RCEP comes into effect on January 1

January 1 is the beginning of 2022 and the starting point for the formal entry into force of the Regional Comprehensive Economic Partnership Agreement (hereinafter referred to as RCEP). As the free trade zone with the largest participating population, the most diverse membership structure, and the greatest development potential in the world, the entry into force of RCEP will surely add new momentum to the development and prosperity of the region.

Statistics show that by 2025, RCEP will bring more than 10% growth in exports of 15 member countries. By 2030, the total national income of RCEP member countries will increase by US$186 billion, and the total annual export volume is expected to increase by an additional US$519 billion.

More open and free, more than 90% of the goods trade in the region will eventually achieve zero tariffs

RCEP aims at a comprehensive, modern, high-quality and inclusive free trade agreement, benchmarking against high-level international free trade rules, and forming more open, free, and transparent economic and trade rules in the region. The agreement consists of a preamble, 20 chapters, and 4 appendices to the market access commitment form. The content covers the fields of goods trade, service trade and investment, etc. The text of the agreement is more than 14,000 pages.

In terms of trade in goods, the 15 parties have adopted bilateral bidding arrangements for the liberalization of trade in goods. After the agreement takes effect, more than 90% of the goods trade in the region will eventually achieve zero tariffs, and the tax will be reduced to zero immediately. And tax reduction to zero within 10 years, so that the RCEP Free Trade Zone is expected to fulfill all its commitments to liberalize trade in goods in a relatively short period of time.

In terms of trade in services, among the 15 member states, 7 members including Japan, South Korea, Australia, Singapore, Brunei, Malaysia, and Indonesia have adopted negative list commitments, while the remaining 8 members including China have adopted positive list commitments and will agree to the agreement. It will be converted into a negative list within 6 years after its entry into force. As far as the level of openness is concerned, all 15 parties have made openness commitments higher than the level of their respective "10+1" free trade agreements.

Among them, China’s service trade opening commitments have reached the highest level of existing free trade agreements. The number of service departments promised is based on the approximately 100 departments promised by China’s accession to the WTO. 22 It has raised the level of commitments in 37 departments including finance, law, construction, and shipping. Other members have made high-level openness commitments in the construction, medical, real estate, finance, transportation and other service sectors that China focuses on.

In terms of investment, the 15 parties have adopted a negative list method to make high-level openness commitments for investment in the five non-service sectors of manufacturing, agriculture, forestry, fisheries, and mining, which has greatly improved the transparency of the policies of all parties.

In addition, all parties have also formulated regulations on small and medium-sized enterprises, economic and technological cooperation, etc., incorporating modern topics such as intellectual property rights, e-commerce, competition policies, and government procurement to meet the needs of the development of knowledge economy and digital economy.

What needs to be mentioned in particular is that RCEP provides rules for the accumulation of origin in the region.

The so-called "accumulation of origin" rule means that when determining the origin qualification of a product, materials from other member states of RCEP used in the production of the product are allowed to be regarded as the origin materials of the country where the product is produced, and the origin material area is combined to calculate the origin. The value component makes it easier for the final product to meet the set conditions, obtain the qualification of origin and enjoy preferential tariffs.

Jiang Feng, Director of the Customs Administration Department of the General Administration of Customs, once explained with an example that if a factory in my country produces refrigerators for export to ASEAN, the compressor and its parts from South Korea are used in the production, which exceeds 60% of the total price of the refrigerator. In the trade agreement, since it did not meet the required regional value component of 40% of the origin standard, exports to ASEAN cannot enjoy tariff concessions. However, under RCEP, Korean compressors can be regarded as regional origin materials and accumulated, and export to ASEAN can enjoy tariff concessions.

RCEP brings many benefits and injects strong impetus into regional and global economic growth

As the free trade zone with the largest population, the most diverse membership structure, and the greatest potential for development in the world, this is not only a landmark achievement of East Asian regional cooperation, but also a victory for multilateralism and free trade, which will surely promote the region. The development and prosperity of China will add new kinetic energy and contribute new power to the recovery of the world economy.

For the region, RCEP's huge market opening and regulatory commitments will promote the economic growth and development of all member states in the region, and all countries will benefit.

On the one hand, RCEP integrates multiple "10+1" free trade agreements between ASEAN and China, Japan, South Korea, Australia, and New Zealand to form a unified regional rule system. Significantly reduce the institutional cost of enterprises using the free trade agreement, and further enhance the trade creation effect brought by the free trade agreement.

On the other hand, RCEP has further relaxed the market access of goods, services, investment and other fields among member countries, and gradually unified the rules of origin, customs procedures, inspection and quarantine, and technical standards, which will promote the free flow of economic factors in the region and strengthen production among members. Division of labor and cooperation will stimulate the expansion and upgrading of the consumer market in the region, and promote the further development of the industrial chain, supply chain and value chain in the region.

In addition, RCEP will increase economic and technical assistance to developing and least developed economies to gradually bridge the development level differences among members, vigorously promote coordinated and balanced regional development, and promote the establishment of a new pattern of open regional economic integration.

The United Nations Conference on Trade and Development has previously studied the effects of RCEP. The research report shows that by 2025, RCEP will bring more than 10% growth in exports of 15 member countries. The Peterson Institute for International Economics in the United States has also conducted research and calculations. The results show that by 2030, the total national income of RCEP member countries will increase by US$186 billion, and the total annual export volume is expected to increase by an additional US$519 billion.

Previous data showed that in 2020, my country’s exports to RCEP member countries reached US$700.7 billion, accounting for 27% of my country’s total exports; imports from RCEP’s trading partners reached US$777.9 billion, accounting for 37.8% of my country’s total imports. 10% of foreign investment comes from RCEP member states, so after RCEP takes effect, it means that nearly 30% of my country’s exports can achieve zero-tariff treatment.

Globally, the significance of RCEP is also very important. After the agreement is fully implemented, it will drive nearly one-third of the world's economic volume to form a unified super-large-scale market. The space for development is extremely broad, and it will also inject strong impetus into global economic growth.