Free Trade (Agreements) Enhancing Consumer Protection in Southeast Asia

[A version of this posting appears on the East Asia Forum blog.]
Those opposed nowadays to greater economic integration through the WTO or free trade agreements typically assume that this will undermine consumer protection, especially due to more unsafe goods coming into local markets. But as David Vogel documented in the mid-1990s for the US, we often find “trading up” to higher safety standards. Partly this is because exporters may need to improve safety features to comply with requirements set by public or private law in the destination country. It is then often inefficient to remove such features for products also sold into local markets, where requirements may initially be lower, or if features are removed consumers and regulators in local markets will more readily press for local safety standards to be raised.
FTAs and other international agreements can also facilitate enactment of better consumer product safety laws. The EU was an early example. In 1979, the Treaty of Rome was interpreted to require “mutual recognition”: goods produced to safety standards required in one EU country would be deemed to satisfy standards in an importing country. But to avoid a “regulatory race to the bottom”, the EU also developed a new and more effective approach to setting joint minimum safety standards.
Intriguingly, Southeast Asia is experiencing similar developments. …

… After all 10 current member states had committed to the ASEAN Free Trade Area from 1999, for example, they also agreed on an ASEAN Cosmetics Directive. This provided initially for mutual recognition, but then a fully harmonised regime (completed in 2012). The regime establishes common technical standards (eg for prohibited ingredients) as well as powers for national regulators, which are based on an earlier EU Directive rather than the less stringent US model. Developing countries like Myanmar still face problems in enforcing these standards, but at least they now have a regulatory scheme, thanks to an international agreement.
In 2008, when ASEAN agreed on a Blueprint to an enhanced ASEAN Economic Community from end-2015, it recognised that further efforts would be needed to ratchet up consumer protection laws. A new Committee has encouraged capacity-building, regulatory cooperation and significant improvements in member states.
For example, for pre-market controls over product safety by public authorities, Singapore introduced regulations in 2011 requiring consumer goods to meet standards from 4 specified international bodies (eg ISO or EU standards, subject to any Singaporean government amendments) or otherwise ‘regional’ or national standards. Exceptions include products regulated by specific laws, such healthcare or certain foods. This complements an older regime that imposes minimum safety standards for 45 specific (higher-risk) general consumer goods.
Under Malaysia’s Consumer Protection Act 1999, only a few specific mandatory performance standards have been set recently by the general regulator. But the Act anyway has a “minimum safety requirement”, requiring all consumer goods to be reasonably safe. Unlike the corresponding provision in EU law since 1992 or Singapore’s 2011 regulations, however, Malaysia’s Act does not directly reference standards set by international bodies. Those can offer more certainty for suppliers as well as specific protections for consumers – providing the specified organisations allow adequate input from consumer groups, so their standards are in fact reasonably safe.
In other ASEAN countries, there is still no “general safety requirement” as in Malaysia or even Singapore’s recent approximation. Indeed, the general consumer affairs regulators typically have very limited jurisdiction to set minimum safety standards even for specific goods (such as foods). Instead, those powers are reserved for other, usually longer-established and better-resourced government departments. They may also be more concerned to promote the regulated industries’ immediate economic interests than the more diffuse interests associated with consumer protection.
Such limited powers for most general consumer regulators in Southeast Asia also sit awkwardly with their typically more wide-ranging powers to implement post-market controls to ensure the safety of consumer products, eg by banning goods found to be unsafe or forcing a recall. General consumer regulators can usually intervene at this stage either with or without cooperation from any relevant national sectoral regulators. However, there are exceptions even under new Consumer Protection Acts enacted in Vietnam in 2010, and Myanmar in 2014. In addition, Brunei still lacks a framework law altogether.
A further regulatory gap across ASEAN countries is that there is no requirement for suppliers to notify their national consumer regulators even if conducting a voluntary product recall (as required eg in Australia since 1986), let alone if they become aware of a serious product-related accident (as in Australia since 2010, following the EU in 2001). The closest provision is under Vietnam’s Law, requiring specific public notices of recalls if suppliers learn of defects.
This gap limits the capacity of ASEAN regulators to accurately analyse injury risk data and then actually use what powers are legislated for them. It also restricts the usefulness of the ASEAN Committee’s “Product Alerts” webpage, compared to the EU’s extensive “RAPEX” database, as well as making it harder to develop Recall Guidelines.
Lastly, ASEAN countries have also been encouraged to reform private law mechanisms that indirectly encourage suppliers to improve product safety, and promise fuller compensation to injured consumers. Indonesia’s 1999 Consumer Protection Law reverses the burden of proof, so the manufacturer has to prove that it was not negligent in supplying a product that harms a consumer. Five other countries have gone the next step of imposing EU-like strict product liability, so the consumer only has to prove that a safety “defect” caused harm. Indeed, these five statutes often go further than the EU law in terms of the substantive rights given to consumers. However, problems of access to justice limit their effectiveness in practice. Thailand is an exception, as courts provide special procedures for consumer complaints and consumer NGOs are active.
In sum, although parts of Southeast Asia still face significant legislative and practical challenges in enhancing consumer product safety law, major progress has been made alongside trade liberalisation within ASEAN and with outside trading partners.
Background research was supported by the Sydney Southeast Asia Centre as well as AusAID and UNCTAD consultancies for the ASEAN Secretariat.

Author: Luke Nottage

Prof Luke Nottage (BCA, LLB, PhD VUW, LLM LLD Kyoto) is founding co-director of the Australian Network for Japanese Law (ANJeL), Associate Director (Japan) of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), and Professor of Comparative and Transnational Business Law at Sydney Law School. He specialises in international dispute resolution, foreign investment law, contract and consumer (product safety) law.