Interview with Wei Jianguo: Promoting RCEP and joining the CPTPP is China's commitment to a high level of openness

China is forcing reform with a high level of opening up to the outside world. China is consciously pursuing the highest standards of openness and consciously integrating high-level and high-standard international rules, and it is also a layout that actively opens up its market and further alleviates trade frictions

Text | "Caijing" reporter Jiang Wei

Edit | Hao Zhou

In early November, after six ASEAN member and four non-ASEAN member states formally submitted their approval letters to the ASEAN Secretary-General for the Regional Comprehensive Economic Partnership (RCEP), the RCEP had met the threshold required for the agreement to enter into force. The world's largest free trade agreement will come into force on January 1, 2022.

The RCEP has a total of 15 members, and its entry into force requires the ratification of at least six ASEAN countries and three non-ASEAN countries. Countries that have completed the ratification process include Brunei, Cambodia, Laos, Singapore, Thailand and Vietnam among ASEAN countries, as well as China, Japan, New Zealand and Australia, which are not members of ASEAN.

The head of the International Department of the Ministry of Commerce of China recently said that the entry into force of the RCEP will effectively promote regional economic integration and promote post-epidemic economic recovery and growth; China submitted a letter of approval as early as April this year, and all preparations are in place to ensure that the agreement will fully fulfill its obligations when it enters into force.

After eight years of negotiations, RCEP members completed the signing of the agreement in November last year. The trade agreement covers nearly 30 percent of the world's population, and the economy and trade represent about 30 percent of the world's total. RCEP will enable 90% of the goods traded in the region to achieve tariff-free over the next 20 years, with commitments to reduce tariffs immediately to zero and zero within a decade. The rules of origin accumulation are seen as a highlight of the RCEP, and the accumulation of value added across the 15 members will make tariff preferences more accessible.

Wei Jianguo, former vice minister of China's Ministry of Commerce and vice chairman of the China Center for International Economic Exchanges, recently called the entry into force of the RCEP a "landmark event in the Asia-Pacific region" in an exclusive interview with Caijing. He pointed out that the landing of RCEP will bring about the eastward migration of manufacturing, technology, capital and talent.

In Wei Jianguo's view, a high level of opening up to the outside world is an important preparation for China in the face of the global economic structure after the new crown epidemic. "High level of openness includes promoting the generation of RCEP and actively joining the CPTPP."

The full name of the CPTPP is the Comprehensive and Progressive Trans-Pacific Partnership Agreement, which is a free trade agreement that the original TPP negotiators continued to promote after the United States withdrew from the TPP (Trans-Pacific Partnership). In September, China formally submitted its application to join the CPTPP.

It is conducive to economic recovery after the epidemic

Caijing: What does it mean for the RCEP to go into effect, especially in the context of many economies affected by COVID-19?

Wei Jianguo: The entry into force of the RCEP will have a great impact on economic recovery and is a milestone event in the Asia-Pacific region.

After the epidemic, the global economic structure will be reorganized. At present, it seems that the traditional three major industrial clusters, namely the United States, Canada and Mexico, The German-French-Austrian cluster in Europe, and the China-Japan-South Korea cluster, will have a significant reorganization. The US-Canada-Mexico cluster will weaken, and the overall industrial chain and supply chain will be reduced; Europe may lead to a slow overall economic recovery and a decline in product competitiveness due to supply chain ruptures; while China's situation is just the opposite, after the epidemic, China resumed work and production first, and the overall situation exceeded global expectations.

RCEP will lead to four eastward shifts: manufacturing, technology, capital and talent. I think the most important thing is that manufacturing has moved east, and then technology, capital, and talent. Why is manufacturing in the forefront? Because now the global manufacturing industry and the real economy are getting worse and worse, where to go in this situation? According to the economic point of view, the manufacturing industry follows the market, capital follows profit, technology follows innovation, and talent follows interests.

The Chinese market is the largest in the world, with 400 million middle class. In addition to consumer goods, the production of consumer goods is also a large market. I personally think China will overtake the United States as the largest economy by 2026. As manufacturing moves east, so does technology. At present, China's innovation ability is relatively strong, especially in the fields of digital economy, 5G, cloud computing, new materials, and life sciences, which will bring great innovation power.

China needs to be prepared for the post-COVID-19 global economic landscape. One of China's most important preparations is the new pattern of double circulation, which is a major strategic decision in the economic field. Another major decision is a high level of opening up, not only a reduction in tariffs as it was done when it joined the World Trade Organization (WTO), but also a high level of opening up that includes promoting the generation of RCEP and actively joining the CPTPP.

Caijing: Does the eastward shift of manufacturing you are referring to also include Southeast Asian countries?

Wei Jianguo: Not only in Southeast Asia, but also in China. Why? The epidemic has taught the eastward-moving manufacturing industry a big lesson: it is not enough for the labor force to be cheap and the cost is low, and the entire production chain is missing any one. Since the epidemic, there have been many problems in Vietnamese factories.

After the reform and opening up, China's production chain has formed the most complete global industrial system through processing trade, and the upstream and downstream are closely and seamlessly connected. This chain does not usually break, and its solid development is more attractive to the world than any cheap labor. When investors turn to China again, they will find that it was wrong to move out of China just because of rising costs. Now many companies are going back, including Foxconn, Mitsubishi, Samsung and so on. They believe that if only because of the high wages or land prices where the original factory is located, they can move to lower-cost cities such as Hefei and Wuhan.

Personally, I think China's import and export trade will triple this year. When the two-digit growth was achieved in the first quarter of this year, many scholars believed that China's foreign trade would have a phenomenon of high and low this year, and I disagree. I think double-digit growth will continue until the end of this year or even next year, which I call a window period. Why? It is not because the epidemic has slowed down, the demand for Chinese products will decrease after countries resume production, but on the contrary. In the first three quarters of this year, this year's foreign trade import and export has reached 28.33 trillion yuan, an increase of 22.7% year-on-year. This is a number that is hard to find around the world, and I expect the same trend to remain in the fourth quarter, which has orders for Christmas, New Year and early next year. The only thing to worry about now is the sea freight, but prices have fallen.

The good momentum of foreign trade can continue until next year or even the end of next year, but we must not be blindly optimistic, we must have a sense of crisis, and take precautions. This is an opportunity for our foreign trade transformation and upgrading, increasing structural adjustment, and increasing high-tech products and mechanical and electrical products. According to past experience, it is difficult to find your own shortcomings in a good time, so you must be calm, enterprises must transform and upgrade, and what to do after this window period has passed.

The RCEP takes fully into account the interests of developing countries

Caijing: RCEP brings China and Japan under a free trade agreement for the first time, how do you see the impact on the future of China-Japan trade?

Wei Jianguo: First, RCEP will be more conducive to the restructuring of the Sino-Japanese economic and trade pattern, especially after the epidemic, the industry will move east, China and Japan will complement each other's advantages, and there is room for cooperation in the fields of chips, intelligent manufacturing and robots. Japan's exports to China were previously investment entrepot-type, and after RCEP, it will change from the original investment entrepot type to an investment market type, focusing on the Chinese market. Secondly, the RCEP will also help China and Japan to increase third-party cooperation between RCEP members and "Belt and Road" countries in the new environment. Third, the RCEP will further promote the conclusion of the China-Japan-RoK Free Trade Area, and now that all three countries are already members of the RCEP, the standard of the China-Japan-ROK FTA will be higher than that of the RCEP.

In addition, if The joining of China and Japan in RCEP is the primary version of the new pattern of restructuring the future of the Chinese and Japanese economies, then the next step after China joins the CPTPP, the new pattern of Sino-Japanese economic and trade cooperation will become an upgraded version.

Caijing: The standard of RCEP is not so high, is it considering that the membership structure is more diverse? These include developed countries such as Japan and Australia, as well as least developed countries such as Laos and Cambodia.

Wei Jianguo: RCEP members have different levels of economic development and different degrees of openness, and RCEP fully takes into account the interests of developing countries. Exiting India has placed more emphasis on its own interests, which is the exception. The three characteristics that distinguish RCEP from other trade agreements are different political systems of members, different levels of economic development and different development paths, but RCEP solves the problems caused by these differences very well, which is rare in other ftTA.

Caijing: Prior to the entry into force of the RCEP, ASEAN had signed free trade agreements with China, Japan and the Republic of Korea, as well as Australia and New Zealand, respectively. What new benefits will the new trade agreement bring to ASEAN? Which ASEAN countries will benefit more?

Wei Jianguo: The biggest benefit is that the market is expanding, and ASEAN is mainly an export-oriented economy and needs a larger market. The RCEP has become more pronounced in lowering trade barriers and encouraging investment facilitation and trade liberalization, which is what ASEAN wants. The signing of new multilateral agreements on the basis of retaining the original bilateral agreements will increase in the future.

Personally, I think the benefits are more from countries that have changed rapidly from a planned economy to a market-based economy, such as Vietnam. It makes full use of the original planned advantages, coupled with the market advantages. Vietnam has begun to benefit from the CPTPP, exports are already increasing, and attracting foreign investment is also increasing. But the pandemic has also brought some problems.

Caijing: The rules of origin accumulation are considered a bright spot for RCEP, how will it reshape supply chains within the region?

Wei Jianguo: Rules of origin will lead to revolutionary changes and make the supply chain more perfectly integrated. Under the RCEP rules, from the source of supply to the final finished product, as long as it meets the requirements, it can enjoy tariff concessions. After the RCEP comes into effect, when determining the origin qualification of the product, the origin materials of the RCEP members can be cumulatively calculated, so that it is easier to meet the origin standard of 40% of the value added of the final export product and realize tariff preferences.

The policy of origin that RCEP Member States wish to implement is further adapted and adapted. With the changes in the global economy, the division of labor is now becoming more and more refined, so is the manufacturing industry, and the processing industry is also the same. Only in this way can a country's position in the global industrial chain be consolidated.

Caijing: How do you see the challenges that RCEP brings to China?

Wei Jianguo: I think challenges and opportunities coexist. RCEP is taking a path of common prosperity and common openness, where poor brothers and rich brothers are together. The CPTPP is more challenging for China, but the CPTPP is an important step in China's reform and opening up to the outside world. This, coupled with our application to join the Digital Economy Partnership Agreement some time ago, shows that China is forcing our own reforms with a high level of opening up. This is China's conscious pursuit of the highest standards of openness, consciously integrating high-level and high-standard international rules, and also taking the initiative to open up the market and further alleviate trade frictions.

China has no intention of dominating the CPTPP

Caijing: You started calling for China to join the TPP early on, but there was a lot of debate about whether China should join the TPP. The standard of CPTPP is higher than that of RCEP, will joining CPTPP have an impact on some domestic industries?

Wei Jianguo: At that time, the TPP negotiations were dominated by the United States, and its purpose was different. The U.S.-led TPP under Obama is designed to contain China and wants to limit China with rules. The high level of the TPP is reflected in government procurement, intellectual property protection, labor treatment, digital circulation, state-owned enterprise competition, etc., and the CPTPP uses more than 95% of the content of the TPP. At that time, many people thought it was difficult for us to do so many state-owned enterprises. After several years, state-owned enterprises have become different. The reform of state-owned enterprises promoted competitive neutrality and eliminated some subsidies and preferences given by the state.

CPTPP also has many good places, such as increasing innovation and strengthening the participation of small and medium-sized enterprises in international competition, which is consistent with deepening China's reform and opening up and our general direction. I divide the CPTPP content into two major blocks, one is the same direction, such as intellectual property protection, government procurement, zero tariffs and zero barriers; the other is that some areas can be discussed, for us for the first time, although we have deficiencies and gaps, but can be corrected, such as data circulation, state-owned enterprise reform. We must continue to insist on similar areas, and we will add to the deficiencies as long as there is no contradiction with sovereignty, security and development. This list can help people abroad to solve their puzzles, but also help people at home to solve their puzzles.

When the WTO accession negotiations were held, people felt that China's accession to the WTO would have a huge impact on the automobile industry and agriculture, but the current situation is just the opposite. As long as it is within our control, we should consciously accept the highest standards of trade and investment. The members of the CPTPP are not only developed but also developing countries, with different economic management policies and economic development policies. The TPP's negotiations with Vietnam have given some buffer periods, and we can also strive for some transition periods.

When we joined the WTO, in order to comply with WTO rules, the central government revised more than 2,000 laws and regulations and departmental rules. Now we can say that China has done a good job, and the next step can continue to open up. Former WTO Director-General Lamy once told me that China is the best student of the WTO, not only fulfilling its tasks, but also exceeding its quotas.

Caijing: You mentioned that the Obama-era TPP was meant to contain China, and if the United States returns to the CPTPP, will it make it more difficult for China to join?

Wei Jianguo: We must overcome two misunderstandings. First, China does not have any intention of dominating the CPTPP after joining the CPTPP, and Japan believes that China wants to dominate, but it is not. Second, if the United States returns, this is very good for resolving Sino-US trade frictions, and the two sides can understand their respective needs through contacts from all sides. It is a good thing that the first and second largest economies coexist under the CPTPP rules, which is conducive to resolving Sino-US trade frictions and building mutual trust between China and the United States. It is not that the Return of the United States to the CPTPP will further block China's accession, or that the two will confront and fall out in the FTA.

Caijing: China chose to apply to join the CPTPP this year, in addition to forcing reform, is it also more prepared than before?

Wei Jianguo: After accelerating its opening up to the outside world, China has initially met the requirements of high-level and high-standard free trade agreements, so it is more confident, so it is not surprising that China's attitude will change after a few years. A few years ago someone said that joining the TPP was dancing with wolves, and I said it was not dancing with wolves, and joining the TPP was in a high level of trade rules. China's own efforts are the most important, and no country in the world is as conscious as China in reform and opening up, and no country has forced itself to reform through opening up to China like this. In the next step, when formulating a global trading system with rules as the main body, I think China's voice and voice will be louder.