RCEP will Bring New Opportunities to China's Textile and Apparel Exports


On November 15, the signing of the Regional Comprehensive Economic Partnership (RCEP) was officially built.

The 4th Regional Comprehensive Economic Partnership (RCEP) Leaders' Virtual Meeting was held on November 15. At the meeting, under the witness of leaders of 15 countries, trade ministers of various countries signed the RCEP agreement. East Asia is the free trade zone with the largest population, the most diverse membership structure, and the greatest development potential in the world. The signing of the RCEP 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's prosperity and make new contribution to the world economy to achieve restorative growth.

It is reported that the RCEP negotiations were officially launched in November 2012, involving more than ten fields such as SMEs, investment, economic and technical cooperation, and trade in goods and services. After 3 times of leaders' meetings, 19 ministerial meetings, and 28 rounds of formal negotiations, RCEP negotiations have made significant progress in 2019. RCEP was finally signed after eight years of negotiations, providing hopes for people in the profound changes of a kind unseen in a century.

I. RCEP covers one-third of the world's population

In 2019, the 15 member states of RCEP have a total population of 2.27 billion, with US$ 26 trillion worth of GDP and US$ 5.2 trillion worth of total export, each accounting for approximately 30% of the global total. The RCEP free trade zone means that about one-third of the world's economies will form the world's biggest trade bloc. RCEP includes major countries in East Asia and will inject strong impetus into regional and global economic growth.

15 Asia-Pacific countries signed the Regional Comprehensive Economic Partnership (RCEP), the world's biggest trade pact. The agreement involves all 10 member countries of the Association of Southeast Asian Nations and five of its major trading partners-China, Japan, South Korea, Australia and New Zealand. RCEP aims to establish a free trade agreement among the 15 countries to open markets to each other, implement regional economic integration, and unified markets through the reduction of tariffs and non-tariff barriers.

Zhu Yin, associate professor of the Department of Public Administration of the University of International Relations said, "RCEP negotiations will undoubtedly take greater steps in reducing tariff barriers. In the future, 95% or more of tax items may be included into the scope of zero tariffs. The market space will also be greater, which will benefit the foreign trade enterprises."

Data shows that in the first three quarters of this year, China-ASEAN trade volume reached US$ 481.81 billion, up 5% year-on-year. ASEAN became China's largest trading partner, and China's investment in ASEAN surged by 76.6% year-on-year. RCEP members are all important economic and trade partners of China. According to data from the Ministry of Commerce, from January to September 2020, China's foreign trade with other RCEP members (excluding ASEAN) reached US$ 1.05 trillion, accounting for about one-third of China's total foreign trade. In addition, through this agreement, China and Japan, which did not have a bilateral trade mechanism before, will have further development in economic and trade relations.

Wang Shouwen, China's vice minister of commerce, once pointed out that the formation of a unified free trade zone in the region will help the local region to form a supply chain and value chain based on its comparative advantages, which will benefit the flow of goods and technology in the region, as well as service flows and capital flows, including the cross-border movement of people.

After the RCEP is signed, if more than 90% of the products gradually reduce tariffs to zero, it will greatly promote the economic vitality of RCEP members. In addition, practical actions of RCEP will support the liberalization and facilitation of trade and investment, so as to boost global economic confidence, and stimulate the recovery of the global economy after the COVID-19 pandemic.

II. Impact on the textile and apparel industry

The signing of RCEP will reduce the China's imported cost of iron ore, rubber, PX, etc., which will help improve the competitiveness of related industrial chains in the long run.

At the same time, RCEP will expand China's export market space, meet the needs of domestic import consumption, strengthen the regional supply chain and industrial chain, and help stabilize foreign trade and foreign investment, which provides effective support for "dual circulation".

Take the production of the ready-made garment as an example. The imported ready-made garment needs to pay certain tariffs, and the tariff costs are eventually allocated to consumers. After the agreement is signed, the situation will change. Australian wool can enter China's market without tax. After being woven in China, it may be exported to Vietnam. And Vietnam can make garments via these fabrics, and then exported them to South Korea, Japan, China, and other countries. These processes may be tax-free, which will promote the local textile and apparel industry, providing new employment opportunities, and benefiting exports.

In these processes, in view of the tariff advantages of the agreement, the cost of garment production and transportation has been greatly reduced. While providing new employment opportunities for countries in the region, businesses and consumers can also get more benefits.

In 2018, China's textile and apparel exports totaled US$ 277.16 billion. Among the RCEP member states, its exports to ASEAN were US$ 38.23 billion, ranking third after the European Union and the United States. And the exports to Japan reached US$ 20.87 billion. The exports from China to South Korea, Australia, and New Zealand were US$ 8.06 billion, US$ 5.31 billion, and US$ 1.11 billion respectively, accounting for 28% of China's total textile and apparel exports, and are important markets for China's textile and apparel exports. The RCEP member countries exported a total of US$ 413 billion in textiles and apparel to the world in 2018, accounting for more than half of the global textile and clothing exports. Internally, the member states are China's important exported destinations, and externally, the member states as a whole are the world's largest textile and garment production region.

RCEP is not only good for China's textile and apparel exports, but also good for ASEAN countries. These countries will rely on their resource and price advantages to increase their share of the internal market in the RCEP region. If China's textile and apparel industry has not yet changed to a high-end and high-value-added direction, RCEP will do more harm than good to China. In the future, RCEP's role in promoting the export of textiles and garments in other countries will force China's textile and apparel industry to accelerate its transformation and upgrading. China's textile and apparel industry will meet both opportunities and challenges.