Non-Tariff Measures and Regional Integration in ASEAN

While tariffs have been substantially reduced under the ASEAN Free Trade Agreement (AFTA), little progress has been made in reducing non-tariff measures (NTMs), and as a result, there has been little increase in intra-regional trade. An UNCTAD led study (Ing et al. 2016) has documented the current NTMs in the ASEAN region. While many NTMs are legitimate, such as sanitary and phyto-sanitary restrictions to protect health and the environment, many appear to function as protection of domestic producers from competition from imports. Six countries in ASEAN have 100 per cent of their imports covered by one NTM or another. For technical NTMs (SPS and TBT), we measure the similarity in regulations between two different countries. If a country has similar regulations, for example regarding SPS rules, then it is likely that these rules are not an impediment to trade. Using a gravity model to explain trade unit values, we find that regulatory convergence can substantially reduce the costs effect of NTMs. For example, a regulatory reform to realign existing NTMs and to maximize regulatory overlap, but without increasing or decreasing the number of NTMs in any country, could reduce the current net effects of NTMs by 15 to 25 per cent. For non-technical barriers, such as quotas or price controls, we estimate an ad valorem equivalent. In this analysis, we attempt to quantify the trade impacts of these NTMs using a computable general equilibrium model. Our results suggest that harmonising technical NTMs and eliminating non-technical NTMs altogether would increase ASEAN countries net welfare by $3 billion if the barriers are reduced on intra-ASEAN trade only. Furthermore, these gains could be increased to $12 billion if technical measures on non-ASEAN imports were reformed or further to $18 billion if ASEAN technical measures could be matched to international levels so that ASEAN exporters could access European, American and Japanese markets.