As ASEAN continues to make progress toward the goals of the Blueprint 2025, the dream of creating a highly integrated and cohesive economy with enhanced connectivity and sectoral cooperation is potentially at risk. One important source of risk comes from ASEAN’s difficulties in effectively tackling the proliferation of non-tariff barriers to trade. As tariffs have fallen, member states have responded by placing an increasing number of new obstacles in place. Not all trade actions taken by ASEAN member states are an automatic trade barrier. States have legitimate policy objectives to achieve in protecting public health and safety, for example. But it is possible for such actions to cross over and become barriers to trade or for governments to design measures from the beginning to obstruct foreign firms from participating fully in domestic marketplaces. In spite of repeated commitments to eliminate such barriers to trade, ASEAN has struggled to identify non-tariff measures (NTMs) and non-tariff barriers (NTBs), much less assess the impact of these challenges, nor to stop the continued rise in obstacles of all sorts across the region. Failure to effectively address the increase of unjustified, difficult and costly trade issues undermines the progress towards the ASEAN Economic Community’s Blueprint goals and objectives. This report is designed to assist ASEAN members in achieving deeper integration in the region. It examines barriers to trade in three sectors: automotive, agri-food (alcoholic drinks, biscuits and seafood) and healthcare (pharmaceuticals and medical devices). The study complements existing NTM and NTB literature by identifying and assessing specific barriers to trade faced by businesses trading today across the ASEAN region. The results give policymakers a better understanding of the range of company concerns and helps officials devise and implement appropriate strategies to assess and reduce NTBs.
Trade policy experts frequently discuss non-tariff barriers (NTBs) or non-tariff measures (NTMs) that hamper the movement of goods across borders. But much of this discussion takes place at a high level of generality with few specific examples.
Businesses on the ground are not particularly interested in vague discussions about NTBs. Instead, they are occupied with trying to understand and respond to specific issues that prevent their goods from getting into or out of markets. One underappreciated problem for companies is product labeling.
Governments can certainly use labeling laws and regulations as a means to protect their markets from foreign competition. Often, however, government regulatory bodies and legislators view product labels as a necessary tool to protect their citizens from harm or to provide customers with important information.
Global and regional trade rules all allow governments to regulate in the interests of public health, animal health and plant life. For companies, ensuring safe products with reliably high quality is also important. Hence, both government and firms would agree that regulations for product labeling are necessary.
But many governments appear to be asking for excessive information to be included on products. For smaller companies in particular, onerous regulations on labels can make it impossible for otherwise competitive firms to trade.
As an example, here are the rules for exporting food products to Laos:
Food distributed directly to consumers in Laos must carry Lao language wording in a font and size that is clearly visible. Foreign language wording is also permitted.
In principle, food product labels are required to indicate the following:
· name of product
· registration number for food products
· name and location of producers or company that packed products for distribution
· country that produced the product
· quantity of product (expressed in metric system)
· important contents of products in percentage in relation to gross weight, in decreasing order
· production date or expiry date, depending on products
· if available, advice on storage, preparation methods, use of preservatives and colorings
In practice, it may be that regulations requiring Lao language labels are not always enforced. Uncertainty is one of the biggest challenges for businesses. Uneven enforcement of the rules means that companies could be caught out at any moment if the regulations are not strictly followed.
Thailand has equally complex rules around labels, with particularly strict provisions for dairy, baby foods, canned foods, vinegar, beverages, edible oil and fats, and gourmet powder (defined as an article containing monosodium glutamate (MSG) and used for food seasoning). Food products must be approved and registered with the Thai Food and Drug Administration (FDA). When seeking registration, importers must supply two samples of each product, details of the exact composition by percentage of each ingredient, and six labels. Foodstuffs in sealed containers are subject to specific regulations.
Assuming a company survives this far, food products for shipment into Thailand must show labels in Thai with the following information for consumers:
· Name and brand of the product (both generic and trade)
· Registration number
· Name and address of the manufacturer
· Name and address of the importer
· Date of manufacturing and expiry
· Net weight and volume
· Any additives used
· Health and nutritional claims (if any)
Alcoholic beverages must advise the percentage of alcohol content. There must also be a health warning, printed in Thai, on the label or on a sticker, with specific wording.
Cosmetics have to be labeled in Thai with:
· The name and type of the product
· The name of manufacturer and address
· Directions for use
· Net contents
· A statement of caution if irregular use may cause injury
These rules from Thailand are so complex, overall, that firms may have to use a local agent or importer to help register foreign products and help with labeling. Again, for smaller firms, meeting these rules may prove impossible.
These examples may be on the extreme end, but juggling different requirements for labeling of products, boxes, packaging and so forth is a common issue across companies, countries and sectors. If labeling rules get to be too onerous, firms will simply bypass markets entirely.
Future posts will continue to highlight specific examples of labeling and other non-tariff barriers as well as explore how free trade agreements can conflict with labeling rules and create outcomes that governments do not always appear to appreciate.