The Interpretation of RCEP Trade Agreement and Its Significance to China

The Regional Agreement on Comprehensive Economic Partnership is a trade agreement initiated by 10 ASEAN countries and invited by 16 countries including China, Japan, South Korea, Australia, New Zealand and India. It aims to reduce tariff and non-tariff barriers and establish a Tongil Market. On March 8, 2021, the Chinese government officially approved the agreement and became the first country to approve it in March of the same year. This agreement will come into effect on January 1, 2022.

RCEP consists of four parts: the preface, 20 chapters, and commitment table, with a total of 56 attachments, which are both cumbersome and extensive. Among them, trade in goods, investment in services, and principles in various fields are the most concerning issues.

In terms of trade in goods, after the agreement takes effect, over 90% of goods in the region will eventually reach zero tariffs, with tariffs on major products immediately falling to zero or zero within 10 years. In terms of zero tariff level, China has the highest commitment proportion to 10 countries including ASEAN, Australia, and New Zealand, at about 90%. Except for the three least developed countries, Laos, Cambodia, and Myanmar, the proportion of commitments made by other countries to China is slightly higher than that of China to them. Another key point of the RCEP Trade Agreement in terms of goods trade is the rule of origin accumulation. According to this rule, when enterprises determine the eligibility of product origin, they can accumulate raw materials from RCEP member countries to enjoy more preferential tariffs. For China, rules of origin accumulation can help further expand exports, stabilize and strengthen regional supply chains. In addition, in terms of facilitating trade in goods, various countries have formulated a series of standards in customs procedures, inspection and quarantine, technical standards, and other aspects.

In the field of services and investment, the opening up of China's service trade is currently the highest standard of the RCEP trade agreement. On the basis of the 100 departments promised after joining the WTO, an additional 22 departments have been added, and the commitment level of 37 departments such as finance, law, construction, and shipping has improved. In terms of investment, the RCEP trade agreement is integrated and updated on the basis of the original investment rules of the ASEAN 10+1 Free Trade Agreement, which helps to consolidate the foundation of a more stable, convenient, and open regional investment environment.

For China, the RCEP trade agreement mainly has the following impacts:

1. Promote economic growth and regional integration in the Asia Pacific region. As the world's largest free trade agreement, the signing of RCEP will promote economic integration and trade liberalization in the region, accelerate economic development in the Asia Pacific region, reduce costs, enhance market vitality, and enhance the economic competitiveness of countries in the region.

By strengthening economic cooperation with other member countries, China can reduce its dependence on the US market and improve its adaptability to several markets. In addition, as China's influence and strength in the region increase, the signing of RCEP provides an opportunity for China to play a greater leadership role in the region. The trade relations with Japan will be strengthened, which will also promote trade and economic development in the wider Asia Pacific region.

3. Expand China's openness and market access. RCEP will further expand the scope of China's opening-up, lower market entry barriers, promote trade and investment cooperation between domestic enterprises and other enterprises in the region, and enhance China's position and competitiveness in the global value chain.