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Head of the Department of International Trade and Economic Affairs of the Ministry of Commerce on RCEP (II)

IV. What major consensuses has RCEP reached in market liberalization?

In terms of trade in goods, the 15 parties have made arrangements for trade in goods liberalization through making offers in bilateral pairs. After the agreement enters into force, over 90% of the trade in goods in the region will eventually be duty-free, most of which will have zero-tariff immediately or within ten years. In this way, the RCEP FTA can deliver on all the commitments to liberalize trade in goods in a relatively short period of time. It is foreseeable that as general rules such as the rules of origin, customs procedures, inspection and quarantine and technical standards become effective, the synergy of tariff elimination and the removal of non-tariff barriers will gradually unleash the agreement’s trade creation effect, substantially reduce the costs of intra-regional trade and product prices and raise the competitiveness of regional products to the benefit of businesses and consumers of the parties..

In terms of trade in services, seven parties, including Japan, Korea, Australia, Singapore, Brunei, Malaysia and Indonesia, made commitments using the negative list approach, while the remaining eight, China included adopted the positive list, which will be converted to negative list within six years of the entry into force of the agreement. As far as liberalization level is concerned, all the 15 parties made commitments higher than the level of their 10+1 FTAs. China’s services liberalization commitments are of the highest level among China’s existing FTAs, adding 22 sectors, such as research and development, management consulting, manufacturing-related services and air transport, to the 100 sectors committed at its accession to the WTO, while raising the commitment level for 37 sectors, including finance, legal services, architecture and maritime shipping. Other parties all made high-level liberalization commitments on architecture, healthcare, real estate, finance and transport, among other sectors of interest to China.

On the investment side, the 15 parties all made high-level liberalization commitments through negative list on five non-service sectors, including manufacturing, agriculture, forestry, fisheries and mining, greatly enhancing policy transparency. China’s investment negative list reflects the latest development in domestic reform. This is also the first time that China makes commitments on investment through negative list under an FTA, which is of great significance for improving its domestic foreign investment management system of pre-establishment national treatment plus negative list, consolidating its reform outcomes from reducing the negative list for foreign investment, and widening market access for foreign investment.

In terms of the movement of natural persons, the parties commit to grant certain periods of residence and visa facilitation to commercial personnel of all kinds from regional countries, such as investors, corporate personnel, contracted service providers, accompanying spouses and family, engaging in various trade and investment activities. Compared to past agreements, RCEP expands the commitment scope from service providers to include all categories of natural persons that might move across borders under the agreement, such as investors, accompanying spouses and family, with a general level basically exceeding the parties’ practice under existing FTAs.

V. What is RCEP like in terms of benchmarking against international high-standard free trade rules?

RCEP has expanded the scope of free trade rules of previous 10+1 FTAs, benchmarking against international high-standard rules while incorporating intellectual property, e-commerce, competition and government procurement and providing for strengthened cooperation on small and medium-sized enterprises and economic and technical cooperation.

With respect to intellectual property, RCEP covers copyrights, trademarks, geographical indications, patents, industrial design, genetic resources, traditional knowledge and folklore, among others. While taking into account different development levels of RCEP countries, it remarkably enhances protection for intellectual property rights. On e-commerce, RCEP provides for electronic authentication and signature, online consumer protection, online personal information protection, cyber security, cross-border transfer of information by electronic means and others. Besides, in accordance with Chinese laws and regulations, China for the first time includes the flow of data, information storage and other provisions in an FTA. Regarding trade remedies, on the basis of WTO rules, RCEP makes detailed provisions on anti-dumping, countervailing, and safeguard measures, and for the first time includes "prohibition of zeroing" provisions in an FTA. Meanwhile, it draws on international high-standard rules and makes anti-dumping and countervailing investigations much more professional and transparent with a list of best practices. On competition, RCEP excels in promoting antitrust and consumer protection. On government procurement, RCEP parties reached a consensus on active exchange of information and cooperation in government procurement, provision of technical assistance, and strengthening capacity building. On cooperation, RCEP highlights the role of FTAs in stepping up support for and input into SMEs and economic and technical cooperation so that the provisions in the RCEP agreement can better benefit SMEs and developing economies.

6. What important consensus has RCEP reached on the rules of origin?

In terms of rules of origin, RCEP uses the principle of regional accumulation, which allows the value content of a product's origin to cumulate within the 15-member region, and the value content from any of the RCEP parties will be factored in, which will significantly increase the utilization of the agreement's preferential tariff rates. For example, a good that could not be counted as originating in a country under previous bilateral FTAs between members, after regional value accumulation, may be recognized as originating in the RCEP region and enjoy RCEP preferential tariffs. This will enable multinational companies to arrange industrial layout more flexibly, establish a more refined and better organized division of labor along the industrial chain, and reduce the production cost of final products. It will not only boost intra-RCEP trade, but also greatly deepen integration and development of regional supply and value chains.

At the same time, compared with the previous "10+1" agreement, RCEP recognizes still more types of certificates of origin, in addition to the traditional ones, including an approved exporter's declaration as well as an exporter's declaration. This marks the shift of origin declaration system from issuance by officially-authorized issuing bodies to credit-based declaration by enterprises themselves. The new model greatly cuts administrative and business costs and further enhances the efficiency of customs clearance.

7. What are the provisions of RCEP in enhancing the level of intra-regional trade facilitation?

RCEP's trade facilitation measures mainly include customs procedures and trade facilitation, sanitary and phytosanitary measures, and measures on standards, technical regulations, and conformity assessment procedures. In terms of customs procedures and trade facilitation, RCEP simplifies customs clearance procedures, adopts efficient management tools to promote customs procedures such as advance rulings, pre-arrival processing, and application of information technology, and, where possible, strives to release express consignments and perishable goods within six hours of arrival. Such measures will promote the development of new types of cross-border logistics such as express delivery, and facilitate the clearance and trade of fresh produce such as fruits and vegetables, meat, eggs, and dairy products. The overall level of trade facilitation exceeds that of the WTO Agreement on Trade Facilitation. Regarding sanitary and phytosanitary measures, a range of measures have been established to protect human, animal or plant life or health and to ensure that these measures are not, to the extent possible, trade-restrictive or unreasonably discriminatory to other RCEP members. Building on the WTO's SPS Agreement, RCEP also strengthens enforcement of rules on risk analysis, audit, certification, import checks, and emergency measures. With respect to standards, technical regulations, and conformity assessment procedures, RCEP calls for parties to reduce unnecessary technical barriers to trade in the recognition of standards, technical regulations, and conformity assessment procedures, and encourages the standardization bodies of the parties to strengthen information exchange and cooperation on standards, technical regulations, and conformity assessment procedures. These initiatives will greatly enhance the level of intra-regional trade facilitation of goods, reduce trade costs, shorten logistics time, and further promote the formation of a regionally integrated market.

8. Besides market access commitments, what are the other provisions in the Trade in Services Chapter?

Aside from market access and relevant rules, the Trade in Services Chapter also incorporates three annexes regarding financial services, telecommunications services, and professional services. The Financial Services and Telecommunications Services Annexes include comprehensive and high-level commitments, and the Professional Services Annex sets out cooperation arrangements for mutual recognition of professional qualifications.

The Financial Services Annex represents China’s highest-level commitment in the financial sector. Rules such as new financial services, self-regulatory organizations, and transfers and processing of financial information are introduced for the first time, and high-level commitments to regulatory transparency are made, fostering a more open, stable, and transparent level playing field for financial service providers of the parties while preserving regulatory space for safeguarding stability of the financial system and guarding against financial risks. These rules will not only help Chinese financial enterprises expand overseas markets, but also attract overseas institutions to start business in China, thus invigorating the domestic financial market.

The Telecommunications Services Annex establishes a framework of rules regarding trade in telecommunications services. Building on top of the telecommunications annex of the “10+1” agreement, RCEP extends rules to areas including approaches to regulation, international submarine cable systems, unbounding of network elements, access to poles, ducts, and conduits, international mobile roaming, and flexibility in the choice of technology. This set of rules will accelerate coordinated development of the regional information and communications technology sector, redirect regional investment and focus of development towards cutting edge technologies, facilitate innovation and integration of regional industries, and upgrade and restructure the industrial and supply chains.

The Professional Services Annex lists arrangements for exchanges among RCEP parties over professional qualifications, including strengthening dialogues between relevant bodies recognizing professional qualifications; encouraging negotiations on professional qualifications, licensing, or registration in professional services sectors of mutual interest; and encouraging the development of mutually acceptable professional standards in areas like education, examinations, experience, conducts and ethics, professional development and re-certification, scope of practice, and consumer protection.

9. Besides investment liberalization, what are the other provisions in the Investment Chapter?

The Investment Chapter of RCEP covers four main areas: investment liberalization, investment protection, investment promotion, and investment facilitation. In specific, this chapter includes investment protection provisions, such as fair and equitable treatment, expropriation, transfers, compensation for losses, as well as investment facilitation provisions, such as dispute prevention and resolution of foreign investors’ complaints.

The parties have also agreed to enter into discussions on a investor-state dispute settlement mechanism no later than two years after the agreement comes into effect. The Investment Chapter represents overall integration and improvement of multiple “10+1” investment agreements, and will create an investment environment that is more stable, open, transparent, and facilitative.