The Regional Comprehensive Economic Partnership (RCEP) was officially signed on November 15, 2020, and is expected to enter into force in early 2022. As RCEP members, China and Thailand actively promoted the signing of RCEP and took the lead in completing the domestic ratification process. Geographically adjacent and with complementary agricultural resources, the two countries are each other's important agricultural trading partners. What impact will RCEP have on Sino-Thai agricultural trade? What opportunities will Chinese agricultural companies face?
An Overview on Sino-Thai Agricultural Trade
Thailand has a tropical monsoon climate that sees concurrent rainfall and hot temperature. With rich arable land and abundant agricultural labor force, Thailand is a traditional agricultural country known as the “Granary of Southeast Asia”. Thailand is a major exporter of rice and natural rubber in Asia and globally, and at the same time exports large amounts of coffee beans, vegetables, tropical fruits, and canned aquatic products. China and Thailand are highly complementary in agriculture as Thailand has abundant agricultural resources and labor force while China has advantages in technology, management and capital, which releases great potential for cooperation.
With the establishment of the ASEAN-China Free Trade Area, the tariffs on 87% of China's agricultural exports to Thailand and 94.5% of Thailand's exports to China have been eliminated. ACFTA deepens the bilateral agricultural cooperation by providing market motivation and institutional guarantees.
Data shows that the trade volume of agricultural products between China and Thailand increased 3.9 times from USD 3.68 billion to USD 14.31 billion from 2010 to 2020, an average annual growth rate of 14.6%. China's exports to Thailand increased 3.6 times from USD 1.19 billion to USD 4.28 billion, and the imports from Thailand increased 4 times from USD 2.49 billion to USD 10.03 billion. China's trade deficit with Thailand is increasing. Sino-Thai agricultural trade continued to grow despite the pandemic outbreak in 2020, with imports and exports increasing by 15% and 42.9% respectively over 2019.
China is Thailand's largest importer and exporter of agricultural products; and Thailand is China's third largest exporter and fifth largest importer of agricultural products. In terms of trade structure, Sino-Thai agricultural trade is dominated by fruits, vegetables and grains. In recent years, the bilateral trade volume in aquatic products and livestock products has rapidly increased.
The Level of Openness in Agricultural Products of China and Thailand under RCEP
In the field of agricultural product market access, China and Thailand have maintained the level of openness under ASEAN-China Free Trade Agreement (ACFTA), and raised the level of openness for a small number of products. 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. The criteria for value content under RCEP are roughly the same as those under ACFTA while RCEP has more members than ACFTA, thus it is easier for RCEP members to reach the criteria. This lowers the threshold for the access to benefits, showing that the tariff concession under RCEP is still of great significance.
For the imports from China, Thailand has promised to maintain zero tariffs or immediately reduce tariffs to zero for 895 agricultural tariff items, accounting for 53.4% of the total items and including livestock products, tomatoes, lettuce, grapes, and apples. There are 461 agricultural items on which the tariff will drop to zero after 10, 15 or 20 years, accounting for 27.5% and including fish, fruits, nuts, vegetable oil, honey, and wine. In addition, Thailand has adopted partial tariff cuts or maintained the benchmark tariff rate for 87 sensitive agricultural items, accounting for 5.1% and including cattle, sheep, horses and their edible offal under certain special tariff items. Correspondingly, China maintains zero tariffs or immediately reduces tariffs to zero for 960 agricultural tariff items imported from Thailand, accounting for 65.3% of the total items and including aquatic products and tropical fruits. There are 404 agricultural items the tariff on which will drop to zero after 10, 15 or 20 years, accounting for 27.5% and including livestock products, fruits and vegetables. There are only 106 items with partial tariff cuts or without tariff cut, accounting for 7.2% and including grain, sugar, and cotton products.
In terms of investment, the Thai government under RCEP has further opened up such fields as rice planting, orchards, dry land planting, and animal husbandry where foreign capital was originally strictly restricted, which offers opportunities for Chinese companies to invest in Thailand. In addition, after RCEP takes effect, members such as China and Thailand will aim at customs clearance within six hours for express delivery and perishable goods. This will promote the development of cross-border logistics and e-commerce of agricultural products, and facilitate the rapid customs clearance and trade growth of fresh agricultural products.
The Priorities for Deepening the Sino-Thai Agricultural Cooperation under RCEP
RCEP offers new opportunities for quality improvement and upgrading of Sino-Thai agricultural cooperation. Agricultural companies should pay close attention to RCEP's entry into force and make a plan in advance, to fully tap the benefits brought by RCEP.
The first is to further prosper the bilateral agricultural trade. Thailand's tropical fruits and health products, as well as China's fish and nuts, are well-known in each other's markets. The favorable conditions such as preferential tariffs and fast customs clearance should be fully used to expand the bilateral trade.
The second is to actively strengthen the agricultural investment in Thailand. As the rules of origin under RCEP are relatively loose and Thailand is expanding the investment access, actions should be taken to increase the investment in Thailand's agriculture and agricultural products processing, optimize resource allocation, and carry out the cooperation in agricultural industry chain.
The third is to promote the development of cross-border e-commerce of agricultural products. RCEP has favorable conditions for developing the cross-border e-commerce of agricultural products. The pandemic has opened up broader space for developing Sino-Thai cross-border e-commerce of agricultural products. Relevant companies can enhance their layout of cross-border e-commerce in Thailand and establish overseas warehouse.
(Source: CCPIT/ chinatradenews.com.cn)