Regional Integration in ASEAN through the ASEAN Economic Community
The inauguration of the ASEAN Economic Community (AEC) on 31 December 2015 was a significant milestone in ASEAN’s 50-year journey towards stronger regional integration and cooperation. The AEC was established with the aim to promote seamless movement of goods, services, investment, capital, and skilled labour within ASEAN.
The European Union (EU) is often seen as an inspiration for ASEAN. In the EU, significant integration has been achieved and this has resulted in the accessibility of goods, services and skilled labour across European markets. While ASEAN shares similar aspirations, it is important to understand that the pathway for ASEAN in achieving regionalism diverges from the EU model and there has to be further considerations in the measures to advance the region as a whole due to the diversity in cultures, political systems and levels of economic development. Besides, ASEAN is institutionalised based on intergovernmental cooperation and consensus-based decision making, with no effective supranational governance structure and enforcement mechanism. In view of this, it is vital that each ASEAN member state remains committed in the vision to be a single market in order for ASEAN to move towards that goal as a region.
Addressing Non-Tariff Barriers to Trade in the Region
Through the years, ASEAN has successfully established a more open market with intra-regional tariffs virtually eliminated and formal restrictions in the services sector gradually removed. However, the journey towards creating a single market remains as member states take the next step in tackling existing non-tariff measures (NTMs). While NTMs can serve legitimate purposes, the challenge arises when NTMs turn into non-tariff barriers (NTBs) and these challenges can be more significant than tariffs.
NTBs come in various forms, such as the divergence in domestic and import regulations, administrative complexity and inconsistencies in implementation and enforcement. ASEAN has adopted frameworks such as the ASEAN Trade Facilitation Framework (ATFF) and ASEAN Food Safety Regulatory Framework (AFSRF) which serve as sound structures and supporting instruments to boost the trade of goods in the region. However, these have to be followed through with the necessary implementation at a national level in order to realise the full benefits. Additionally, in view of the ‘non-binding’ nature of some of the ASEAN commitments, it is essential that ASEAN member states demonstrate the political will to ensure the full implementation of ASEAN frameworks and agreements.
Trade Barriers in the Food Sector and Ways to Overcome
Within ASEAN, the agri-food sector will continue to be a key sector in the foreseeable future. Continuous growth is predicted in the food and beverage sector as the total value of sales is projected to rise to USD 164 billion in 2020, as compared to USD 108 billion in 2015. In order to unlock the potential for additional growth in trade within ASEAN, the free flow of agri-food products remains a necessity and ASEAN only stands to gain if it accelerates and intensifies its collective efforts to reduce NTBs.
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Together with its members, Food Industry Asia (FIA) has identified the six priority issues that represent the most significant trade barriers in the food sector which should be addressed, namely nutrition labelling; halal certification; pre-market product registration; import/export certification; authorisation of food ingredients; additives and flavour; contaminant limits and analytical methods. In order to overcome regulatory hurdles as a result from the fragmented regulatory frameworks and their actual implementation in ASEAN member states, it is believed that there can be greater levels of integration through measures such as mutual recognition and acceptance of equivalence of standards, while ensuring alignment with global guidelines and adhering to the principles of Good Regulatory Practice.
Beyond the commitment from policymakers and regulators, businesses play an important role in the process of achieving regulatory convergence. In 2016, a study was commissioned by the APEC Business Advisory Council. In the study, the disparity in the perspectives from government and businesses about NTMs was reported, whereby 69% of businesses believe that NTMs are applied in a biased and discriminatory way whereas 75% of government respondents believe that NTMs are consistent and fair. Likewise, in ASEAN, similar sentiments are being shared by companies with trade businesses in the region. This suggests the central importance of public-private partnerships and stakeholder collaboration to minimise the divergence in perceptions from both public and private sectors.
FIA is particularly encouraged by the recent announcement by the ASEAN Prepared Foodstuff Product Working Group (PFPWG) in taking up the work on nutrition labelling harmonisation, following the last engagement between the ASEAN Food and Beverage Alliance (AFBA) and PFPWG. Considering that nutrition labelling has been identified as a top priority issue by the food industry, the commitment by PFPWG came as a very positive news. In order to give fresh impetus to the trade efficiency in the region, it is vital that all ASEAN member states continue to prioritise the commitment in removing NTMs and NTBs.
The journey towards regional integration continues with the implementation of the AEC Blueprint 2025 to follow up from the previous blueprint. FIA members remain positive about the future of AEC and regional integration that will foster the growth of the food industry in ASEAN. To achieve the goals outlined in the AEC, the industry calls on ASEAN and its member states to follow-through on their commitments to eliminate NTBs and facilitate intra-regional trade to promote an enabling environment for businesses. FIA also remains fully committed and stand ready to continue working with ASEAN institutions and its member states to address the multifaceted issues and challenges to face a truly integrated, viable and globally competitive regional economic community by 2025.