Implications of ASEAN Economic Community (AEC) and Trade and Investments on Regional Food Security

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Abstract

Since the end of 2015, Asean Economic Community (AEC) has been implementing in ASEAN member countries. The implementation of AEC aims to reduce barrier of trade among member countries which is expected to increase trade, investment, efficiency, income, food security as well as reduce poverty rate within the region. After several years of its implementation, it is important to investigate its impact on ASEAN member countries.

Overview

The establishment of the ASEAN Economic Community (AEC) greatly aims to contribute to addressing the food security concern of the region. AEC could improve food security by upgrading economic access to food through increase in income, and decreasing food commodity prices and stabilizing supply through trade (The RSIS Centre for Non-Traditional Security (NTS) Studies, 2013; Desker, et.al., 2014).

The AEC supports eonomic integration and covers trade in goods, complemented by the 1995 ASEAN Framework Agreement on Services (AFAS) and the 1998 ASEAN Investment Area (AIA) agreement. The Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA) requires that tariff rates levied on a wide range of products traded within the region be reduced to no more than five percent. Quantitative restrictions and other non-tariff barriers are to be eliminated. Although originally scheduled to be realized by 2008, the target of a free trade area in ASEAN was continuously moved forward.

The elimination of tariffs and non-tariff barriers among the ASEAN members has served as a catalyst for greater efficiency in production and long-term competitiveness. Moreover, the reduction of barriers to intraregional trade gives ASEAN consumers a wider choice of better quality consumer products. Similarly, these contributes to the following:

• Food accessibility is enhanced through the harmonization of safety standards, along with the integrated transport systems, that promote regional food trade (Desker, et.al.,2014).
• The employment opportunities brought about by business growth and free flow of services within the region, accompanied by expansion of commerce and industries generate better income for the people. Therefore, the ability of the populace to acquire food is improved.
• Freer trade, moreover, provides consumers with diverse options that adds to the improved accessibility of food in the region. Meanwhile, trade, particularly its liberalization stimulates competition and specialization that can lower the cost of trade in food products (Bello, 2005; Caballero-Anthony et. al., 2013).

In addition, food security will be enhanced through the promotion of sustainable food production through agricultural infrastructure improvements and adoption of new technologies (Invest in ASEAN, undated). The unrestricted flow of investments envisioned in AEC has the potential to provide financial assistance to support infrastructure development that will facilitate movement of goods from one place to another, and adoption of technologies to improve and/or uphold sufficient food production despite challenging times.

The Project will end in September 2020

Objectives

The general objective is to analyze the potential impacts of AEC on existing trade agreements, flow of investments, and related commitments among ASEAN member countries and across existing ASEAN Free Trade Agreements (FTAs), and its implications on food security in the region.

The study intends to initially examine the trade and investment implications of AEC among ASEAN member countries, on the ASEAN as a whole, and on existing ASEAN FTAs. This phase aims to provide a state-of-the-art and comprehensive review of literature on emerging and possible effects of regional cooperation to identify priority research areas for the succeeding phases, i.e., focusing on those that are expected to have significant impact on food security in the region. Specifically, this study aims to:

• Identify trade flow of agricultural and food products within ASEAN member countries. This analysis aims to know major exporter and major importer; and to find new trade pattern after implementation of AEC
• Compare trend of export and import of agricultural and food products within the member of ASEAN before and after implementation of AEC. It is predicted that trend of export and import after AEC to be higher than before AEC. Trend analysis will be used to test this objective.
• Estimate comparative advantage and specialization of ASEAN member countries before and after the implementation of AEC. This analysis will use Revealed Comparative Advantage (RCA) and Trade Specialization Index using export and import data of agricultural and food products within the region. It is predicted that each member country more specialized on her own competitive product after the implementation of AEC.

Estimate agriculture and food market integration among ASEAN member countries before and after the implementation of AEC. Time series data of prices will be used to analyze agricultural and food market integration within the region. Cointegration analysis of Engle-Granger (1987) will be employed for objectiv to investigate long run as well as short run market integration. It is predicted that after implementation of AEC, agricultural and food market within the region being more integrated and speed of adjustment become shorter.

Expected Outputs

By and large, the research study is expected to identify the trade and investment implications of AEC

• among ASEAN member countries,
• on the ASEAN as a whole, and
• on existing ASEAN FTAs.

Specifically, the study will provide trends and projections on key trade and investment parameters and an analysis of the competitive advantage of each country for key food commodities. An integrative report will be developed by synthesizing the insights and lessons across the country results. The extensive literature review, data collection and analysis for the first year would inform and provide better focus for the succeeding phases, particularly, on aspects that greatly influence food security in the region.

In this light, the following activities will be conducted:

• Literature review and Secondary data collection
  • to extensively review literature on the implications of AEC on the FTAs among ASEAN member countries and with regional partners on key food/commodity areas (and in the process, to collect secondary data from existing studies and nationally/regionally collected data needed for the analysis)
• Initial Data Processing and Mid-Term Review/Presentation
  • to present initial results (e.g. emerging patterns and trends) and share collected information with the team to help visualize a common storyline/argument for integration and synthesis (also a venue to agree on the necessary inputs to be provided by country leaders for the integration)
• Final Report Writing and Presentation
  • to finalize the report based on the insights and lessons learned (e.g. providing evidence on the importance of regional value chains given the AEC)