On 1 January 2022, the Regional Comprehensive Economic Partnership (RCEP) took effect in Japan. Below I’ll introduce RCEP, explaining the idea behind the free trade agreements in general.
Customs duties
Historically, when a country exports goods or services to other countries, the importing country imposes customs duties (tariff) on the goods and services. By doing so, the importing country protects domestic industries. For instance, if foreign cheaper products drive out domestic products in a country, domestic workers can lose their jobs. Or, if its food self-sufficiency ratio becomes too low, its security can be fragile.
Meanwhile, several countries/regions strategically adopt a free port policy. For instance, Singapore and Hong Kong impose almost no customs duties.
From WTO to FTA/EPA
After World War II, as protectionism was seen as one of the causes of the war, promoting free trade became the world trend. GATT and the following WTO were established for that purpose. The EU is the biggest customs union globally, where no customs duties are imposed on the movement of goods and provision of services between the member states.
However, it turned out to be difficult to set a unified rule at the global level through WTO, where developing countries still need high tariffs to protect and develop their less competitive industries. Instead, countries are now seeking bilateral agreements called free trade agreements (FTA) or economic partnership agreements (EPA)[1] to eliminate or reduce tariffs. This move has further developed multilateral agreements: RCEP and the Trans-Pacific Partnership (TPP).
What are the benefits for Japan?
RCEP comprises the ASEAN nations[2] plus Australia, China, Japan, New Zealand, and South Korea. It is Japan’s first economic partnership agreement with China and South Korea, the 1st and the 3rd biggest destination of its export, respectively. Therefore, Japan is likely to benefit the most from RCEP tariff concessions for export to China.
Below are highlights of the benefits for Japan.
Note:
[1] EPA is a more comprehensive agreement, including investment, intellectual property rights, etc.
[2] Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
1. Export to China
The customs duties on motors for EV (electric vehicles) will be reduced in stages from the current 10-12% and eliminated in the future.
The same on sake (Japanese rice wine), scallops, retort cooked rice, yellowtail (buri in Japanese), and chocolate snacks, which are popular in China, will be reduced in stages and eliminated in the future.
2. Import
The customs duties on clothes from Thailand, Vietnam, Australia, etc., have already been eliminated following its effectuation.
The same on shaoxingjiu (Chinese rice wine) and makgeolli (Korean rice wine) will be reduced in stages and eliminated in the future.
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Disclaimer: While every effort has been made to ensure that the information on this article is accurate at the time of posting, it is not intended to provide legal advice as individual situations will differ. If you do require advice or wish to find out more about the information provided and related topics, please contact the author.
Text by: Atty. Atsushi Miyake of Miyake Law, January 2022.
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