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ASEAN Countries Need to Harmonise Regulations to Improve Trade Performance

Seminar , Think Tank , Trade

ASEAN Countries Need to Harmonise Regulations to Improve Trade Performance

Jakarta, 31 January 2020: ASEAN member countries need to harmonize regulations to improve trade performance in the Southeast Asian region. Trade between ASEAN countries is now increasingly open with reduced tariffs. However, actual intra-ASEAN trade remains relatively low. There are multiple reasons why intra-ASEAN trade remains low including Non-Tariff Measure (NTMs), as well as logistics, customs procedures and other trade facilitation issues. 

These issues and others were discussed at the ‘Why Think Tanks Matter Forum’ co-hosted by the Center for Indonesian Policy Studies (CIPS) and the Economic Research Institute for ASEAN and East Asia (ERIA). The aim of the forum was to highlight the importance of think tank research and policy analysis to the policy-making process.  Policymakers in Indonesia and ASEAN more broadly, increasingly request evidence-based policy recommendations. The analysis and recommendations produced by think thanks enable decision makers to produce policies that are able to answer the needs of communities.

'To improve trade performance, regional trade agreements must go beyond trade liberalization and tariffs in order to provide tangible benefits. Overcoming non-tariff measures and other trade facilitation issues must be the core of a transparent, actionable and realistic work program,' said ERIA Policy Fellow Salvador Buban.

Specifically he noted that the recently updated ERIA-UNCTAD Non-Tariff Measure (NTM) Database is crucial step in addressing NTMs as it enhances transparency, ‘but addressing the barrier effects of NTMS requires more than that, such as the application of good regulatory practices to help ensure crafting of better regulations.’

Also, ASEAN’s ‘Seamless Trade Facilitation Indicators’ developed by ERIA together with the ASEAN Trade Facilitation Joint Consultative Committee was an important initiative, which is expected to clarify the implementation of trade facilitation measures in the region, including recommendations  to improve them. The ultimate goal, he said, is to promote seamless trade facilitation which is critical to create the ASEAN Economic Community as a single market and production base as well as to promote trade competitiveness, better governance and improved development outcomes in the region.

Meanwhile, Director of ASEAN Negotiations at the Ministry of Trade Dr Donna Gultom said that Indonesia has a great opportunity to improve its trade performance with its regional partners, both ASEAN and ASEAN FTA Partners. But lately, Indonesia has faced challenges in this regard, such as trade tension which in the end is causing increased protectionism which was initiated by the United States and China. This has influenced many countries to do the same. In addition, there was an indirect disruption to Indonesia's exports.

Donna alluded to the role of think tanks which she said were very relevant and important in the policy making process. But to be involved in the process, a qualified think tanks is needed.

'The Ministry of Trade frequently requires the input from think tanks in various studies, both in the framework of international trade and in helping the Minister to make decisions / policies to control imports and increase exports,' she explained.

Regarding the issue of NTMs, Center for Indonesian Policy Studies (CIPS) researcher, Felippa Ann Amanta, said the United Nations Conference on Trade and Development (UNCTAD) defines NTM policy as various forms of policy other than customs tariffs that affect international trade by changing the amount traded, price or both.

Examples of NTMs include quotas, licenses, regulations and label requirements, price controls and anti-competitive measures. NTM policies can be classified in several forms, including Sanitary and phytosanitary measures (SPS), Technical barriers to trade (TBT) and Pre-shipment inspection and other formalities. Many of these policies have legitimate functions to protect the health and welfare of citizens.

However, as tariffs have been almost completely eliminated, the number of NTMs has multiplied substantially creating new complexities for trade across borders. ERIA, in collaboration with UNCTAD, created the ‘NTM Database’ which catalogues all the NTMs in ASEAN plus 6 countries, thus providing critical information to policymakers and researchers alike.

'Total number of NTMs increased by approximately 15% from 8,237 in 2015 to 9,502 in 2018,' explained Felippa.

Indonesia is one of the countries implementing many NTM policies, including regulations on food. The application of NTMs in the food sector has a major impact on food security because it affects the quality, quantity and price of food consumed. But according to Felippa, NTMs inhibit trade could ultimately contribute to the emergence of malnutrition rates by increasing the cost of food items.

According to her, the impact of NTM’s on Indonesia's food trade can be seen from the 2019 Global Food Safety Index published by the Economist Intelligence Unit. Indonesia is ranked 62nd out of 113 countries. Although food security has improved over the past few years in Indonesia from 76th in 2015, Indonesia still lags behind neighboring countries such as Malaysia (28th rank), Thailand (52nd), and Viet Nam (54th).

For this reason, there are several things that can be done to improve ASEAN's trade performance, such as evaluating the quota system, promoting policies that are oriented to open markets and reducing the gap of non-tariff measures. In addition, ASEAN countries also need to reduce difficult packaging policies (unreasonable packaging, labeling and product standards), reduce the complex regulatory environment, create reliable trade institutions, and simplify the rules of origin process.

ERIA and CIPS are two Jakarta based were both included in the Top 100 Think Tanks in South and Southeast Asia and The Pacific in the 2019 Global Go To Think Tank Index. ERIA was ranked 11th and CIPS ranked 74th.

There are several criteria used to assess the performance of a think tank in the Global Go to Think Tank Index. Some of these include the ability to bridge the academic world with policy makers, the ability to bridge policy makers with the needs of society or the public, the ability to produce analyses, research, and policy alternatives and also the extent to which research results and recommendations from the institutions can be useful for public.

The Global Go To Think Tank Index is an annual report issued by the Think Tanks and Civil Society Program (TTCSP) which is part of the University of Pennsylvania. The launch of the index, which has been carried out since 2006, aims to provide a better understanding of the role of study institutions in the government and also the community.

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31 January 2020

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