Department of Agricultural, Food, and Resource Economics Innovation Lab for Food Security Policy, Research, Capacity and Influence

ABSTRACT

Laos has been granted unilateral, duty-free, quota-free access for all exports – except arms and ammunition – from the European Union (EU); however, its exports are facing several issues and challenges in the sector of agri-food products. This study aims to understand the export potential of Lao agri-food products, export impediments, and composition of market access for exporting Lao agricultural products to the EU market. Based on the analysis, the paper provides policy recommendations for export facilitation in the agri-food sector. The Normalized Revealed Comparative Advantage (NRCA) and Export Potential Index (EPI) are used to measure the trade flow based on UN COMTRADE and BACI datasets. First, the findings show that the European market stands as Laos' fourth largest trading partner in terms of agricultural trade flows, particularly agri-food products. However, due to a lack of export diversification, agricultural export products accounted for only 8% of total exports to the EU in 2020. Next, the findings show potential high demand agri-food products for export to the EU include non-roasted & non-decaffeinated coffee, banana, as well as fresh or dried and husked rice. The measurement of comparative advantage index (NRCA > 0) shows the export potential of agricultural products from Laos had an increasing trend from 90 products in 2012 to 107 products in 2020, even though there had been a decrease between 2016 and 2020. Third, the critical requirements of the EU for Lao agricultural exports have become a significant market impediment, as many Lao exporters are not well-versed with EU market, along with firms’ limited ability to produce high-quality products to keep up with EU standards. Because the majority of firms in Laos at present are small and medium-sized businesses, they cannot run their operations internationally. Fourth, the results also indicated that a lack of technical support from relevant stakeholders, new EU rules and regulatory enforcement on agri-food importing, the COVID-19 pandemic, and high transportation costs are all important challenges facing Lao exporters. In addition, obtaining an organic certificate on product standards and safety requirements is another big issue facing Lao exporters. Finally, the domestic business association does not function effectively in enhancing economies of scale and helping with market negotiation. The policy recommendations are discussed in this study, with the aim to find insights for promoting agri-food export from Laos to the EU market.