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Mutual Recognition to Facilitate Agriculture Trade: Lessons from Southeast Asia

In its trade and food safety series, EEFS has discussed the recent momentum towards regulatory cooperation in Africa as well as explored the roles that both standards and regulations play in facilitating trade in safe foods. This article continues EEFS’ focus on trade in the month of July and expands upon the role that the principle of mutual recognition plays in facilitating agriculture trade with lessons learned from Southeast Asia.

As African Union member states move to increase intra-continental trade through initiatives such as the African Continental Free Trade Area (AfCFTA), leaders face choices on the appropriate trade policy mechanisms to shape desired outcomes. A central objective of the AfCFTA, for example, is to “expand intra African trade through better harmonization and coordination of trade liberalization and facilitation regimes.” [1]

While acknowledging the important role harmonization can play in the trade process, this article examines mutual recognition as an alternative mechanism for regulatory cooperation, and how lessons learned in Southeast Asia may inform efforts to expand intra-continental trade, such as those underway in Africa.

What is Harmonization?

Harmonization refers to countries adopting the same laws, regulations, standards, and conformity assessment procedures within an industry or product. The reason harmonization is so effective is because trading partners face no ambiguity in understanding another country’s rules and conformance systems. They are able to trust that their trading partner operates within a system that ensures identical protections to human, plant, and animal well-being that their own national system provides.

The challenge is that harmonization in multilateral contexts (that is, across more than two countries) is very difficult to practically achieve and sustain. Each country has different processes for writing, ratifying, and codifying new laws and regulations, which can often be time-consuming and wrought with challenges in the political economy.

What is Mutual Recognition?

While harmonization is probably the most well-known form of regulatory cooperation to facilitate trade, it is not the only. Mutual recognition is a similar but distinct approach to achieving the same objectives. The principle behind mutual recognition is that trading partners may have differences in their formal rules (laws, regulations, and standards) and conformity assessment systems, so long as they are shown to provide an acceptable level of protection.

To apply the principle of mutual recognition in practice, two or more countries enter into a mutual recognition arrangement (MRA), a framework agreement that lays out, among other things, the conditions under which different rules and conformance systems will be accepted. One of these conditions is typically an agreed process/procedure for determining “equivalence” among different rules and/or conformance systems. Equivalence may be determined through assessments of each system against a set of agreed protections and may use an international standard as the basis for comparison.

Lessons Learned from Southeast Asia’s Approach to Mutual Recognition

In 2015, the Association of Southeast Asian Nations (ASEAN) Secretariat established the ASEAN Economic Community (AEC) to increase integration, connectivity, and competitiveness across the ten ASEAN member states (AMS). As part of efforts to advance the AEC, the ASEAN Secretariat has been facilitating MRAs across key industries to improve connectivity, including in the tourism industry, accounting industry, architecture services industry, and the electronic equipment industry.

The ASEAN Secretariat is now in the process of establishing an MRA for the agrifood sector. ASEAN’s recent experience in this sector presents several lessons learned that may be valuable to the African Union and its member states in in applying the principle of mutual recognition.

1) Agrifood MRAs may focus on mandatory regulations and/or voluntary standards

MRAs may address voluntary standards or mandatory regulations, and, as discussed in a recent EEFS article, both play complementary roles to ensure food safety in agricultural market systems. The ASEAN agrifood MRA will be focused on addressing national voluntary production standards (Good Agricultural Practices [GAP]), including practices which promote food safety. A novel set of regional standards adopted from international standards but tailored to producers in least-developed AMS are the basis for determining equivalence across countries in the ASEAN MRA.

All AMS national voluntary standards are encouraged to undergo an alignment assessment against the ASEAN agrifood standards (GAP, GAqP, GAHP) using an agreed-upon assessment tool conducted through a three-part process. This process consists of self-evaluation by each AMS; peer review by regional sector-specific technical committees; and resolution of issues through group validation. One of the most beneficial developments from this model will be encouraging the least developed AMS to upgrade their national standards, including the adoption of important food safety measures at the farm level.

2) Agrifood MRAs should also focus on conformity assessment systems

Where guaranteeing appropriate levels of protection for human, plants, and/or animals is a concern, it is important to recognize the interdependent roles that both standards and conformity assessment systems play. The written rules on their own are unimportant if market actors have no assurance that suppliers are in compliance with the rules.

This is where the role of conformity assessment bodies becomes important, including certification bodies (which audit the producer for compliance with the standard), accreditation bodies (which audit the certification body to ensure credibility), and laboratories (which support microbial and/or chemical testing as a standard may require). To promote mutual recognition of conformity assessment bodies across AMS, the ASEAN agrifood MRA will utilize International Organization for Standardization (ISO) standards as the basis for comparison: specifically ISO 17065 for certification bodies, ISO 17011 for accreditation bodies, and ISO 17025 for laboratories.

3) Agrifood MRAs may focus on one or several points in a value chain

There are different regulations, standards, and conformity assessment procedures for different levels of the value chain, including the primary production level, the processing and packaging levels, transportation level, storage level, etc. MRAs often focus on a single stage of the value chain, but they may also be designed to focus on multiple points along the value chain.

The ASEAN agrifood MRA will focus exclusively on the production level with the goal of incentivizing small- and medium-scale producers to adopt improved GAPs to access intra- and extra-regional markets. A single point focus for an MRA may not be inclusive of all food safety concerns, but it is a more manageable arrangement, while additional MRAs can be put in place to focus on additional points in the chain. ASEAN’s experience will demonstrate the value of starting with production-level standards as a first step toward incentivizing producers to upgrade their practices.

5) Agrifood MRAs may be bilateral or multilateral

The ASEAN agrifood MRA is an example of a multilateral MRA, where more than two member states agree to the principles of the arrangement. But MRAs may also be facilitated as bilateral arrangements. Multilateral arrangements are understandably more complex, as they must integrate several countries, often with varying degrees of institutional capacity and resources for MRA implementation. Bilateral arrangements are simpler to negotiate — and easier to oversee — but less inclusive where advancing least developed countries may be a particular objective. Examples of successful bilateral MRAs operating in the agrifood sector include the U.S-Japan MRA for organic agriculture and the Canada-Thailand Equivalence Agreement for Seafood Trade.

6) Multilateral inclusivity calls for institutional upgrading milestones

As previously mentioned, multilateral MRAs face the difficulty of integrating member states that may have substantially varying degrees of institutional capacity. This reality should not hold up a multilateral MRA from moving forward. The ASEAN agrifood MRA will introduce a model where all member states are represented on the MRA implementing bodies from day one, while they progressively advance towards achieving milestones for full participation. The ASEAN agrifood MRA will set two clear milestones:

  1. National standard alignment with the ASEAN agrifood standards
  2. Conformity assessment bodies’ compliance with ISO 17025, 17011, and 17025

This model is designed to ensure inclusiveness with a focus on institutional capacity building, while member states that are ready may immediately benefit from recognition by other member states.

7) Involve the private sector early and often

Although MRAs are often treaty-level agreements entered into and enforced by national governments, the private sector understands what is needed to facilitate trust in suppliers across borders. Additionally, the uptake of voluntary standards among producers is demand-driven. If buyers do not demand a particular standard, producers lack an incentive to invest in the production-level upgrades necessary to comply with a standard. So it is necessary to determine what private sector buyers across agrifood market channels want and do not want from their suppliers.

In designing the ASEAN agrifood MRA, a comprehensive market survey was conducted to determine buyer awareness and perceptions of the ASEAN agrifood standards, and whether an MRA would influence their food purchase decisions across the region. While awareness was determined to be low, the perception of the potential benefit was determined to be very positive. Buyers indicated that a cohesive standard would remove the uncertainty of the ten different national standards currently in place. The ASEAN agrifood MRA has been designed to integrate key private sector actors operating across AMS within MRA implementing bodies to ensure their voices are heard.

8) MRAs are not a panacea. They do not cover every aspect of a trading system.

Finally, MRAs will not solve all food safety challenges nor tear down all barriers to trade. It is valuable to think of an MRA as a framework agreement that provides the basis for accepting specific differences in the regulatory framework of a trading partner. Despite a well-designed and implemented MRA, additional barriers to trade may remain. Therefore, additional regulatory cooperation mechanisms will remain necessary to continue removing both tariff and non-tariff barriers to trade.

ASEAN’s experience with mutual recognition as a trade policy mechanism offers insight into how MRAs may advance regional trade integration efforts. As leaders of African Union member states work toward expanding intra-African agricultural trade and improving food safety, the above lessons learned highlight MRAs as a regulatory cooperation mechanism to consider.

For more on trade and food safety, stay tuned for EEFS’ upcoming article exploring traceability within nutritious food market systems!

References

[1] African Union, CFTA - Continental Free Trade Area, accessed July 23, 2019, https://au.int/en/ti/cfta/about.

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