Non-tariff barriers, not tariffs, are stalling Asean's trade goals

Business Times

a day ago

[SINGAPORE] While global headlines fixate on tariff wars and rising protectionism sparked by US President Donald Trump's administration and its use of levies as geopolitical leverage, analysts say it is non-tariff barriers that are quietly choking trade within South-east Asia.
In the Asean context, a key non-tariff barrier hindering deeper regional trade integration are the divergent national standards, particularly in areas such as testing and certification, said Arief Ramayandi, a senior research fellow at the Asian Development Bank Institute.
'These barriers are compounded by practices such as import licensing, quotas, complex customs procedures and local content regulations,' he told The Business Times.
Some of these measures reflect legitimate policy goals and are likely to remain in place. But others are seen as unnecessarily restrictive, creating persistent roadblocks that have proven difficult to remove, he said.
The answer, Ramayandi suggested, lies in greater harmonisation across standards and certification processes, and possibly the establishment of an independent mechanism to monitor and address non-tariff barrier-related practices more effectively.
Natixis' senior economist for emerging Asia Trinh Nguyen noted that greater ease of worker mobility as well as better connectivity and infrastructure beyond mainland South-east Asia are also key to greater regional integration.
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Amid a broader global shift away from the world's largest consumer towards alternative economies and regional pacts, trade-reliant South-east Asia has set itself apart with repeated calls for unity and coordinated efforts to deepen intra-bloc trade.
Notably, intra-Asean trade accounts for roughly a fifth of the ten-member alliance's total trade, which pales in comparison to the share of intra-European Union trade that's around three times larger.
The 27-member bloc may be the world's largest single market, but Asean has also fully eliminated tariffs on 98.6 per cent of products traded in the bloc since 2020.
Asked whether full tariff elimination within Asean would significantly help the bloc's standing in the current uncertain trade environment, Stephen Olson, a visiting senior fellow at the Iseas – Yusof Ishak Institute told BT that with tariffs within the region already so low, additional cuts are 'unlikely to be a game changer'.
The remaining duties simply reflect the need of various Asean member states to continue providing a degree of protection to certain industries that are key to the government, whether it be for economic, strategic or social considerations, he explained.
Asean on May 25 concluded negotiations on a revised trade in goods deal – the cornerstone of its economic integration framework – at the bloc's summit in Kuala Lumpur.
Its conclusion to upgrade the pact 'sends a positive signal that the bloc remains highly committed to an open and rules-based multilateral trading system that has served regional growth well over the years', said DBS Group Research senior economists Radhika Rao and Chua Han Teng.
The duo added that from a medium-term perspective, the region will also need to generate sufficient demand at home to benefit from intra-regional trade and investment flows, whilst lowering reliance on extra-regional markets.
But the way Ramayandi sees it, the Asean Trade in Goods Agreement 'does not seem to be an effective tool for increasing intra-Asean trade volumes, which have been relatively steady since 2010, if not declining'.
He noted that the upgraded deal is now set to address issues such as non-tariff barriers, digital trade, green trade and the resilience of supply chains.
But 'although this sounds promising, its effectiveness in increasing the trade volumes is yet to be seen', said the economist.
'Non-tariff barriers are far more important, and it remains to be seen if the revised agreement will have the teeth to make meaningful progress on that front,' said Olson from Iseas – Yusof Ishak.