As the 2015 deadline for ASEAN’s Economic Community (AEC) draws closer, the ASEAN Regional Integration Support from the EU (ARISE) hosted a workshop in Jakarta, Indonesia last week, to explore the benefits of working towards mutual recognition agreements across the region.

ARISE is focused on enhancing the capacity of ASEAN Member States in harmonising and implementing policies and regulations in the economic and trade sectors. The ASEAN Food and Beverage Alliance (AFBA) was among those participating in the discussion.

Following the workshop, the FIA Secretariat spoke to Mr Pushpanathan Sundram, the Principal Advisor of the ASEAN Food and Beverage Alliance (AFBA) and Mr Kim Leighton, FIA Chief Scientific Officer and Principal Technical Advisor to AFBA on the benefits of establishing MRAs on food standards in ASEAN and how AFBA can help facilitate their implementation.

FIA: The 2015 deadline is quickly approaching for a single ASEAN Economic Community (AEC). Why is economic integration important in ASEAN for the private and public sectors? What role can the food industry play support the 2015 integration?
Mr. Pushpanathan:
Economic integration in ASEAN will help unlock the region’s significant economic growth potential. As a one of the drivers of the global economy, the ASEAN region already has a combined GDP of US$2.2 trillion. This figure is expected to double by 2020, according to the World Economic Forum (WEF), trade forecast to grow at around 6% across the region. The AEC will encourage the intra- and extra-regional free flow of goods and services, by reducing costs and complexities associated with importing and exporting around the region.

The region’s agro-food industry plays an important role in this growth in trade. Growing at around 36.6% in 2011, it is the fastest growing sector in the region. In many countries in the region, the industry contributes significantly to the GDP, reaching 50 per cent in Myanmar and 33.4 per cent in Cambodia for example.

However, the industry also faces non-tariff barriers and technical constraints that is impeding the growth of trade within ASEAN. These barriers in the food sector stem from the inadequate harmonisation in areas such as product registration and labelling standards; highlighting the importance of economic integration across the region.

FIA: The EU has a harmonised approach to food standards and policies. Is this something that ASEAN can seek to replicate in preparation for the AEC by 2015?
Mr. Pushpanathan:
Economic integration and the harmonisation of EU’s food standards and policies have resulted in significant growth of the bloc’s food industry. Estimates from a European Commission review in 1997 suggest that intra-EU manufacturing trade, which includes food, was boosted by 20-30 percent following the bloc’s move towards harmonisation. The convergence of standards and policies in the EU have eliminated red tape for food trade, standardised the use of ingredients and have reduced costs in areas such as labelling and packaging. This has led to a more efficient and competitive industry, and improved consumer trust and confidence.

While the EU is a very different region to ASEAN, the food industry can expect significant gains through regional economic integration and harmonisation of standards. However full harmonisation is a journey and there are many steps in this process.

FIA: Other than harmonisation of standards, what can be done to reduce technical barriers to trade? Would this mean lowering standards for product safety and consumer protection?
Mr. Leighton:
ASEAN faces a number of challenges in its journey towards achieving full harmonisation, given the national difference and gaps that currently exist in food control infrastructures and regulatory frameworks between member countries. One mechanism that can assist countries in being able to provide agreement on the coverage of tradable goods and reduce the costs and challenges for governments associated with negotiating individual harmonised standards for products is the use of mutual recognition arrangements (MRAs).

MRAs provide a framework within which countries can determine that there are adequate measures in the country of production or origin to ensure the product is safe, and that there is sufficient information to enable informed choice. MRAs provide a mechanism to meet an agreed level of equivalence of outcome before committing to full harmonisation, thereby reducing the impact of TBTs.

Consumer interests such as product safety and product information can be preserved in such agreements. For example, under a regional MRA a manufacturer would still need to comply with the labelling requirements of the country of origin, but it may remove the need to affix a new label to trade within the region, subject to language requirements.

FIA: What role can MRAs play resolving regulatory complexity and improving trade in the region?
Mr. Pushpanathan:
MRAs are good first step towards the harmonisation of standards and removal of technical barriers to trade (TBTs) in the region. MRAs facilitate the movement of goods and services, allowing trading partners to develop trust and confidence in their respective systems. between countries without the need for regulators to harmonise legislation.

The use of MRAs to help resolve differences in regulatory requirements between different countries within ASEAN will encourage the intra-ASEAN flow of products, increasing consumer choice and product availability as well as increasing the region’s overall competitiveness.

AFBA recognises the potential opportunity that MRAs can provide to countries where there are significant hurdles in achieving full harmonisation in the region, while allowing a reduction in TBTs and opening opportunities for trade. MRAs have been successfully used by other countries in trade agreements, and there is the opportunity to learn from their successes and how this could assist the ASEAN.

As the leading representative of food and beverage companies in the region, AFBA is keen to support ASEAN in exploring ways for Member States to work together in using mutual recognition arrangements based on equivalence of outcomes, while retaining differences in national legislation.

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