1. Could you give a briefing on the RCEP?
On November 15, 2020, Chinese Premier Li Keqiang attended the 4th RCEP Summit via video link. At the meeting, the leaders of 15 participating countries witnessed the signing of the RCEP Agreement by the trade ministers. Minister of Commerce Zhong Shan signed the Agreement on behalf of the Chinese government. It marks the formal launch of a free trade area featuring the largest population, broadest commercial scale and greatest development potential.
Initiated by ASEAN in 2012, the RCEP went through 31 rounds of negotiations over the last 8 years. Since the beginning of this year in particular, despite daunting challenges posed by the pandemic, RCEP members fully concluded the market access negotiations, completed legal scrubbing for the over 14000-page text, and eventually signed the Agreement at the Summit as scheduled. This is the most significant outcome of East Asian economic integration in the last two decades.
In general, the RCEP Agreement is a modern, comprehensive, high-quality large regional free trade agreement that delivers mutual benefits. The Agreement is comprised of Preamble, 20 Chapters (Initial Provisions and General Definitions, Trade in Goods, Rules of Origin, Customs Procedures and Trade Facilitation, Sanitary and Phytosanitary Measures, Standards, Technical Regulations, and Conformity Assessment Procedures, Trade Remedies, Trade in Services, Temporary Movement of Natural Persons, Investment, Intellectual Property, Electronic Commerce, Competition, Small and Medium Enterprises, Economic and Technical Cooperation, Government Procurement, General Provisions and Exceptions, Institutional Provisions, Dispute Settlement, and Final Provisions), and four Market Access Annexes (Schedules of Tariff Commitments, Schedules of Specific Commitments for Services, Schedules of Reservations and Non-Conforming Measures for Services and Investment, Schedule of Specific Commitments on Temporary Movement of Natural Persons).
The RCEP is by far the largest free trade area by size. In 2019, the 15 member countries' population totaled 2.27 billion, GDP USD 26 trillion, export USD 5.2 trillion, accounting for around 30% of the world respectively. The establishment of the RCEP would create an integrated super-large market with around one third of the global economy. With the involvement of major East Asian countries, the RCEP would strongly energize regional and global economy.
The RCEP integrates trade and economic rules within the region. It brings together multiple ASEAN's "10+1" FTAs with China, Japan, the ROK, Australia and New Zealand and existing free trade partnerships among the latter five countries. It also forges new free trade partnerships between China and Japan, and between Japan and the ROK. The RCEP deepens regional industrial and value chains by harmonizing the rules of origin with regional-content rules. The RCEP promotes emerging types of cross-border logistics by facilitating customs with new technologies. The RCEP enhances transparency of investment policies by adopting the negative list approach to advance investment liberalization. All of these efforts would optimize and harmonize regional trade and economic rules.
The RCEP achieves both high quality and inclusiveness. For merchandize trade, over 90% of goods will eventually enjoy zero tariff. Services trade and investment are much more open than the "10+1" FTAs. In addition, the RCEP also includes a number of modern topics such as high-level intellectual property, e-commerce, competition policies and government procurement. Taking account of different national actualities, the RCEP accords the least developed countries the special and differential treatment and addresses the real needs of both developing and least developed countries by stipulation of stronger economic and technological cooperation. It is fair to say that the RCEP accommodates the needs of all parties to the greatest extent. It will drives forward inclusive and balanced development of the region and deliver shared benefits to all.
II. What is the significance of signing the RCEP Agreement for China?
The establishment of the RCEP free trade area is a major progress made in China's endeavor to implement its free trade area strategies under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. The RCEP FTA will provide a strong boost to China's efforts in making institutional innovations to support an open economy in the new era and fostering a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other.
RCEP will become an important platform for China to expand its opening-up to the outside world in the new era. China's trade with RCEP participating countries (RPCs) roughly accounts for one third of its total foreign trade, and paid-in investment from RPCs makes up over 10% of the total paid-in investment in China. A huge integrated market under the RCEP Agreement will release enormous potential and further promote intra-regional trade and investment flows, which will help China further optimize its foreign trade and investment architecture, keep bringing domestic rules in line with high-standard international trade and investment rules and make institutional innovations to support an open economy of higher standards through more comprehensive, in-depth and diversified opening-up.
RCEP will help China foster a new, dual-cycle development paradigm. It will help Chinese firms in all sectors to further engage in market competition and enhance their ability to allocate resources in both the international and domestic markets. This will help China facilitate domestic innovation, reform and development through greater opening-up, continuously transform and upgrade various sectors, consolidate its position in regional industrial and supply chains, provide effective support for virtuous flows in the national economy, move faster to foster new strengths in international economic competition and cooperation, and promote high-quality economic development.
RCEP will add much more substance to China's FTA network. Moving faster to implement the FTA strategies is an important element in China's new round of opening-up. After signing the RCEP Agreement, China has a total of 19 free trade agreements signed with foreign countries and 26 free trade partners. China and Japan have established free trade relations through the RCEP Agreement, which marks the first time for China to sign a free trade agreement with the world's top ten economies, and represents a major breakthrough in the implementation of its FTA strategies. With RCEP, the trade between China and its free trade partners will account for a larger share of about 35% of China' total foreign trade. The Agreement will greatly increase the value of China' FTA network.
III. How will the signing of the RCEP Agreement boost regional economic growth in East Asia?
RCEP will boost the confidence of all parties in economic growth. Against the backdrop of the difficulties facing the global economy, the establishment of the RCEP free trade area sends a strong signal that RPCs oppose unilateralism and trade protectionism, support free trade and uphold the multilateral trading system. This signal will certainly boost all parties' confidence in economic growth. According to an internationally renowned think tank, by 2025, RCEP is expected to help its members increase export, stocks of outbound investment and GDP by 10.4%, 2.6%, and 1.8%, respectively, compared with the baseline.
RCEP will greatly enhance the level of regional economic integration in East Asia. The establishment of the RCEP free trade area is a new milestone in regional economic integration in East Asia. It will remarkably optimize the overall business environment in the region, significantly reduce firms' institutional costs in utilizing free trade agreements, and further enhance the trade creation effect brought about by free trade agreements. RCEP will also gradually bridge the development gap among its members, promote coordinated and balanced regional development, and foster a new pattern of integrated development for an open regional economy by stepping up economic and technical assistance to developing and least developed economies.
RCEP will help integrate regional industrial, supply and value chains. RCEP members' economic structures are highly complementary, and the region is rich in a wide variety of factors of production, including capital, technology and labor. RCEP will further broaden market access in goods, services and investment among member countries, and gradually harmonize their rules of origin, customs procedures, inspection and quarantine requirements and technical standards. It will promote the free flow of economic factors within the region, enhance the division of labor and cooperation in production among members, expand and upgrade the regional consumer market, and further develop regional industrial, supply and value chains.
