Understanding RCEP And China'S Textile Industry

The world's largest free trade zone emerges with the trend

On November 15, 2020, the regional comprehensive economic partnership agreement (RCEP) was officially signed. The 15 member countries include ten ASEAN countries, China, Japan, South Korea, Australia and New Zealand, covering a total population of 2.27 billion, with a total GDP of 26.2 trillion US dollars and a total export volume of 5.2 trillion US dollars, accounting for about 30% of the global total. After eight years of negotiation and consultation, the members of RCEP have jointly promoted the transformation of the world's largest free trade area from an idea to a reality. This is not only an important landmark of East Asian regional cooperation, but also an important engine to stimulate global economic growth.

After the RCEP is signed, each member still needs to complete its own domestic ratification procedures. The agreement will enter into force 60 days after the relevant documents are submitted by at least six ASEAN Member States and three non ASEAN Member States. As the largest free trade arrangement in the world, after RCEP comes into effect, the final number of zero tariff products in goods trade will exceed 90%. The overall opening level of service trade and investment is significantly higher than the original "10 + 1" free trade agreement. It also includes high-level intellectual property rights, e-commerce, competition policy, government procurement and other modernization issues. For China's textile industry, RCEP will have a far-reaching positive impact on expanding the scale of foreign trade and deepening the supply chain cooperation in the regional industrial chain.

China and RCEP Member States

Textile and clothing trade is close

China has always had close contacts with 14 other RCEP members in the field of textile and garment trade. In terms of export, ASEAN and Japan are the third and fourth largest export markets of China's textile and garment industry after the European Union and the United States, accounting for about 20% of China's annual textile and garment exports (the total export volume to the above two markets is about 60 billion US dollars); as the world's important textile and clothing consumer markets, South Korea and Australia have relatively sufficient purchasing power and are also industry terminals Important destination for product export. In terms of import, China's annual import of textiles and clothing from ASEAN exceeds 7 billion US dollars, accounting for about 30% of the annual import volume of the industry. ASEAN has become the largest source of China's import of textiles and clothing. For example, China imported a large number of cotton yarn and clothing from Vietnam, and cotton knitted clothing from Cambodia. At the same time, Japan and South Korea are also important import sources of functional fabrics, chemical fiber textiles and clothing, textile dyes, etc. In addition, Australia and New Zealand also provide China with a large number of high-quality wool and other textile materials.

According to the statistics of China Customs, the total import and export trade of textiles and garments between China and other RCEP member countries will reach 88.26 billion US dollars in 2019, accounting for 28.8% of the total foreign trade volume of the industry in that year. Among them, China exported 76.19 billion US dollars of textiles and clothing to the above-mentioned countries, accounting for 27.1% of China's exports to the world. At the same time, China imported 12.07 billion US dollars of textiles and clothing from these countries, accounting for 47.4% of the total import volume of the industry.

China and Japan establish free trade partnership for the first time

Achieve a historic breakthrough

Speeding up the implementation of the free trade zone strategy is an important part of China's new round of opening up. Up to now, China has signed 19 free trade agreements with 26 countries and regions, including most RCEP members. Among them, the China New Zealand free trade agreement came into effect in October 2008, the China ASEAN free trade area was fully completed in January 2010, and the China South Korea and China Australia free trade agreements both came into effect in December 2015. Through the signing of RCEP, China and Japan have established a new free trade partnership, which is the first time that China has signed a free trade agreement with the world's top ten economies, and it is also a major historic breakthrough in China's implementation of the free trade area strategy.

China Japan textile trade scale is expected to continue to expand

At present, Japan is the fourth largest export market in our industry. In 2019, China's textile and garment exports to Japan amounted to 20.08 billion US dollars, accounting for 7.4% of the total annual export volume of the industry; in the same period, China's textile and clothing imports from Japan amounted to US $3.25 billion, accounting for about 12.8% of the total global imports (the above data are based on the statistical caliber of China Customs). After RCEP comes into effect, most of the products exported to Japan generally face about 4% - 11% of Japan's import tariff. Except for a small part (masks, bedding filled with textile materials, etc.), the tariff on the main exported garments (such as knitwear, men's and women's shirts, trousers, suits, T-Shirts, socks, dresses, etc.) exported to Japan will be reduced to zero within 16 years.

As Japan has signed free trade agreements with ASEAN, Vietnam, Thailand, Indonesia, India and other countries, the textile and clothing products of the above countries can enjoy tax-free treatment. After RCEP comes into effect, it will be beneficial for our industry to gradually participate in international competition in the Japanese market, reduce the export cost of foreign trade enterprises, and enhance the international competitive advantage of our products.

At the same time, the original import tax rate of 5% - 8% for major categories of products imported from Japan will basically be reduced to zero in 11, 16 or 21 years. For example, for China's textile machinery products such as shuttleless air-jet looms and flat weft knitting machines imported from Japan, the original 8% tax rate will be reduced to zero within 11 or 16 years after RCEP takes effect, which is conducive to accelerating industrial innovation and upgrading and improving production efficiency.

Textile and garment trade between China and South Korea

Tariff optimization under RCEP rules

South Korea is an important trade partner of China's textile industry in East Asia, and is also one of the important export markets of China's textile and clothing. In 2019, China's textile and garment exports to South Korea reached 8.99 billion US dollars, accounting for 3.2% of the total export volume of the whole industry in that year. In the same year, China imported 1.502 billion US dollars of textiles and clothing from South Korea, accounting for 5.9% of the total annual import volume of the industry. For South Korea, China is also the largest source of textile and clothing imports, accounting for more than 1 / 3 of South Korea's total annual imports of textiles and clothing.

The bilateral free trade agreement between China and South Korea came into effect on December 20, 2015, and the concession rules have been implemented for five years, and most textile and clothing products have enjoyed the preferential tariff reduction and exemption. The signing of RCEP has little impact on the existing textile and clothing trade tariffs of the two countries, but some export products still have the best tariff under the RCEP rules. From the list of clothing products with different tax rates under the agreements listed in the table below, it can be seen that after the implementation of RCEP, China's chemical fiber knitwear, men's and women's down jacket, women's jeans, men's cotton shirts and other products' tax rates will be reduced by half to 6.5% on the basis of the basic tax rate. After RCEP comes into effect in the future, it will be conducive to expanding the export of these products to South Korea.

RCEP helps deepen the region

Textile and garment industry chain, supply chain cooperation

The signing of RCEP is a strong shot in the international cooperation of textile industry under the current situation of anti globalization trend of thought and epidemic situation seriously damaging the global textile industry chain cooperation. RCEP members not only include the world's most important textile and clothing production bases (China, ASEAN, Japan, South Korea), but also cover a number of important global textile and clothing consumer markets, which adds assistance to China's active participation in regional industrial cooperation and the construction of a highly efficient and coordinated textile and garment industry chain in the region. After the RCEP comes into effect, especially in terms of increasing exports to Japan, it will promote the trade exchanges and investment interaction between the Lancang Mekong countries, and establish a more linkage production capacity cooperation system, which is conducive to accelerating the formation of a new development pattern of domestic and international dual cycle mutual promotion.

Through RECP, the market access of goods, services, investment and other fields among Member States will be further relaxed, customs procedures and technical standards will be gradually unified. Through the adoption of regional cumulative rules of origin, it will promote the free flow of economic factors in the region, strengthen the cooperation of production division among members, promote the expansion and upgrading of the regional consumption market, and promote the regional industrial chain, supply chain and Further development of the value chain.

RCEP rules of origin accumulation benefit enterprises more

The greatest achievement of RCEP in the field of trade in goods is the provision of rules of origin accumulation within the region. Under the rules of origin of most bilateral free trade agreements in the world, goods from country a to country B, another free trade partner, need to meet the value-added standards or production requirements in country a, and be identified as the original goods of country a before they can enjoy the preferential tariff of country B. The regional accumulation rule of RCEP means that when goods enter from country a to another free trade partner country B, intermediate products of several contracting parties in the agreement can be used to meet the required value-added standards or production requirements, so that the threshold for a country to enjoy zero tariff of country B can be significantly reduced. The regional origin accumulation system such as RCEP will make it easier for enterprises to obtain preferential tariff. At the same time, it will have an impact on the purchase of raw materials and spare parts, the layout of industrial chain and the decision of foreign investment. After RCEP comes into effect in the future, when enterprises import and export products listed in the tariff reduction list and meet the standards of origin, they should actively apply for and issue certificates of origin, so as to enjoy tariff preferences and customs clearance convenience in time, and enhance the competitiveness of products in the international market.

Some data and information sources: Ministry of Commerce