November 15, 15 member states of the Regional Comprehensive Economic Partnership Agreement (RCEP) formally signed the agreement.
RCEP: The world’s largest and most potential regional free trade agreement
RCEP, the Regional Comprehensive Economic Partnership Agreement, officially launched the RCEP negotiations at the 21st ASEAN Summit in November 2012, and it has been 8 years. As of the time of signing, 10 countries (Indonesia, Malaysia, Philippines, Thailand, Singapore, Brunei, Cambodia, Laos, Myanmar, Vietnam) owned by the Association of Southeast Asian Nations (ASEAN) group and its 5 important trading partners (China, Japan) , South Korea, New Zealand, Australia), covering important economies in Southeast Asia and the Pacific Rim.
RCEP is currently the world’s largest and most potential regional free trade agreement, covering 29.7% of the world ’s population and 28.9% of GDP . It also covers the two largest markets with the greatest growth potential in the world. One is the Chinese market with a population of 1.4 billion . The other is the ASEAN market with a population of more than 600 million .
As a modern, comprehensive, high-level and reciprocal agreement, the RCEP agreement consists of a preamble, 20 chapters (mainly including trade in goods, rules of origin, trade relief, service trade, investment, e-commerce, government procurement, etc.) and trade in goods , Service trade, investment, and temporary movement of natural persons.
RCEP and China
In the late 1990s, under the impact of the wave of economic globalization, ASEAN countries gradually realized the importance of starting a new level of cooperation and building all-round cooperative relations, and decided to develop “export-oriented” economic cooperation. The “10+3” cooperation mechanism came into being. “10+3” refers to the ten ASEAN countries and China, Japan, and South Korea. The meeting of foreign ministers, finance ministers, and leaders’ meetings are held regularly every year.
On February 26, 2011, the 18th ASEAN Economic Ministers’ Meeting was held, which produced a draft for the establishment of a Regional Comprehensive Economic Partnership (RCEP). In November, the leaders of the ten ASEAN countries formally approved the RCEP at the ASEAN summit, inviting six dialogue partners from China, Japan, South Korea, India, Australia and New Zealand to participate.
Before the signing of this agreement, China has established a free trade area with ten ASEAN countries, and the zero tariff of the China-ASEAN Free Trade Area has covered more than 90% of the tax items of both parties.
In 2020, China will play a pivotal role in the RCEP. In the first three quarters of this year, China-ASEAN trade volume reached US$481.81 billion , a year-on-year increase of 5%. China’s investment in ASEAN increased by 76.6% year-on-year . ASEAN has become China’s largest trading partner .
RCEP is closely related to you and me
From the perspective of consumers, the achievement of RCEP will enable consumers to enjoy more high-quality and cheaper products with lower expenditures, increase consumer welfare, and better satisfy people’s yearning for a better life. In addition, relevant supporting policies (such as visa-free, visa-on-arrival, and supporting travel, catering and other consumer preferences) that will be issued by subsequent countries will make your travel abroad more convenient and cheaper. Moreover, the achievement of RCEP will also lower the threshold for domestic workers to go abroad for employment and further promote labor mobility in the region.
From the perspective of producers, lower tariff levels and lower barriers to entry (more equal treatment of foreign capital, reduced support for local enterprises, and greater fair competition among regional enterprises) will greatly reduce the production and investment costs of enterprises, and thus Expand the profitability of the enterprise.
The significance of RCEP to China’s development
RCEP cooperates with China’s “One Belt One Road” initiative, and will rely on the “Pan-Asian High-speed Rail Economic Circle” and the “Hainan Free Trade Port” to strengthen its economic radiation to Southeast Asia and the South China Sea, and enhance China’s development and opening up.
The negotiations completed in 2019 covered three items: financial services, telecommunications services, and professional services . All parties have reached agreement on more than 80% of the agreement text. Analysts said that in the future, RCEP will effectively help China’s world-leading 5G technology to be developed in RCEP countries .
RCEP brings a win-win situation
The Diplomat magazine website stated that RCEP is a high-quality, forward-looking trade agreement designed for international trade in the 21st century. Compared with the rules of the World Trade Organization, the RCEP rules are more balanced, and are specifically aimed at the settlement of SMEs, e-commerce, and trade disputes. At the same time, it provides common development rules for international economic cooperation and technical cooperation.
Zhu Yin, Associate Professor of the Department of Public Administration of the School of International Relations: “The RCEP negotiations mean greater steps in reducing tariff barriers. In the future, 95% or more of the tax items will not be excluded from the scope of zero tariffs, and the market space will be greater. The expansion of China from 13 to 15 is a major policy benefit for foreign trade companies .”
In addition, RCEP is also a mutually beneficial free trade agreement that provides transitional arrangements with Vietnam, Myanmar, Cambodia and other countries to provide members with strong conditions to integrate into regional economic integration.
RCEP helps build the supply chain and value chain in the region, further improve production efficiency, expand the comparative advantages of countries, participate in the value accumulation of origin, and promote mutual trade and investment within the region.
Taking the clothing industry as an example, China imports wool from Australia and New Zealand. Because it has signed free trade agreements, it may import wool duty-free in the future. After the import, it will be woven into fabric in China.
This fabric may be exported to Vietnam. Vietnam uses this fabric to weave. After garments are exported to South Korea, Japan, China and other countries, these may be tax-free, which will promote the development of the local textile and garment industry, solve employment, and be very good for exports.
For the region as a whole, RCEP includes all aspects of the economy: trade in goods, investment, technical cooperation, intellectual property protection, rules of origin, and dispute settlement mechanisms.
Tariff reduction among RCEP members is based on the commitment to immediately reduce tariffs to zero tariffs and to reduce tariffs to zero tariffs within ten years. For the first time, China and Japan reached a bilateral tariff reduction arrangement, achieving a historic breakthrough.
Analysts said that the signing of RCEP can be said to be the best economic and trade news in recent years , and it is even more substantial progress for the relations between China, Japan and South Korea.