Non-Tariff Measures Impact on Indonesian Fishery Export

This study aims to analyze the impact of Non-tariff measures using a sanitary and phytosanitary policy (SPS) and technical trade barriers (TBTs) on fishery exports of Indonesia and its trading partner countries, China, South Korea, Vietnam, Canada, Russia and the European Union in the period of 2007 to 2016. SPS and TBT are measured using an inventory approach in the form of coverage ratio. Besides, this study uses a gravity model and panel data regression method. The results of this study indicate that the variables GDP of exporting country and GDP of importing country have a positive and significant effect on Indonesian fishery exports. Distance and SPS have a negative and significant effect on Indonesian fishery exports, while TBT does not affect Indonesian fishery exports.


Introduction
The high production of world fishery products boosted global fisheries trade to 130 billion USD by 2015 (FAO, 2015). The globalization of food trade and technology advancement in the process of production, processing and distribution can cause consumers to demand quality and high-quality assurance on products consumed. The matter is addressed as a problem and the primary focus for governance in many countries, not least Indonesia. Indonesia still faces high barriers non-tariff, particularly in the fishery sector, in international trade. The high non-tariff barriers in the fisheries sector are preceded by environmental issues such as eco-labelling and protection of certain animal species (Ministry of Trade of Republic of Indonesia, 2014). The trade of Indonesia's fishery sector is not only influenced by supply and demand factors but also influenced by international trade policy factors that ensure the safety standards of a product. In maintaining the quality of fishery product safety, Indonesia needs to improve and harmonize the system of quality assurance and security of fishery products with export destination countries or countries. Notably, among the six cooperating in the field of fisheries, i.e. the European Union, Canada, South Korea, China, Russia, and Vietnam. Even though MRA still has a case of rejection of export of Indonesian fishery products in its trading partner country, which can be seen in Figure 1 (BKIPM, 2016).
The reasons for the refusal case of Indonesian fishery exports as a whole are related to the sanitary and phytosanitary policy (SPS) and technical trade barriers (TBTs) both of which have been negotiated in the Uruguay GATT rounds of Uruguay in 1986. The main objective of the policy is to protect people, animals and plants on a country of disease and ensures national prosperity by improving market failures (Aloka et al., 2009). The use of SPS policy is implemented to regulate agriculture and animal products. The SPS policy is an essential control to ensure the health, the well-being of consumers, and protection of the environment. As a result of such use, more than 60 per cent of food-related products were found to be affected by at least one of the forms of SPS policy (UNCTAD, 2013). Research conducted by Thu Thuong (2017) and Hwang and Lim (2017), suggests that SPS policies can act to preclude or precisely reduce the amount of trade in agricultural and food products.
TBT policy applies to import restrictions based on specific product characteristics (UNCTAD, 2003). Due to the increasing importance of implementation and the complexity of TBT, researchers are beginning to pay attention to understanding the impact of TBT on trafficking. Most studies have asked whether TBT can promote or limit trade. The results of the study found that TBT, in general, limited the flow of international trade (Bao & Qiu, 2012).
Based on the above background description, this research will analyze the influence of NTM in the form of SPS and TBT policy on Indonesian fishery exports with trading partner countries such as EU, Canada, South Korea, China, Russia and Vietnam in 2007 to 2016. Trade partner countries are countries that have signed a mutual recognition agreement (MRA) in the field of fisheries with Indonesia. SPS and TBT policies were measured using an inventory approach which is coverage ratio. Independent variables used in this study include exporter country GDP and importer country GDP, geographical distance between countries, SPS policy, and TBT policy.  (1). Regarding the process of elaboration and implementation of the policy, in addition to transparency requirements, policies must be designed on de jure basis and applied de facto in a way that is not discriminatory. This means that countries implementing SPS and TBT policies must be fair, in the sense that they do not benefit certain producers or products; (2) Proportionality to the objectives to be achieved. In this case, related efficiency criteria in choosing and implementing policies; (3) based on need. The policies that are chosen and applied are indispensable to the country in conducting international trade.
SPS and TBT policies require better production processes, investments in new technologies, efficient trade infrastructure, and the use of more expensive delivery methods that are often applied to developing countries. Also, SPS and TBT policies are often governed by a series of conformity assessments that cost, complexity, and duration depend on factors of production.
Therefore, the implementation of complex and sometimes inconsistent regulatory and conformity regulations can lead to SPS and TBT policies being a barrier to developing countries because it creates barriers to unfair market access to developed markets (UNCTAD, 2013).
Analysis of SPS and TBT implementation uses inventory approach. This approach is used to carry out an inventory of non-tariff policies, especially SPS and TBT conducted by each country. This approach consists of two types: the frequency index and the coverage ratio in the period adjusted for the availability of the data. Coverage ratios represent a percentage of the trade of a product that NTM imposed on the importing country and provided a measure of the importance of imported NTM as a whole (UNCTAD, 2013). Besides, coverage ratios have been widely applied to some previous studies (Diesdier et al., 2008;Wood et al., 2017).

Methodology of research
The model of gravity is one model to measure the impact of NTM on trade (Ferrantino, 2006). In the context of trade, this model states the intensity of inter-state trade that is positively related to the exporter and importer's Gross Domestic Product (GDP), and negatively related to the distance between countries

Results and discussions
This study uses panel data, a combination of cross-section and time-series data. Panel data can be estimated with three methods, Pooled Least Square (PLS), Fixed Effect Model (FEM), and Random Effect Model (REM). In determining which model to be used appropriately, it can be done with three tests, i.e. Fstatistic test, Hausman test and Lagrange Multiplier test.
After regression using Pooled Least Square (PLS), Fixed Effect Model (FEM), and Random Effect Model (REM), the result of FEM regression in STATA 13 variable distance cannot be estimated (omitted). Based on these results, it is not possible to estimate using FEM because the variability in the variable distance between countries is very low, causing the parameter cannot be estimated. The Lagrange Multiplier test is used to select the best model between Pooled Least Square or Random Effect Model. In the results obtained from the Lagrange Multiplier test, the chi-square probability value shows less than the degree of significance of ten per cent. The best estimation model for this research is the Random Effect Model. Based on the Lagrange Multiplier test, the best model is the Random Effect model.
The REM estimation results in Table 1 show that the exporter GDP variable (GDPi) has a positive and significant relationship. It shows when a one per cent increase in GDPi will boost Indonesia's fishery exports by 0.624 per cent. The importer GDP variable (GDPj) also has a positive and significant relationship, meaning that when a one per cent increase in GDPj will increase Indonesian fishery exports by 1.36 per cent. The distance variables (DIST) in REM estimation results show a negative and significant relationship to Indonesian fishery exports. This means that when a one per cent increases in distance will decrease Indonesia's fishery exports by 2.91 per cent.
The NTM SPS variable has a negative and significant relationship to Indonesian fishery exports. This means that when a one per cent increases in SPS will reduce the export of fisheries Indonesia by 0.145 per cent. Another NTM variable is TBT which has a positive and insignificant relationship. The probability value is greater than the level of significance (α) of ten per cent stated the TBT variable is not significant in affecting Indonesian fishery exports. The GDP of exporters in this study is that Indonesia's GDP statistically has a positive and significant effect on Indonesian fishery exports. Based on the theory of gravity model, exporter GDP has a proportional relationship to international trade. High exporter GDP shows high production levels both in the production of goods and services. The high level of production of a country will cause exports to experience enhancement. This estimation is consistent with previous research which states that exporter's GDP has a positive effect on exports (Diesdier et al., 2008;Bao & Qiu, 2012;Shepotylo, 2016;Hwang, 2017).
The GDP of importers in this study statistically has a positive and significant effect on Indonesian fishery exports. According to the theory of the gravity model, high GDP importers indicate the level of consumption in the country is high. High country consumption levels indicate high levels of demand in the country. The importer GDP variables that show a positive relationship under previous research which states when the GDP of importers increases, exports also increase (Diesdier et  Geographical distance is one of the critical conditions in the gravity model. Based on the theory of gravity model, distance has a negative effect on international trade relations. The estimation results obtained in this study shows that Indonesia's geographical distance with its trading partner countries has a negative and significant impact on Indonesian fishery exports. The distance variables indicate that the further the distance between the destination country and the exporting country, the greater the cost of transport for the trade to be carried out by both countries (Diesdier et al., 2008;Nugroho, 2014;Shepotylo, 2016;Thu Thuong, 2017;Hwang, 2017;Wood et al., 2017).
SPS policy shows the estimation results is following the research hypothesis that has a negative and significant impact on the fishery exports of Indonesia. The enforcement of NTM, especially SPS, is done as trade protection of a country. SPS policies often increase the fixed and marginal costs of trade or production costs of a country wishing to export to a country that implements SPS. Research conducted by Wood et al. (2017), states that this SPS policy has a distorting effect because it targets the product regardless of its origin. The effects of distortion and trade restrictions are one of the most important reasons of why SPS policies are increasingly being concerned in the matter of their impact on international trade. Therefore, SPS policy has an impact on trade restrictions, particularly on agricultural and food products. Developed countries apply SPS policies to products primarily from developing countries. Most developing countries cannot meet strict regulations because of their low awareness, technology, and capital (UNCTAD, 2013). The estimation results are following previous research which states that the SPS policy can reduce the export of a country (Wei et al., 2012, Thu Thuong, 2017. In this study, TBT variable estimation results showed the positive and insignificant value in influencing Indonesia fishery exports. The results of this estimate do not match the existing theories in previous studies that the implementation of TBT policy of a country will prevent a country that will export to the country (Bao and Qiu, 2012).

Conclusions and policy recommendations
This study analyzes the impact of NTM enforcement in the form of SPS and TBT policies of trading partner countries on Indonesian fishery exports from 2007 to 2016. Indonesia's trading partner countries in the field of fisheries are China, South Korea, Vietnam, Canada, Russia and the European Union. Based on the results of the study, GDP exporters (GDP Indonesia) and GDP importers (GDP of China, South Korea, Vietnam, Canada, Russia and the European Union) have a positive and significant relationship to Indonesian fishery exports.
The distance between Indonesia and China, South Korea, Vietnam, Canada, Russia and the European Union has a significant and negative effect on Indonesian fishery exports. SPS policies enacted by China, South Korea, Vietnam, Canada, Russia and the European Union have a significant and negative effect on Indonesia's fishery exports. On the other hand, TBT policies imposed by China, South Korea, Vietnam, Canada, Russia and the EU have no significant effect on Indonesian fishery exports.
Based on the results of the above study, SPS policies applied by trading partner countries have a negative and significant impact on Indonesian fishery exports. Therefore, the Indonesian government, especially BKIPM (Fish Quarantine Agency, Quality Control and Fishery Products Security) is expected to improve the implementation of quality assurance system, health certification, and handling cases of detention and export refusal.
For further research, the research can be developed with the specific commodity of other fishery export of Indonesia, for instance, the commodity of the mainstay of fishery and agriculture sector. NTM measurements in this study using the coverage ratio approach, further research can be done with other available approaches such as price comparison, quantity impact, and computable general equilibrium model.