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The website of the Ministry of Commerce reported on November 6th that according to the person in charge of the International Department of the Ministry of Commerce, China is ready to implement the Regional Comprehensive Economic Partnership Agreement (RCEP), which can ensure the full performance of its obligations when the agreement comes into effect. Not long ago, on November 2, the ASEAN Secretariat, the custodian of RCEP, issued a notice that RCEP has reached the threshold for the entry into force of the agreement and will come into force for ten countries including China on January 1 next year.

What does RCEP mean for China? Why is China still applying to join CPTPP when it has RCEP? Why did the absence of the United States make the signing of the agreement run more smoothly? Does this mean that a new world pattern is taking shape?

The Governor of Chang ‘an Street and Chongyang Financial Research Institute of Renmin University of China (WeChat WeChat official account: Chongyang of the National People’s Congress) launched the "Key Knowledge" column, and this issue interviewed Liu Ying, a researcher at Chongyang of the National People’s Congress and director of the cooperative research department.

Core summary

1. The entry into force of 1.RCEP is of great significance to China. We will see the chemical reaction, superposition effect, driving effect and radiation effect when the world’s largest country in goods trade meets the world’s largest free trade agreement in generate.

2.RCEP has established free trade relations between China and Japan and between China, Japan and South Korea for the first time, and between ASEAN and China, Japan, South Korea, Australia and New Zealand for the first time, making the three economic circles of the United States, Europe and Asia more balanced and "three-legged".

3. In 2018, the United States was sued by the WTO for more than 158 cases, and its fraction exceeded the sum of China, Europe and Japan. Countries are increasingly discovering that it is not the United States that is decoupling from China, but the United States is decoupling from the world, and the world organizations without the United States seem to play better and smell better.

4. The role played by the United States as a world leader is constantly weakening and degenerating, while the multipolar forces represented by China, the European Union and ASEAN are constantly emerging.

5. The entry into force of 5.RCEP shows that developing countries and emerging economies such as ASEAN are gradually becoming important forces in the region and even the world, and the world economic, trade and wealth center is gradually moving eastward, and the 21st century will also become the century of Asia.

When the world’s first meets the world’s largest

China’s harvest is actually good

Governor: From a macro perspective, what does RCEP mean to China? What does it mean for China to build a new development pattern of "double circulation" at home and abroad?

Liu Ying: RCEP is the largest free trade agreement in the world, covering about one-third of the world’s population, GDP and trade. After RCEP is officially put into operation, it will become a free trade zone with the largest population, the largest economy, the largest trade volume, the largest foreign investment attraction, the fastest economic growth rate and the most development potential.

Interview screenshot

The entry into force of RCEP is of great significance to China. We will see the chemical reaction, superposition effect, driving effect and radiation effect when the world’s largest country in goods trade meets the generate of the world’s largest free trade agreement.

First, it will help promote China’s high-level institutional opening up. The entry into force of RCEP is another major achievement of China’s opening up after China’s entry into WTO, which will help to benchmark the international high-level economic and trade rules, accelerate institutional opening up, and promote the construction of a new open economic system with a higher level. This means that China has taken another important and solid step in high-level opening up. China is gradually building a high-standard free trade zone network based on its periphery, radiating the Belt and Road Initiative and facing the world, and will accelerate the negotiation of more bilateral and multilateral free trade agreements in the future.

Second, the entry into force of RCEP reflects China’s pragmatic actions to promote economic globalization. This year marks the 20th anniversary of China’s accession to the WTO. In recent years, under the headwinds of anti-globalization and trade protectionism, China’s opening-up has not stopped, but has become more firm and powerful. While developing its economy with high quality, it has promoted high-level opening-up and gradually integrated into the world economy. From the time point of view, China’s opening up to the outside world is gradually strengthening. In 2018, the Chairman of the Supreme Leader proposed to accelerate the opening up of the financial industry at the Boao Forum for Asia; On November 15th, 2020, China signed RCEP； with ASEAN, Japan, South Korea and Australia. On November 20th, the Chairman of the Supreme Leader put forward that China should actively consider joining CPTPP； when attending the informal meeting of APEC leaders. On September 16, 2021, the Minister of Commerce formally submitted an application for accession to New Zealand. On October 30th, at the G20 Leaders Summit, the Chairman of the Supreme Leader proposed that he had decided to join the Digital Economy Partnership Agreement (DEPA). On November 1st, the Minister of Commerce formally submitted an application for joining New Zealand.

Third, it helps to give full play to the advantages of the big market and keep the supply chain of the industrial chain stable, open and efficient. RCEP is helpful to smooth the supply chain of regional industrial chain, better connect the domestic and international markets and resources, smooth the domestic cycle, and accelerate the construction of a new development pattern in which domestic and international dual cycles promote each other. For example, Japan, South Korea and China are typical industrial chain relationships in many industries. China and ASEAN are also typical close industrial chains. Joining RCEP will not only help to accelerate the construction of China’s new development pattern, but also help to reshape and close the supply chain of regional industrial chain, making it stable and efficient.

On June 7, 2020, the Ministry of Commerce indicated that China had completed the RCEP approval. Source: vision china

Fourth, it will help promote economic growth in China and the world and improve global governance. After RCEP comes into effect, it will enhance the stability of economic and trade investment in this region, promote intra-regional trade and intra-industry trade, promote regional economic integration, expand the influence of East Asian economic circle, and form a tripartite confrontation with North American and European economic circles. At the same time, RCEP also helps to build consensus, support the multilateral trading system, boost the confidence of enterprises in cross-border trade and investment, and inject a new engine into the recovery of the world economy. While promoting the economy, trade and investment of various countries, China-ASEAN, China-Japan-Korea and RCEP are used to drive the world economic cycle, which is conducive to China’s participation in global governance.

Governor: From a micro perspective, what does RCEP mean to China enterprises? What substantial benefits will it bring to the people of China?

Liu Ying: The substantial benefits of RCEP to China enterprises and China people are all-round:

After the implementation of RCEP, more than 90% of the goods between China and ASEAN, Japan, South Korea, Australia and New Zealand will be promoted to achieve zero tariffs, which will take effect immediately from the date of RCEP’s entry into force and gradually transition within ten years. With the reduction of tariff threshold and non-tariff barriers, it will certainly bring more open dividends and benefits to enterprises and people.

The entry into force of RCEP will form a free trade relationship between China and Japan, the second and third largest countries in the world, for the first time. China and Japan will reduce or reduce tariffs on each other in many fields such as machinery and equipment, electronic information and chemical products, and the proportion of zero-tariff products between China and Japan will reach more than 80%.

On October 16th, the 16th China (Wenzhou) Machinery and Equipment Exhibition was held. Source: vision china

After the entry into force of RCEP next year, enterprises in the RCEP region (ASEAN+China, Japan, Korea, Australia and New Zealand) can enjoy tariff reduction and exemption if the accumulated value components originating in the RCEP region reach 40%, and enterprises can also declare independently. This will help enterprises to import advanced technology, important equipment, design and development, energy conservation and environmental protection and other productive services at a lower cost, and better meet the needs of industrial structure transformation and upgrading and market consumption upgrading.

RCEP will relax the requirements for business people and their families to live and work, which will also help to form a big market among the 15 ASEAN countries, namely China, Japan, South Korea, Australia and New Zealand. Especially for China, after the tariff and non-tariff barriers are greatly reduced, the intra-regional trade potential will be even greater, which will bring about a freer flow of goods, capital, personnel and technology.

China, Japan and South Korea finally "come together"

East Asian economic circle will be on a par with the United States and Europe

Governor: As one of the three economic circles in the world, the economic integration in East Asia has lagged behind Europe and North America for a long time. As the first free trade agreement that brought the three major economies of China, Japan and South Korea together, RCEP ended the long history that there was no regional integrated trade agreement in East Asia. How did this affect the overall status of East Asia and the world trade pattern?

Liu Ying: The entry into force of RCEP will definitely promote the close economic and trade cooperation among China, Japan, South Korea and Southeast Asia, especially to elevate the overall status of East Asia and guide the transfer of the global economic center.

In fact, it is not just East Asia. I have calculated that comparing North America, the European Union and East Asia, East Asia has surpassed North America and Europe in terms of population, GDP and trade. From the perspective of regional economy and industrial chain, the entry into force of RCEP will accelerate the economic, trade and investment cooperation among China, Japan, South Korea, China, Japan and ASEAN, and enhance the strength and influence of East Asia.

Previously, it was difficult for Japan to strengthen its cooperation with China because of the fetters of the United States. The RCEP was signed, which established free trade relations between China and Japan and between China, Japan and South Korea for the first time, and between ASEAN and China, Japan and South Korea, Australia and New Zealand for the first time. As a result, the cooperation between East Asia will be closer because of RCEP, and even expand from the fields of economy, trade and investment to the humanities, and gradually strengthen the internal cooperation in East Asia and produce spillover effects.

Although the regional cooperation in East Asia obviously lags behind that in Europe and America, a series of regional cooperation mechanisms have been established and developed in East Asia. East Asia is a region with many and complicated regional cooperation mechanisms around the world, and most East Asian countries have participated in several FTAs. With ASEAN as the core, FTAs have been signed with China, Japan, Korea, Australia and New Zealand respectively. The entry into force of RCEP will not only help to integrate the FTA bowl effect in East Asia, but also promote the ASEAN-led regional cooperation mechanism and promote the overall regional cooperation in East Asia.

Compared with the North American and European economic circles, the influence of the East Asian economic circle is limited because of the constraints of some foreign countries, and the entry into force of RCEP means that ASEAN can cooperate more closely with China, Japan and South Korea, generate regional economic benefits, enhance the influence of the East Asian economic circle, and make the three economic circles of the United States, Europe and Asia more balanced, showing a "three-legged trend." As an economic, trade and populous country in East Asia, China, through close cooperation with RCEP member countries, can cooperate with CPTPP and DEPA to promote the transformation and upgrading of the economic circle in East Asia in the future.

Overall, the total population, economic volume and total trade volume of the existing 15 member countries of RCEP account for about 30% of the global total, which means that about one third of the global economic volume has formed an integrated market, which will strongly support free trade and multilateral trading systems, stabilize the supply chain of regional industrial chains, and boost the recovery and development of regional and world economies. The operation of RCEP will help to further expand China’s economic influence in the region, and pave the way for China to participate in other potential free trade agreements in the future.

Both "Yu" and "Bright"

China aims to open to the outside world at a higher level.

Governor: As you mentioned, in September this year, China formally applied to join the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP). With RCEP, why should China join CPTPP? What are the differences between the two in terms of content terms, the size of member countries, and the formulation of rules?

Liu Ying: China applied to join CPTPP for three reasons:

First of all, CPTPP covers more content. RCEP contains twenty chapters, while CPTPP contains thirty chapters. Both RCEP and CPTPP are based on the rules of the WTO multilateral trading system, such as intellectual property rights, which are also based on TRIPs. However, compared with CPTPP, RCEP standards are slightly lower, and issues such as state-owned enterprises, environmental protection and labor are not included.

Secondly, CPTPP covers different countries. Although CPTPP has only 11 countries, it covers Mexico and Canada in North America and Chile and Peru in South America. RCEP does not include the four countries of South America and North America. Therefore, to cross the Pacific Ocean, it is necessary to apply to join CPTPP.

Finally, the threshold of CPTPP is higher. Although intellectual property, e-commerce, financial investment and other contents are also in RCEP, CPTPP’s rules and standards are higher and stricter. In order to promote high-level opening up, China still needs to join CPTPP. The predecessor of CPTPP is the Trans-Pacific Partnership Agreement (TPP). Although CPTPP is a "dimension-reduced version" of TPP, it also retains 95% of the terms, but the difficulty is much reduced. It is an open, transparent, mutually beneficial and win-win regional free trade arrangement and the highest standard free trade agreement in the world at present.

China formally applied to join CPTPP (data map). Source: vision china

The difference between RCEP and CPTPP can be seen from the following four aspects:

In terms of international influence, CPTPP’s population, GDP and trade account for 6.6%, 12.8% and 14.8% of the world respectively. These proportions are less than half of RCEP. However, CPTPP has more contents, higher standards and greater influence.

In terms of tariff reduction and exemption, RCEP gives a certain grace period, some of which are immediately reduced to zero tariff, and some of which are reduced to zero tariff after ten years or more, and there are more commodities and grace periods for underdeveloped countries such as Myanmar, Cambodia and Laos. CPTPP, on the other hand, requires a reduction to zero tariff as soon as possible.

In terms of market access, RCEP is a combination of positive list and negative list. Except that all member countries adopt negative list in five industries, such as manufacturing, agriculture, forestry, fishery and mining, seven countries, including Japan, South Korea and Australia, have fully implemented negative list from the beginning, while eight countries, such as China, can enjoy the excessive arrangement of positive list within six years. However, CPTPP requires a comprehensive negative list from the beginning.

In the field of openness, RCEP focuses on traditional issues, while CPTPP incorporates higher-level free rules into the trade framework, including intellectual property rights, environmental standards, labor standards, and state-owned enterprise reform. For example, in dispute settlement, mechanisms such as consultation and expert group should be established, supervision should be improved and efficiency should be improved. There are stricter requirements on the consistency of financial and telecommunications supervision, and there are also very specific requirements on the reform of state-owned enterprises, including not only competition neutrality, but also very detailed provisions on management information disclosure. Compared with RCEP, CPTPP has higher requirements in the field of service trade, especially in the chapter of e-commerce, which emphasizes promoting the flow of information and data in a wider range and attaching importance to data protection rules in digital trade. Formulate rules for cross-border data transmission, and restrict member countries from imposing restrictions on digital trade, including restrictions on data localization and storage. It also regulates and supports electronic signatures, electronic authentication, etc., and protects personal information.

There is no American world organization.

Instead, it is smoother.

Governor: Over the past 20 years since China joined the WTO, China has gradually entered the world economic center, from a rule-adapter to a rule-maker. On the contrary, the United States keeps withdrawing. From RCEP to CPTPP, it is smoother without the world organization of the United States? Does this mean that a new world pattern is taking shape? What bold expectations and expectations can we have in the future?

Liu Ying: Judging from the various retreats of the United States in the Trump era, in fact, the United States not only started to launch trade wars with other countries, but also stayed away from international organizations and withdrew from the international stage in different degrees through various retreats. He not only withdrew from TPP and TTIP, but also withdrew from the important Paris Agreement, threatening to withdraw from the WTO. If he had not failed in his re-election, he might have withdrawn from more international organizations. For the sake of "America first", we should shirk our responsibilities in the world.

Trump data map. Source: vision china

It can be seen that the absence of the United States from RCEP to CPTPP and then to DEPA is an inevitable result. However, under Trump’s disturbance, the normal dispute settlement mechanism of the WTO is also in a state of suspension because it is impossible to appoint a new judge and there is only one judge.

In 2018, the United States was sued by the WTO for more than 158 cases, and its fraction exceeded the sum of China, Europe and Japan. As a result, countries are increasingly discovering that it is not the United States that is decoupling from China, but the United States is decoupling from the world, and the world organizations without the United States seem to play better and smell better.

From the withdrawal of the United States from its leading TPP and TTIP, to the CPTPP led by Japan, the RCEP led by ASEAN, and the DEPA led by Singapore, we can see that after the United States encouraged anti-globalization, countries could not promote the opening of multilateral markets under the WTO framework, and they sought to respond by building FTAs with major trading partners. At the same time, the role played by the United States as a world leader is constantly weakening and degenerating, while the multipolar forces represented by China, the European Union and ASEAN are constantly emerging.

Biden data map. Source: vision china

From this, we see a new world pattern gradually emerging. This watershed actually began as early as 2008. Around 2008, the financial crisis broke out on Wall Street in the United States, and the proportion of developed and developing countries in the world was divided here. After this watershed, the proportion of emerging economies and developing countries represented by China in the global economy continued to rise, while the proportion of developed countries represented by the United States showed a downward trend.

ASEAN has established a dialogue partnership with China, Japan, South Korea, Australia and New Zealand, and the "ASEAN +1" free trade area established on this basis is actually the result of the transformation from competition among big countries to competition among cooperation mechanisms. The entry into force of RCEP shows that developing countries and emerging economies such as ASEAN are gradually developing into regional and even global important forces, and the world economic, trade and wealth center is gradually moving eastward (as can be seen from many multilateral trade agreements in East Asia in recent years, world wealth is returning to Asia), and the 21st century will also become the century of Asia.

Through a series of multilateral trade agreements such as RCEP, CPTPP and DEPA, the development gap among East Asian countries will be narrowed and regional inclusive development will be realized. The world will be more balanced and global governance will be more perfect. A new world pattern is gradually taking shape.

(Original title: China, ready)

Source: Governor of Chang ‘an Street

Process Editor: u008