Entering RCEP member states: What is the prospect of China -Laos agricultural trade?

The Regional Comprehensive Economic Partnership (RCEP) has officially entered into force on January 1, 2022. Currently, 14 countries including China, Singapore, Japan, and Laos have completed the domestic ratification process. Only the Philippines has not. China and Laos are connected by mountains and rivers and have close exchanges. Both sides are committed to promoting the signing of the RCEP agreement and taking the lead in completing the domestic ratification process. In recent years, China-Laos economic and trade cooperation has developed rapidly, and agriculture is an important part of it. Under the dual opportunities of the RCEP agreement coming into force and the opening of the China-Laos railway, what is the prospect of bilateral agricultural trade between China and Laos? What opportunities will my country's agricultural enterprises face?

1. Overview of China-Laos agricultural trade

Laos is the only landlocked country among the ASEAN member states with a low level of economic development. Agriculture is an important sector of its national economy, and agricultural GDP accounts for about 16% of GDP. The trade in agricultural products is small, with a trade volume of US$2.42 billion in 2020, mainly exporting live cattle, beverages, cassava, coffee, bananas, rice, sugar, etc., and importing beverages, refined animal feed, and refined sugar.

After the establishment of the China-ASEAN Free Trade Area in 2010, China-Laos agricultural trade has developed rapidly. From 2010 to 2021, the trade volume of agricultural products between China and Laos will increase from US$45.229 million to US$250 million, an increase of 4.6 times. Among them, China's imports from Laos increased from $30.256 million to $200 million; exports to Laos increased from $14.973 million to $52.546 million. At present, China has become Laos' third largest agricultural trade partner, second only to Thailand and Vietnam. China's agricultural products imported from Laos mainly include sugar cane, bananas, tapioca starch, rice, corn, etc. In 2021, the import value of sugar cane and bananas will account for 35% and 20% of China's total imports of agricultural products from Laos. The types of agricultural products exported from China to Laos are relatively scattered, mainly mushrooms, tobacco and tobacco products, garlic, and beverages.

2. China-Laos agricultural product market opening under RCEP

Laos is one of the least developed countries in ASEAN, and its economic development and openness are far behind other ASEAN members. Other RCEP members give Laos some care, allowing its market access to adopt a relatively low level of opening up, and most products adopt a long transition period of more than 13 years, so that its country can gradually adapt to trade liberalization.

In terms of trade in goods, Laos adopts a unified tax reduction method for all RCEP member countries, and its agricultural product liberalization level is 61.3%. Among them, 164 of the 1,675 tax items of agricultural products were immediately reduced to zero when the agreement came into effect, accounting for 9.8% of the total tax items of agricultural products, mainly including the semen of goats and cattle for breeding, wheat for breeding, and uncombed wool, etc. 863 After 13-20 years, the tariff of individual tax items has been reduced to zero, accounting for 51.5%, mainly including milk sauce, mushroom mycelium, starch, sheep, trout, horses, donkeys, mules, cattle, etc.; 648 tax items of agricultural products are exempted. It accounted for 38.7%, mainly including poultry, fresh and cold beef, sea bass, onion, etc. In the RCEP, China still maintains a relatively high market openness to ASEAN under the bilateral free trade agreement, and the level of liberalization of agricultural products is 92.8%. In addition, it has newly opened individual products such as unground pepper and coconut juice to ASEAN.

The tax reduction method for Laos is consistent with that of other ASEAN members, maintaining zero tariffs or immediately reducing zero tariffs on 960 tax items of agricultural products, accounting for 65.3% of the total tax items of agricultural products, mainly including fish, fruits and nuts, beverages, condiments, cakes Desserts, etc.; 404 tax items will be reduced to zero in 10-20 years, accounting for 27.4%, mainly including almonds, essential oils, tea, juice, etc.; 106 tax items will be exempted or partially reduced due to food security and farmers' livelihood considerations. Taxes, mainly including bananas, tapioca starch, coffee, tea, etc., accounted for 7.3%. In terms of trade in services, Laos has made commitments by adopting a positive list approach to the opening of services, including opening up the lease of land to foreign investors with a lease term of up to 75 years; opening up ship salvage and shallow watering services. In terms of investment, Laos adopts the same negative list as other members. Except for hazardous chemicals, currency issuance, wood manufacturing, textile industry, porcelain, jewelry and other industries, all industries not included in the negative list are open to foreign investment.

3. The main direction of deepening China-Laos agricultural cooperation with the help of RCEP

On December 3, 2021, the entire China-Laos railway line will be completed and opened to traffic. With the addition of tariff reductions and exemptions for agricultural products under RCEP, looser rules of origin and high-level trade facilitation arrangements, it will better achieve regional facilities connectivity and smooth trade, and provide a solid foundation for China and Laos. Agricultural cooperation creates new opportunities. China is currently the largest source of agricultural investment in Laos. In the future, China-Laos agricultural cooperation can be deepened from three aspects: First, to promote the development of agricultural industries and rural areas along the China-Laos railway. With the help of the China-Laos Railway, it will open up a new logistics channel for inland agricultural products between China and the Indo-China Peninsula, promote the development of agricultural products production, processing, warehousing, logistics, services and other industries along the route in Laos, and form a radiation effect on the agriculture-related industries in Thailand, Vietnam and other Mekong countries. . The second is to understand the relevant rules and expand the scale of bilateral trade. Make full use of the preferential measures under RCEP to appropriately expand the export of high-quality agricultural products from Laos and transit to China to meet the needs of China's domestic market; develop agricultural service trade with Laos through channels such as China's fertilizer export to Laos. The third is to increase investment in old agriculture and develop processing trade. Focus on grain, natural rubber, beef cattle, fruit and other industries, take advantage of Laos' labor cost advantages to build agricultural industrial parks, and promote deep processing and brand building of agricultural products.