Towards Resilient Agricultural Value Chains in the Mekong

Agricultural trade has been playing an increasingly important role in shaping the growing relationship between the so-called CLMV countries (Cambodia, Laos, Myanmar and Vietnam), Thailand and China. With the exception of Thailand, agricultural trade dominates bilateral trade between each of the CLMV-T countries and China. With both the population and the poor of the CLMV-T predominantly rural, agricultural development and trade have an important role to play in inclusive growth and social upliftment (Table 1). Together with China, the five Southeast Asian countries constitute the Greater Mekong Subregion, which accounts for about a fifth of the world’s population and GDP.

Agriculture has made a larger contribution to poverty reduction than other sectors. Despite its falling share in GDP, it continues to be a foundational sector for social stability in the CLMV-T countries. For example, many Southeast Asians relied on agriculture to stay afloat during Covid-19 pandemic-imposed movement controls. In Thailand, for instance, migration to rural areas increased by 50 per cent between 2019 and 2020 as workers returned to their farms to escape factory closures and the tourism slump due to lockdowns (Figure 1). This reverse migration has been a feature of every major economic crisis in Thailand and other Southeast Asian countries. This is another reason to ensure the continued sustainability and viability of rural-based agriculture.

What are the main obstacles limiting agricultural trade between the CLMV-T and China? A recent ISEAS publication addresses these questions through detailed case studies of key agricultural export commodities, identifying specific impediments along the agricultural value chain (AVC) and the non-tariff measures (NTMs) and barriers (NTBs) that interfere with cross-border trade.

A key impediment is NTMs — especially technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) requirements — that are enforced arbitrarily and often implemented in a discretionary manner that turns them into NTBs. NTMs such as TBTs and SPS requirements are designed to protect the health and safety of consumers; but they can be used (or abused) to protect domestic producers in the importing country. The situation is made worse by a lack of publicly available information on relevant NTMs. When information is not the problem, capacity constraints at the regulatory and firm/ farm levels create difficulties in complying with technical and product standards.

Apart from the trade policy and domestic capacity challenges, the sustainability of the agriculture sector in the region is intertwined with climate impacts. Climate change and the associated warmer summer months are already affecting agriculture regions. This has led to lethal heat waves, heat stress and drought. The increased frequency of storms intensifies flooding and destruction of food growing regions and infrastructure. These will reduce yields and labour productivity. In the longer-term, sea-level rise and salinity creep would devastate fertile food regions and deltas. Among the CLMV-T countries, Myanmar and Thailand are in the top 10 countries most at risk of being impacted by climate change, according to the Global Climate Risk Index, and Cambodia and Vietnam are in the top 20. The Mekong delta, for example, is projected to reach a tipping point to land infertility by 2050.

The agriculture sector in the CLMV-T countries is not only a victim of climate change but also a contributor to it. Globally, the agriculture sector and land use change and forestry alone contribute 18.4 per cent to greenhouse gas (GHG) emissions. However, this share is much higher in Myanmar (80 per cent), Cambodia (70 per cent) and Lao PDR (50 per cent) (Figure 2). The main sources are land use change, methane gas from livestock and rice cultivation, nitrogen oxides from fertilisers, and energy use on farms and fertiliser production systems. 

So, how can the policy, capacity and sustainability challenges be overcome?

First, there is a clear need to improve the governance environment of cross-border trade as well as improving domestic capacity. Regulatory systems should be aligned with the World Trade Organization agreements on SPS requirements and TBTs. Regulatory frameworks that are harmonised with international guidelines/standards, or those in bilateral or regional agreements, should be adopted.

Second, increased investment in human capital and skills development along the entire AVC is required to enhance compliance and, where necessary, accredit third-party laboratories that can handle testing procedures and conformity assessments. If trade facilitation and cooperation on NTMs could be increased through regional initiatives, the need for enhanced governance and compliance capacity could be significantly reduced. This is particularly important given that it is often difficult to enforce protocols with cross-border GMS trade, even for the formal components. Capacity development also takes time, and therefore simplifying rules and cooperating on NTMs for mutually beneficial outcomes is what is required in the short run.

Third, with the sustainability framework in mind, stakeholders need to think about both the complementarities and the trade-offs between the economic, social and environmental dimensions of AVCs. Strategies that address these three dimensions simultaneously could translate into crop diversification, R&D and innovations, investment in post-harvest and physical infrastructure and logistics to reduce food losses. Farmers should be given technical advice on how to adapt to and mitigate climate change through improved agricultural extension services and climatology information and advisory services. The private sector should be leveraged on to support farmers in terms of product standards and choices as well as training. 

With increasing consumer awareness about the urgency to address climate change globally, including in Southeast Asia and China, sustainability standards have become a new form of competitiveness. Farmers could get higher prices from their certified produce by pursuing more sustainable agricultural practices. Sustainability certification and Payments for Environmental (or Ecosystem) Services (PES), for example, could provide a way to boost farmers’ competitiveness and income, and towards more inclusive and sustainable agricultural practices. By increasing standards and improving competitiveness from both the economic and sustainability points of view, the CLMV-T countries could further diversify their export products and markets, increasing the resiliency of the agriculture sector. Then, they could move to the next level of looking for markets with a greater demand for premium agricultural products, such as organic and fair-trade, that create a higher value supply chain and higher incomes for farmers.

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