China joined the world’s largest free trade agreement, zero tariffs of over 90% of goods

15th, November, 2020, the signing ceremony of the "Regional Comprehensive Economic Partnership Agreement" (RCEP) was carried out by video, and the economic and trade ministers of 15 member states formally signed the agreement. The signing of the agreement marks the successful start of the construction of the East Asia Free Trade Zone with the largest population, the most diverse membership structure and the greatest development potential in the world.

 

The agreement was initiated by the 10 ASEAN countries and invited six dialogue partner countries, China, Japan, South Korea, Australia, New Zealand, and India, to participate. It aims to establish a 16-country free trade agreement with a unified market by reducing tariffs and non-tariff barriers.

 

As of 2018 statistics, the 15 member states of the agreement will cover about 2.3 billion people worldwide, accounting for 30% of the global population; the total GDP will exceed 25 trillion U.S. dollars, and the area covered will become the world's largest free trade zone.

 

Compared with other free trade agreements in operation around the world, the Regional Comprehensive Economic Partnership Agreement is a new type of free trade agreement that is more inclusive. The agreement not only covers issues such as trade in goods, dispute settlement, service trade, and investment, but also involves new issues such as intellectual property rights, digital trade, finance, and telecommunications.

 

(Australian wool + Chinese fabric + Thai ready-made garments) × Duty Free = Trade Creation

The original intention of the agreement is to form a unified rules system in the region, reduce operating costs, and reduce uncertain risks in operations. Form the supply chain and value chain based on the comparative advantages in the region, accelerate the flow of goods, technology, services, and capital, and form a "trade creation" effect. Enterprises in the region can participate in the value accumulation of the place of origin, which is of great benefit to promoting mutual trade and investment in the region.

 

Taking garment production as an example, the import of garments outside the region is subject to certain tariffs, and the tariff costs are ultimately allocated to consumers. After the agreement is signed, the situation will change. Wool produced in Australia can enter China duty-free, and after woven into fabrics in China, it will be exported duty-free to Thailand to make garments. In this process, in view of the tariff advantages of the agreement, the cost of garment production and transportation has been greatly reduced. While driving the employment of countries in the region, businesses and consumers can also get more benefits.

 

Many e-commerce opportunities

SMEs have fewer barriers

The agreement closely follows the development trend of global trade and incorporates many new forms of trade, e-commerce is one of them. In addition to e-commerce, the agreement also includes intellectual property rights, competition policy, government procurement, and small and medium-sized enterprises, which exceed the scope of WTO regulations.

 

In addition, for consumers and companies that rely on imported raw materials and parts from countries in the region, the elimination of tariffs and non-tariff barriers will greatly reduce costs and benefit from it. Consumers will be able to buy high-quality and cheap products from countries in the region, and the "barrier" for SMEs to enter countries in the region will also be greatly reduced. In terms of operating mode, the overall level of openness of trade in goods of the countries in the agreement exceeds 90%, which is much higher than that of WTO countries. In terms of investment, the agreement adopts a more efficient negative list method for investment access negotiations.