A bid to boost market access for agri-food trade in ASEAN is in jeopardy. Non-tariff measures (NTMs) – policy measures other than tariffs that can potentially hinder trade – have emerged as one of the key obstacles to agri-food trade, namely fisheries and agro-based products. NTMs increase trade costs for producers, importers and exporters through information, compliance and procedural...
A bid to boost market access for agri-food trade in ASEAN is in jeopardy. Non-tariff measures (NTMs) – policy measures other than tariffs that can potentially hinder trade – have emerged as one of the key obstacles to agri-food trade, namely fisheries and agro-based products. NTMs increase trade costs for producers, importers and exporters through information, compliance and procedural costs. ASEAN has been implementing a work programme to reduce the trade-distortive effects of NTMs on agri-food trade for more than a decade under the ASEAN Framework Agreement for the Integration of Priority Sectors signed in 2004. Given the fact that NTMs are deeply rooted in the legal systems of ASEAN member states, an ASEAN-wide effort alone is not sufficient to diagnose and eliminate non-tariff barriers that severely reduce agri-food trade in the region.
Reducing Non-Tariff Barriers: Little Progress
There are two indicators to suggest that ASEAN has not made much progress in reducing non-tariff barriers on agri-food products. The first is the number of NTMs, which is on the rise. The global NTM database reveals that the number of NTMs on agri-food trade in ASEAN rose from 434 measures in 2000 to 1,192 measures in 2010 and 2,181 in 2019. About half of them are accounted by so-called sanitary and phytosanitary (SPS) measures. SPS measures – which are rules and standards that governments use to protect humans, animals and plants from diseases and other contaminants – have largely been driven by an increase in consumers’ demand for the quality and safety of products. The remaining measures include import licenses and inspection requirements.
Despite the non-protectionist intent of SPS measures, they have a critical role in determining market access conditions. After all, compliance to SPS measures is necessary for entering markets of other member states. The cost of compliance can be higher for exporters in less developed member states such as Cambodia, Laos and Myanmar. First, the capability of producers in these countries for meeting the requirements is more limited compared to other member states. Second, they have weak export services and less advanced production and testing facilities. Exporters are often required to outsource services like laboratory testing and certification of food products, which can be expensive. These higher costs can outweigh the lower labour costs of these countries in agri-food production.
Any regulatory cooperation aimed at promoting agri-food trade in ASEAN should be based on a two-pronged approach of regulatory convergence.
The second indicator in the effectiveness of NTM reform is the performance of intra-ASEAN exports in agri-food products, which has been stagnant in the past decade. ASEAN trade data reveal that the share of intra-ASEAN exports in ASEAN’s total exports for agri-food products has fallen from 13 per cent in 2010 to 12 per cent in 2018. An analysis of agri-food exports by subsectors (i.e. fisheries and agro-based products) shows that exports of fisheries rose by 87 per cent from US$1.3 billion in 2010 to US$2.4 billion in 2018. But agro-based exports such as tomatoes and beans fell by 6 per cent from US$5.6 billion to US$5.2 billion in the same period. The varied export performances across subsectors may reflect different adaptive capacities of producers and traders to comply with regulatory requirements in ASEAN’s markets. For instance, growth of agro-based exports from 2010 to 2018 was positive for Cambodia, Thailand and Vietnam. However, this was negative for Indonesia, Laos, Malaysia, Myanmar and the Philippines.
There are three possible explanations for the limited impact of ASEAN’s NTM reform on agri-food trade. First, governments of the member states have incomplete information on the NTMs in force in other member states and sometimes even in their own countries. Second, identifying and eliminating non-tariff barriers from the list of thousands of NTMs require substantial effort in terms of time, financial resources, technical capacity and strong political support at the national and regional levels. These factors are still deficient in ASEAN. Third, the proliferation of NTMs, especially SPS measures, has added to the complexity of cost-benefit analysis used to justify the elimination of non-tariff barriers. This involves the assessments of costs, benefits, and potential risks on human, animal and plant health. This requires a group of experts from different fields such as economics, agriculture and health.
The Way Forward
Any regulatory cooperation aimed at promoting agri-food trade in ASEAN should be based on a two-pronged approach of regulatory convergence. This includes a top-down approach that promotes harmonisation and mutual recognition of SPS measures at the regional level, and the bottom-up approach that strengthens the capacity of member states in the design of NTMs, implementation of good regulatory practices and integration of NTM reform into reforms of their national regulations. This includes capacity building for small- and medium-sized enterprises to comply with regulatory requirements in ASEAN’s markets. Effective implementation of the top-down and bottom-up approach should reduce the trade-distortive effects of NTMs for agri-food trade, and contribute to regulatory convergence in the region.
Sithanonxay Suvannaphakdy was Lead Researcher (Economic Affairs) at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute.