Economic Impacts of Import Liberalization Policy On Agricultural Food Sector in Malaysia

Deficient domestic production and supply while substantial requirements from both local food industries and final consumption largely dictate the government to remove a non-tariff barrier through implementing unrestricted quota policy for beef, mutton, and coffee in Malaysia. Previous studies discovered varied impacts of the non-tariff barrier removal across countries and commodities. After approximately five years of implementation, it is pertinent to evaluate the impacts of import quota removal on both sides – local industries and consumers to those primary commodities. A secondary database was utilized before and after the quota removal period. The major quantitative methods, nonparametric trend test, and multivariate dummy regression were applied to identify the monotonic trends and to estimate the effects of quota removal, respectively, focusing on value-added exports and market prices. Before the regression analysis, diagnostic tests were conducted to confirm the validity of each estimated model. Following the implementation of liberalized import policy, all commodities experienced significant impacts, however, the impacts and magnitude differ considerably – value-added beef exports decreased as larger than mutton while value-added exportsfor coffee increased. The market prices significantly increased in both livestock commodities with mutton was nearly twice as a beef increment. Besides, the trend analysis indicated declining imports with increasing market prices for both beef and mutton after the quota removal, yet, coffee showed contrary effects. While the trade theory promises better off after removing non-tariff barriers, this study found different consequences between commodities across economic indicators at the national level.