The Positive Influence Of RCEP On Wool Textile Trade And Industrial Integration

On November 15, 2020, during the fourth RCEP leaders' meeting, the ten ASEAN countries, China, Japan, South Korea, Australia and New Zealand formally signed the regional comprehensive economic partnership agreement (RCEP) witnessed by Premier Li Keqiang and other leaders of 15 member states. This marks the official launch of the free trade zone with the largest population, the largest economic and trade scale and the most potential for development in the world.

The RCEP agreement covers a market of 2.2 billion people (nearly 30% of the world), US $26.2 trillion of GDP (about 30% of the world) and total exports of $5.2 trillion, accounting for nearly 28% of Global trade (based on data from 2019). This will strongly support the free trade and multilateral trade system, stabilize the supply chain of regional industrial chain and boost the recovery and development of regional and world economy. Under the promotion of RCEP agreement, the development of China's wool textile industry and trade facilitation will be promoted accordingly, which will have a positive impact.

Complete wool textile industry chain in RCEP region

Close trade relations

RCEP covers the whole industry chain from wool production to product consumption. Australia and New Zealand are the main producing areas of wool, China and ASEAN are the main wool processing and manufacturing industries, and China, Japan and South Korea are important consumer markets of wool products.

China is the largest export market of wool products from Australia and New Zealand. ASEAN and Japan are the second and fourth export markets of China's wool products respectively, and ASEAN is the second largest import market of Japan.

In 2020, the total trade volume of wool textile raw materials and products (excluding carpet) between China and other RCEP member countries will be 3.59 billion US dollars, accounting for 33% of the total trade volume. Among them, the export value was 2.08 billion US dollars, accounting for 28% of the total export value; the import value was 1.51 billion US dollars, accounting for 44% of the total import value. The orderly and convenient development of RCEP regional trade is particularly important to the wool textile industry.

Trade situation of wool textile raw materials and products between China and other RCEP in 2020

Photo data source: China Customs

Free trade was further expanded and deepened

Regional integration and development of wool textile industry will be accelerated

RCEP is another important breakthrough since the implementation of China's free trade zone strategy. Prior to this, China has signed free trade agreements with several RCEP members. In 2008, the China New Zealand free trade agreement came into force. In 2010, the China ASEAN free trade area was fully established. In 2015, the China Australia and China South Korea FTA came into force. In addition to the free trade agreements between ASEAN and Japan and other regions, through the construction of these free trade agreements and free trade zones, wool textile products have achieved relatively free flow from the production, processing to consumption of wool textile raw materials in the region. With the signing of RCEP, China and Japan have also realized a new free trade partnership. The expansion and deepening of regional free trade will help to further promote China's wool textile exports and increase trade and investment exchanges.

The wool textile industry will further realize free trade and integration in RCEP region. RCEP adopts the rules of origin accumulated by regions, which reduces the threshold of origin identification, and makes it easier for products in different regions of the region to enjoy tariff concessions. It is helpful to strengthen the division and cooperation among members and promote the further development of regional integration of wool textile industry.

RCEP helps to improve China's wool products

Market competitiveness in Japan

Japan imports more than 2 billion U.S. dollars of wool textile products annually, of which China accounts for about 45%, which is the largest import market. Japan is also the fourth export market of China's wool products. In 2020, China's exports to Japan accounted for 10% of China's total exports of wool products.

Japan's current import tariff on China's main wool textile products ranges from 2% to 10%. The tax reduction policy mainly adopts the method of gradually reducing the tax. The tariff of wool yarn, wool fabric, blanket and other products will be reduced to 0% in 11 years, and the tariff of wool knitted clothing, wool woven clothing, wool scarf and other products will be reduced to 0% in 16 years.

Japan's arrangement of reducing taxes on wool textile products imported from China

Source: China Wool Textile Industry Association

As Japan has signed free trade agreements with ASEAN, India and other countries, the above countries can enjoy tax-free treatment for wool textile products imported into Japan market. Under the promotion of zero tariff, Japan's import of ASEAN wool textile products has increased year by year in recent years. In 2020, the import volume of ASEAN accounted for 25% of Japan's total wool textile imports.

At present, the grade of wool textile products exported from China and ASEAN to Japan is not much different. With the implementation of RCEP tariff reduction policy, it will help to improve the competitiveness of China's wool textile exports in Japan.

China and South Korea enjoy trade

FTA preferences

South Korea is one of the important export markets of China's wool products. In 2020, China's exports to South Korea accounted for 5% of the total exports of wool products. China is also South Korea's largest source of textile and clothing imports, accounting for more than 1 / 3 of South Korea's annual textile and clothing imports.

The bilateral free trade agreement between China and South Korea has come into effect in 2015. In the past five years, the tariff of wool textile products has been reduced, and there is a certain degree of preference on the basis of the general tax rate. According to the agreement between China and South Korea, the main wool textile products will be exempted from tariff in the next 5 or 10 years, which is the optimal situation.