On June 2, the Regional Comprehensive Economic Partnership (RCEP) came into full effect for 15 member countries, marking that the world’s largest free trade area will enter a new stage of full implementation.
The current situation and characteristics of the textile and garment industry
In recent years, the RCEP regional market, with Japan, South Korea, Australia and New Zealand as its foundation and China as its growth engine, has become increasingly prominent in the global textile and apparel industry. The release of policy dividends from RCEP will help reconstruct the industrial value chain in East Asia, accelerate the economic recovery process of various countries, and create more comprehensive and in-depth regional industrial cooperation opportunities for our country.
Overview of the development of my country’s textile and garment industry
From the distribution point of view:
my country’s textile and apparel industry chain is concentrated in the eastern and southern regions as well as Xinjiang and other raw material production areas. In comparison, enterprises in Zhejiang Province and Jiangsu Province have a wider coverage in the industrial chain and can basically cover the upstream, middle and lower reaches of the textile and apparel industry chain. Representative enterprises in other provinces such as Fujian Province, Shandong Province and Guangdong Province mainly include Fabric and clothing trade enterprise.
In terms of growth:
The profit performance of the textile, clothing and apparel industry is significantly higher than the overall level of the manufacturing industry. At present, our country has formed the most complete textile and apparel industry chain and supply chain in the world.
From the perspective:
Technological progress promotes industry development, and my country’s clothing and textile industry has made significant progress in terms of industrial chain, industrial structure, and marketization level. According to data from the China Textile and Apparel Federation, the textile and apparel industry has broken through the “stuck neck” problem in fiber materials, green manufacturing, textile machinery, etc. With the application and development of technologies such as the Internet, big data, AI, and the Internet of Things, the industrial structure of the textile and clothing industry continues to be optimized and adjusted, and the proportion of labor-intensive industries has declined.
The impact of RCEP on the textile industry when it takes full effect
RCEP member countries play an important role in global textile and apparel trade and have a significant impact on my country’s import and export trade. In 2022, my country’s textile and apparel exports to other member states of the Regional Comprehensive Economic Partnership Agreement (RCEP) reached US$95.31 billion, a year-on-year increase of 9.7%, and its proportion of total textile and apparel exports increased from 27.3% in 2019 to 2022. 29.5%.
Trade exchanges in China’s textile and apparel industry
For the whole year of 2022, my country’s textile and apparel exports reached US$323.34 billion, a year-on-year increase of 2.6% (a year-on-year increase of 5.9% in RMB), setting another record high. Among them, textile exports were US$147.95 billion, a year-on-year increase of 2.0% (a year-on-year increase of 4.9% in RMB); clothing exports were US$175.40 billion, a year-on-year increase of 3.2% (a year-on-year increase of 6.7% in RMB).
With the upgrading of domestic consumption and the improvement of the production layout capabilities of clothing companies’ transnational supply chains, the scale of my country’s clothing imports from RCEP member countries has continued to expand in recent years.
The main raw materials imported by my country from RCEP member countries
Vietnam: imports a large amount of cotton yarn and clothing;
Cambodia: imported cotton knitted clothing, etc.;
Japan & South Korea: Import functional fabrics, chemical fiber textiles and clothing, textile dyes, etc.;
The main trade situation of my country’s textile and apparel export market in 2022
United States: Entering the post-epidemic period, end consumption in the U.S. textile market remains active.
ASEAN: As epidemic prevention and control measures are relaxed, the manufacturing industry in ASEAN countries has begun to recover, and the demand for products in my country’s textile industry chain continues to increase. In terms of exports of chemical fibers, textile yarns and textile fabrics, ASEAN is my country’s largest market, with Vietnam being one of the most important exporting countries.
EU & Japan:
The impact of RCEP on the textile and apparel industries of member countries
The textile and apparel industry has an extremely long industrial chain with many intermediate links. For a long time, affected by various factors such as labor costs and supply, trade preferential arrangements, cotton quotas, procurement strategies, etc., RCEP member states have formed a China-centered regional industrial cooperation model with obvious advantages. China, Japan, South Korea, and ASEAN countries have A supply chain layout and trade investment model that is both competitive and cooperative has been established.
In general, the full entry into force of RCEP will further leverage the advantages of low-cost and labor resources in ASEAN countries, and will promote textile and clothing exports, employment and economic growth in ASEAN countries. At the same time, it will drive the growth of China’s exports of intermediate products such as yarns and fabrics to ASEAN, and significantly increase the fluidity, activity and interdependence of textile and apparel trade in the region, thereby driving the rise of China-centered Asian supply chains.
1. Trade level
Compared with other industries, RCEP has a more direct and significant impact on the textile and apparel industry trade. The relevant provisions mainly include:
Tariff reduction commitments
The RCEP provisions expand the scope of tariff concessions to some textile and apparel products, including some clothing and bed fabrics exported to Indonesia, some chemical fibers and fabrics, clothing and textiles exported to the Philippines, and some cotton yarn, fabrics and chemical fiber products exported to Malaysia. , will be able to enjoy tariff reductions beyond those in the original free trade agreement.
Trade liberalization and facilitation measures
Under the RCEP framework, other member states’ liberalization commitments to China’s textiles exceed 94%, and China’s liberalization commitments to textiles exceed 95%.
Influence
RCEP is the first free trade agreement between China and Japan, and its effectiveness is remarkableIt will benefit my country’s textile and apparel exports to Japan. In recent years, due to factors such as the weakening of the demographic dividend, trade protection measures, and rising raw material costs, China’s share of textile and apparel exports to Japan has been continuously squeezed out by ASEAN countries, falling from about 80% in 2010 to 59% in 2020.
According to Japan’s tariff reduction commitment schedule, the tax rates for 21 tax codes on knitted clothing will be reduced to 0 in the 10th year, and the tax rates for 266 tax codes will be reduced to 0 in the 16th year. Under RCEP, Japan’s average annual tariff reduction for Chinese textile and apparel products is 0.5%-0.8%. It is expected that in the first year after the implementation of RCEP, China’s exports of clothing to Japan will pay a reduction of 83 million to 125 million U.S. dollars in tariffs. After that, With annual increases until zero tariffs are achieved, my country’s exports of clothing to Japan will be able to pay about US$1.25 billion less in tariffs every year.
2. Investment level
rules of origin
RCEP is relatively loose regarding the origin of textile and clothing products. Annex 1 of Chapter 3 (Rules of Origin) of the Agreement text states that knitted or crocheted fabrics are “Chapter Changes” and all non-originating materials are deemed to have been changed at the first two-digit level of the Harmonized System. origin.
investment facilitation
Article 17 (Investment Facilitation) of Chapter 10 (Investment) of RCEP includes: simplifying investment application and approval procedures; designing or maintaining contact points, one-stop investment centers, contact centers or other entities to provide assistance and Consulting services, including providing business licenses and permitting facilities.
Influence
The unified, concise and relatively loose rules of origin in the RCEP agreement are conducive to the optimal allocation of production chain resources in the region. Before the establishment of RCEP, there were already existing bilateral free trade agreements between member states, but they had many additional conditions and were not as favorable as RCEP.
Taking the ASEAN-Japan Free Trade Agreement as an example, the rules of origin indicate that some specific fabrics must be produced within the free trade zone to enjoy duty-free treatment. After RCEP comes into effect, if ASEAN countries import fabrics from my country, process them domestically and re-export them, they will be deemed to apply the rules of origin and enjoy tax-free treatment in the region. This will not only help ASEAN countries expand exports and make full use of resources in the production chain, but will also help the export of my country’s intermediate products (fabrics, etc.), slow down the transfer of the entire industry chain, maintain my country’s central position in the global competitive landscape, and promote the ” go out”.
Investment facilitation measures help my country expand intra-regional trade and investment and are conducive to building a regional value chain. According to incomplete statistics, the stock of foreign investment in China’s textile industry exceeds 10 billion US dollars. The industry’s foreign investment covers almost the entire textile and apparel industry chain. Investment methods include greenfield investment, equity mergers and acquisitions, asset acquisitions and joint ventures and other typical forms of FDI (international direct investment). RCEP’s investment facilitation measures will be conducive to the recovery and growth of my country’s foreign investment. They will not only benefit the production and construction of member countries, but also build a regional value chain with China as the core, giving full play to the region’s broad market prospects and production and manufacturing potential.
3. Industrial level
Industrial synergy is closely related to trade and investment. In addition to the main provisions mentioned above, the provisions affecting the agreement also include:
movement of natural persons
It includes 9 items, namely definition, scope, spouses and dependents, granting temporary entry, specific commitment table for temporary movement of natural persons, processing applications, transparency, cooperation, and dispute resolution. It will be more convenient for my country to carry out textile and clothing technology exchanges and investments with RCEP member countries.
intellectual property
Leading companies in the field of clothing and apparel possess a large amount of innovative intellectual property rights, which provides institutional guarantees for developed countries to carry out technological cooperation with my country, and is also conducive to improving my country’s brand image in the process of transformation.
Influence
RCEP countries complement each other’s advantages, and by improving division of labor and collaboration, it will help strengthen China’s important position in the competitive landscape of the global textile and apparel industry. After RCEP takes effect, driven by tariff preferences, China and countries in the region will carry out extensive cooperation to achieve the economic effect of “working together to stay warm”. For example, in the process of raw material export and processing, various countries provide tax-free benefits, and the cost reduction is transmitted to the fabrics, which is ultimately reflected in the price of ready-made garments. Competition and cooperation between regions have reduced the overall cost of garments, making the textile and apparel industry in China and the core Asia-Pacific region more competitive in the international market.
Emerging countries that benefit from the RCEP policy will force Chinese companies to innovate, and at the same time provide China with good opportunities for industrial transformation and overseas market deployment. Competition within the textile and apparel industry will become more intense, and domestic brands will compete with export products from developed countries, forcing companies to speed up technological innovation and seize a larger international market. At the same time, Chinese textile and apparel companies will have the opportunity to fully explore the regional market potential. For example, many well-known clothing brands in my country have accelerated their deployment within the RCEP region, such as Anta opening flagship stores in Vietnam, Malaysia, the Philippines and other countries; Lily Lili opening flagship stores in Thailand and Singapore. It has opened 70 retail stores in 11 countries; Heilan Home has opened 29 stores in Malaysia, Thailand, Singapore, Vietnam, Japan and other countries; Semir has deeply cultivated the Lazada platform and opened physical stores in Indonesia and Laos. Emerging countries provide a vast consumer market, and my country will speed up corporate upgrading and build higher-quality Chinese brands on the unified policies and regional stage provided by RCEP.
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