Entering RCEP member countries: What is the prospect of China-Thailand agricultural trade?

The Regional Comprehensive Economic Partnership Agreement (RCEP) was officially signed on November 15, 2020 and is expected to take effect in early 2022. Both China and Thailand are members of RCEP. The two countries actively promoted the successful signing of the agreement and took the lead in completing the domestic approval process. They are geographically adjacent and have complementary agricultural resources. They are each other's important agricultural trading partners. What impact will RCEP have on China-Thailand agricultural trade? What opportunities will Chinese agricultural enterprises face?

1、 Overview of China-Thailand Agricultural Trade

Thailand has a tropical monsoon climate, with rain and heat in the same period, rich arable land resources and abundant agricultural labor. It is a traditional agricultural country and is known as the "Granary of Southeast Asia". Thailand is a major exporter of rice and natural rubber in Asia and the world and it also occupies an important position in the export of coffee beans, vegetables, tropical fruits, canned aquatic products and other agricultural products. China and Thailand are highly complementary in agriculture. Thailand has advantages in agricultural resources and labor. Our country has advantages in technology, management and capital and has great potential for cooperation.

With the establishment of the China-ASEAN Free Trade Area, Thailand has eliminated tariffs on 87% of China's agricultural products and 94.5% of Thailand's agricultural products, providing market momentum and institutional guarantees for deepening bilateral agricultural cooperation. From 2010 to 2020, the trade volume of agricultural products between China and Thailand increased from US$3.68 billion to US$14.31 billion, an increase of 2.9 times, with an average annual growth rate of 14.6%; China’s exports to Thailand increased from US$1.19 billion to US$4.28 billion. Increased by 2.6 times; imports from Thailand increased from 2.49 billion US dollars to 10.03 billion US dollars, an increase of three times. China is in a deficit position and the deficit is expanding. Even with the outbreak of the epidemic in 2020, China-Thailand agricultural trade continued to grow against the trend, with imports and exports increasing by 15% and 42.9% respectively over the same period. At present, China is Thailand's largest agricultural product export market and its largest source of imports; Thailand is China's third largest agricultural product import source country and the fifth largest agricultural product exporter. In terms of trade structure, China-Thailand trade in agricultural products is dominated by fruits, vegetables and grains. In recent years, trade in aquatic products and livestock products has also rapidly increased.

2、 The opening of China and Thailand's agricultural products sector under the RCEP agreement

In the field of agricultural product market access, China and Thailand have generally maintained the level of openness under the China-ASEAN Free Trade Area, and expanded the level of openness to a small number of products. The RCEP rule of origin implements "regional accumulation", allowing the value components of 15 members to be included in the regional value. Under the condition that the regional value component standards are roughly the same as the China-ASEAN Free Trade Agreement, because RCEP has more members and is easier to meet the standards. The threshold for enjoying benefits is further lowered and the tariff reduction under RCEP is still of great significance.

On the whole, Thailand promised to maintain zero tariffs or immediately reduce to zero tariffs on agricultural products under China's 895 tariff lines, accounting for 53.4% of the total agricultural products. The main categories are livestock products, tomatoes, lettuce, grapes, and apples. There are 461 categories of agricultural products that have dropped to zero after 10, 15 or 20 years, accounting for 27.5%, mainly fish, fruits, nuts, vegetable oil, honey, wine, etc. In addition, Thailand adopted partial tax cuts or maintained the benchmark tax rate for 87 of its more sensitive agricultural products, accounting for 5.1%, mainly cattle, sheep, horses and their edible offal under certain special tax items. Correspondingly, China maintains zero tariffs or immediately reduces tariffs on agricultural products under 960 categories in Thailand, accounting for 65.3% of all agricultural products, mainly aquatic products and tropical fruits. There are 404 agricultural products that have dropped to zero in 10, 15 or 20 years, accounting for 27.5% of all categories, mainly livestock products, fruits and vegetables. There are only 106 products with partial tax cuts and exceptions, accounting for 7.2%, mainly grain, sugar, and cotton products.

In terms of investment, under the RCEP, the Thai government has expanded the opening up of fields such as rice planting, orchards, dryland planting and animal husbandry that previously strictly restricted foreigners from entering, which provides opportunities for Chinese companies to invest in Thailand. In addition, after the RCEP takes effect, members such as China and Thailand will strive for 6-hour customs clearance for express goods and perishable goods, which will help promote the development of cross-border logistics and e-commerce of agricultural products, and promote the rapid customs clearance and trade growth of fresh agricultural products.

3. Leveraging RCEP to deepen the main directions of China-Thailand agricultural cooperation

RCEP provides new opportunities for the improvement and upgrading of China-Thailand agricultural cooperation. Agricultural enterprises can pay close attention to the progress of RCEP's entry into force, actively plan and strive to fully tap the RCEP dividend.

One is to further prosper bilateral agricultural trade. Thailand’s tropical fruits and health products, as well as our country’s fish and nuts, are well-known in each other’s markets. The tariff reduction and exemption treatment under the agreement and the convenience of customs clearance conditions can be used to expand bilateral trade. The second is to actively develop agricultural investment cooperation with Thailand. With the aid of the loose rules of origin in the agreement and Thailand's opportunity to increase agricultural investment access, expand investment in Thailand's agriculture and agricultural products processing industry, optimize resource allocation and carry out agricultural industry chain cooperation. The third is to promote the development of cross-border e-commerce of agricultural products. RCEP has created a good environment for the development of cross-border e-commerce of agricultural products. Especially in the context of the epidemic, Sino-Thailand cross-border e-commerce of agricultural products has broad room for development. Relevant companies can increase their cross-border e-commerce layout and overseas warehouse construction in Thailand.