hours in Brunei, and 142 hours in Myanmar. These figures include time for customs clearance and inspection procedures conducted by other border agencies.
The average number of hours for importers to comply with all border requirements ranges from 8 hours in Cambodia to 33 hours in Singapore, 56 hours in Vietnam, 120 hours in the Philippines, and 230 hours in Myanmar.
Although data on time taken for border compliance for perishable goods such as agricultural and pharmaceutical products alone is not available, perishable goods tend to face longer delays at the border than non-perishable goods. They are more likely to be physically inspected by border authorities to ensure they meet food safety and product quality requirements. When the border authorities do not prioritise the physical inspection and release of perishable goods, exporters and importers incur higher costs of storage and damage of such goods during storage at border checkpoints. This issue is more pronounced in countries with less efficient trade-related procedures and lacking appropriate storage facilities in normal times. Covid-19 containment measures such as mandatory testing and 14-day quarantine periods for truck drivers add to these delays and their associated costs.
Article 7.9 of the WTO’s TFA requires WTO members, which includes all Southeast Asian states, to allow the release of perishable goods, provided all the regulatory requirements have been met, within the shortest possible time. This means granting perishable goods appropriate priority when scheduling examinations and allowing for proper storage prior to release, including release at storage facilities where practicable.
If Article 7.9 is fully implemented, it should result in the faster release of perishable goods. This should prevent or reduce unnecessary delays at the border, decrease the risk of damages, prevent business losses and increase the business competitiveness of traders and transport operators. Adequate storage facilities would also reduce product quality deterioration due to border clearance delays. Fewer, shorter delays should help traders and transport operators preserve the quality of their products and improve relations with buyers.
ASEAN member states, as suggested by the wide variance in average border clearance times, are in different stages in the implementation of Article 7.9 of the WTO’s TFA. The implementation commitments notified to the WTO reveal that 6 ASEAN member states have been implementing the obligations for the quick release of perishable goods under Article 7.9 since February 2017. They are Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand. The remaining four, Cambodia, Laos, Myanmar, and Vietnam (CLMV), plan to implement Article 7.9 after a transition period. Laos is ready to implement it in January 2021; Vietnam in January 2023; and Cambodia in January 2026. Myanmar has yet to determine the date of implementation.
ASEAN member states, especially the poorer CLMV, should reinforce their on-going efforts in facilitating trade in perishable goods at the border while implementing the ACRF’s behind-the-border measures. Otherwise, long delays in the release of perishable goods at the border aggravated by the Covid-19 crisis could increase time and costs for traders and transport operators, which are passed on to importers and consumers as higher prices and lower quality products.
Sithanonxay Suvannaphakdy was Lead Researcher (Economic Affairs) at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute.