The influence of RCEP on textile and apparel after it took effect
Source: chinatexnet.com Date: 2022-02-23
The Regional Comprehensive Economic Partnership (RCEP) agreement, the world's largest free trade agreement, came into effect on first day of 2022. The RCEP includes 10 ASEAN members, China, Japan, the Republic of Korea, Australia and New Zealand. The 15 states' total population, gross domestic product and trade all account for about 30 percent of the world total. After RCEP goes into force, member countries can enjoy preferential tariffs when they export goods. Will it bring about some new changes?
The course and content of RCEP negotiation
RCEP was passed with introduced for the first time at the 21th ASEAN Summit in 2012. The purpose is to establish a free trade agreement with a unified market by reducing tariffs and non-tariff barriers. The RCEP negotiation includes trade in goods, trade in services, investment and rules, and RCEP member countries have different levels of economic development, so they encounter all kinds of difficulties in the negotiations.
RCEP member countries have a population of 2.37 billion, accounting for 30.9% of the total population, accounting for 29.9% of the world's GDP. From the global situation of imports and exports, the exports account for 39.7% of the world's exports and imports account for 25.6%. The trade value among RCEP member countries is about 10.4 trillion USD, accounting for 27.4% of the global. It can be found that the RCEP member countries are mainly export-oriented, and the proportion of imports is relatively low. Among the 15 countries, China accounts for the largest proportion of imports and exports in the world, accounting for 10.7% of imports and 24% of exports in 2019, followed by 3.7% of Japan's imports and exports, 2.6% of South Korea's imports and 2.8% of exports. The ten ASEAN countries account for 7.5% of exports and 7.2% of imports.
India withdrew from the RCEP agreement, but if India joins at a later stage, the consumption potential of the agreement will be further enhanced.
The influence of RCEP Agreement on textile and apparel
There are great economic differences among the member countries, most of them are developing countries, and only Japan, New Zealand, Australia, Singapore and South Korea are developed countries. The economic differences among the RCEP member countries also make the exchange of goods different. Let's focus on the textile and apparel situation.
In 2019, the textile and apparel exports of RCEP member countries were 374.6 billion USD, accounting for 46.9% of the world, while imports were 138.5 billion USD, accounting for 15.9% of the world. Thus it can be seen that the textile and apparel of RCEP member countries are mainly export-oriented. As the textile and apparel industry chain of the member states was not certain, the production and marketing of textiles and apparel were also different, of which Vietnam, Cambodia, Myanmar, Indonesia and other ASEAN regions were mainly net exporters, and so was China. Singapore, Brunei, the Philippines, Japan, South Korea, Australia and New Zealand were net importers. After RCEP took effect, tariffs among member countries will be greatly reduced and trade costs will drop, then local enterprises will not only face domestic competition, but also competition from foreign brands will become more obvious, especially the Chinese market is the largest producer and major importer among the member countries, and the production cost of textiles and apparel in Southeast Asia and other regions is obviously lower than that of China, so some products will be impacted by overseas brands.
From the perspective of the import and export structure of textiles and apparel in the major member countries, with the exception of New Zealand, South Korea and Japan, the other member countries mainly export clothing, supplemented by textiles, while the import structure is on the contrary. Cambodia, Myanmar, Vietnam, Laos, Indonesia, the Philippines, Thailand, China and Malaysia mainly import textiles. From this, we can see that the downstream end-users apparel processing capacity of ASEAN region was strong, and its international competitiveness has been increasing in recent years, but the upstream industrial chain was not perfect and lacked its own supply of raw materials and semi-finished products. Therefore, the upstream and midstream were highly dependent on imports, while developed regions such as Japan and South Korea mainly imported textiles and apparel, which were the main places of consumption. Of course, among these member states, China was not only the main place of production but also the main place of consumption, and the industrial chain was relatively perfect, so there are both opportunities and challenges after the tariff reduction.
Judging from the contents of the RCEP agreement, After the RCEP agreement took effect, it can help significantly lower tariffs and fulfill the commitment to open investment in services, and more than 90% of the trade in goods in the region will eventually achieve zero tariff. After the reduction of tariffs, the cost of trade among the member countries decreases, so the competitiveness of RCEP member countries significantly improves, so it is conducive to the growth of consumption, while the competitiveness of textiles and apparel from major production bases such as India, Bangladesh, Turkey and other major production bases has declined in RCEP. At the same time, the main source countries of textile and apparel imports from EU and US are China, ASEAN and other major textile and apparel production bases. Under the same conditions, the probability of goods circulating among member countries increases, which virtually puts some pressure on EU and US and other markets. In addition, investment barriers among RCEP member countries have fallen, and overseas investment is expected to increase.
