The Regional Comprehensive Economic Partnership (RCEP) has come into force since January 1, 2022 in China, Japan, Australia and 6 ASEAN countries. As the important starting point of China’s another new round of opening-up to the world and opening-up based on related institutions, RCEP agreement has many new features in market access and rule coordination. More than 90% of the merchandise trade in the region will eventually be tariff-free.

Economists and experts in international investment and trade believe that in the short term, RCEP will bring benefits to the foreign trade industry and related market entities in Shanghai, while in the medium and long term, it will also function as the stabilizer, guide and propeller for Shanghai economy. The city needs to seize the historic opportunity, make good use of RCEP to plan well, intensify the “four functions,” and expand high-standard opening-up. 

A useful supplement to WTO multilateral trade system

According to the simulated result in Evaluation Report on the Impact of RCEP on Regional Economy recently released by the Ministry of Commerce International Trade and Economic Cooperation Research Institute, by 2035, the cumulative growth of the actual GDP, export volume and import volume of China will have reached 0.35%, 7.59% and 10.55% respectively compared to the benchmark volumes thanks to the RCEP. The cumulative growth of export volume and import volume will have reached US$315.4 billion and US$306.8 billion respectively, while the cumulative growth of economic welfare will have reached US$ 99.6 billion.

Chen Liang, Associate Researcher of Shanghai Academy of Social Sciences Institute for the World Economy, believes that RECEP has three main features, namely extended scope of benefits, more inclusiveness and wider scope of topics. Besides, compared to the existing “10+1” agreement, RCEP generally has a higher level of standard of rules and opening-up, and covers a range of new topics, including intellectual property, E-commerce, competition policies and government procurement, etc.  

From Chen Liang’s viewpoint, RCEP is a useful supplement to the WTO multilateral trade system. Currently, the global economy is faced with many problems, such as the intensifying trend of deglobalization, a sign of gradual marginalization of WTO, and challenges posed by the COVID-19 pandemic to supply chain security, etc. “While China is a staunch supporter of the multilateral trading system, it should not lag behind in bilateral and regional cooperation.”

Shanghai gets a head start in some sectors

“As an international financial center and an important port city, Shanghai plays a prominent role in the regional network, and RCEP will further present new opportunities for transformation and upgrading of existing industries for Shanghai,” said Zhang Lei.

Chen Liang indicated that the establishment of RCEP will help to build Shanghai into an international trade center, and in the long run it will function as the stabilizer, guide and propeller for Shanghai economy. Moreover, as the leading city of China in economic development, Shanghai will be more attractive to trade and technical manpower in the RCEP region. Shanghai should bring into full play its role of the central node in the RCEP region, serve the dual circulation of both domestic and international circulation well, and enhance further integration of the manufacturing industry and the service industry.

RCEP’s promotion of cross-border financial services and internationalization of RMB will also help to consolidate and strengthen the position of Shanghai as an international financial center. Besides, the opening-up of the telecommunications service industry encourages more telecom enterprises and digital enterprises to participate in market competition, which will provide local enterprises in Shanghai with an opportunity for “going out.” Furthermore, RCEP also brings China a band-new opportunity: China signed a free trade agreement with Japan for the first time, which will effectively improve the optimization and integration of economic and trade rules for the two countries and expand the possibility of bilateral economy and trade. Tan Qian, Director of Department of Statistics Analysis, Shanghai WTO Affairs Consultation Center, said that Japanese-funded regional enterprises with their headquarters in Shanghai has formed agglomeration on a certain scale in Shanghai, which lays a good foundation for industrial investment cooperation and is in alignment with Shanghai's efforts to upgrade industry and build itself into a city of international trade center.

The implementation of RCEP will also facilitate the efforts of Shanghai to build itself into an Asia-Pacific intellectual property center. So far, Shanghai is home to international cooperation and exchange platforms such as Shanghai International Intellectual Property Forum, specialized arbitration and mediation organizations such as WIPO Arbitration and Mediation Center in Shanghai, as well as overseas arbitration and mediation organizations such as Singapore International Arbitration Centre, which enable Shanghai to be well positioned to provide integrated intellectual property services for the whole country and the Asia-Pacific region at large.

RCEP is also the first free trade agreement with digital trade attributes to include China. Shanghai is comprehensively promoting the digital transformation of the city and has now shown certain advantages in the construction of new-type information infrastructure like 5G network. Zhang Lei, Professor of WTO Chairs (China) and Dean of School of Trade Negotiations, Shanghai University of International Business and Economics, suggested that Shanghai should make full use of major open platforms such as Lin-gang Special Area and Hongqiao International Hub for Opening Up, etc. to accelerate the construction of itself as an international data port, explore to seek alignment with the rules of RCEP related to digital trade rules on the basis of effective superintendence, and provide experience for formulating opening rules for China's digital economy and participating in global digital governance.

Seize the opportunity of transformation in competition and cooperation

“RCEP does not overturn the original ‘10+1’ agreement; instead, it integrates and coordinates existing rules. Therefore, Shanghai can adapt to RCEP rules quickly.” Chen Liang told the reporter that bilateral agreements between China and most of the economies in the region have long been signed, and Shanghai has become accustomed to and proficient in using these international trade rules for a long time.

Zhang Lei believes that from the perspective of the industrial chain and supply chain, the division of labor in the international industrial chain may be restructured to a certain degree, and low-end manufacturing industries and labor-intensive industries in Shanghai will face challenges because of the rules of origin in the RCEP agreement. “As some RCEP members have advantages in raw materials and labor cost, the agreement adopts relatively lenient rules of origin, and international competition in the division of labor in some industries will be more intense.”

That’s why Tan Qian believes that Shanghai should make great endeavors in research and prognosis in advance to better cope with the potential challenges that RCEP may bring in a complex international environment. “Opening-up is a two-way street. To a certain extent, Japanese manufacturing and service industries compete and cooperate with their counterparts in Shanghai, which presents not only opportunities but competitions for Shanghai. Devoted efforts to facilitate development and innovation by opening up will invigorate not only the high-quality development of Shanghai, but also that of the RCEP regional economy.”

 

Source: Jiefang Daily  

By Zha Rui