Entering RCEP members: What is the prospect of China-Japan agricultural trade?

The Regional Comprehensive Economic Partnership Agreement (RCEP) was formally signed on November 15, 2020. The total population, economic volume, and total trade volume of the RCEP region account for about 30% of the global total. It is currently the world's largest free trade zone. At present, China, Singapore, Thailand, Japan and other countries have completed domestic approval procedures, and the agreement is expected to take effect in 2022. Both China and Japan are members of RCEP and they are each other's important agricultural product trading partners. What impact will the RCEP agreement have on China-Japan agricultural product trade?  What is the prospect of China-Japan agricultural trade after reaching the RCEP ?

1. The overall situation of China-Japan agricultural trade

Japan has a large population and a developed economy. Due to the shortage of agricultural resources such as arable land and the high price of agricultural labor, Japan's agriculture generally lacks comparative advantages and is an important import market for agricultural products in the world. In recent years, Japan’s agricultural imports have remained above US$70 billion, making it become one of the world’s top five importing countries of agricultural products. Japan’s main imported agricultural products are fish, pig products, cattle products, poultry products, corn products, etc.  Japan has certain advantages in processed agricultural products and high-end specialty agricultural products such as Japanese beef. These products are exported in small quantities.

China and Japan are geographically adjacent and their eating habits are similar. Chinese agricultural products export to Japan have unique conditions. After China’s accession to the WTO, trade in agricultural products between China and Japan has grown rapidly. However, as Japan’s free trade agreements with Thailand, Vietnam and other ASEAN countries have caused trade transfers to our country and Japan’s implementation of technical trade measures and other factors, our country’s agricultural exports to Japan is stuttering. According to China Customs data, China's agricultural exports to Japan increased from 5.74 billion US dollars in 2001 to 12.02 billion US dollars in 2012 and then declined, falling to 10.38 billion US dollars in 2019 and further falling to 9.64 billion US dollars in 2020. Since the base of Japan's agricultural imports is small but growing rapidly, it was still less than US$300 million in 2001 and reached US$1.28 billion in 2020. China’s exports to Japan are mainly vegetables, poultry products, fish, shellfish, and molluscs, while imports from Japan are mainly aquatic products, wine, and puffed food. Japan is China's largest exporter on agricultural products, and China is Japan's second largest source of agricultural imports. China-Japan agricultural trade is of great significance to both sides.

2.The opening situation of Chinese and Japanese agricultural products markets under RCEP

Before the RCEP was reached, ASEAN, New Zealand, Australia, and South Korea had signed bilateral free trade agreements with our country. Among the members, Japan had not signed a free trade agreement with our country. The signing of RCEP made the first bilateral tariff concession arrangement between China and Japan.

Japan has consistently implemented high protections for agriculture, and the level of agricultural openness under the free trade agreements that has signed is generally low. Under RCEP, Japan promised to finally eliminate tariffs on more than 1,400 agricultural products tax items in China, accounting for about 60% of the total agricultural products tax items in China. Among them, there were 717 items with immediate zero tax reduction, accounting for 29.3% of the total agricultural products tax items, mainly unroasted coffee, tea, corn, edible sorghum, soybeans, sugar cane honey, chewing gum, etc.; 11 years, 318 zero tax items, Accounted for 13% of the total agricultural products tax items, mainly fresh and frozen fish, frozen sweet corn, dried mushrooms, pears, peaches, grain grits, caviar, canned peas, etc.; 373 tax items were reduced to zero in 2016, accounting for the total agricultural product tax items  15.3% of agricultural products, mainly tomatoes, cauliflower, burdock, oranges, cherries, ginseng, canned abalone, canned sea cucumbers, biscuits, garlic powder, etc.; there are 5 zero tax items in 21 years, accounting for 0.2% of the total agricultural products tax items, mainly fermented Beverages, alcoholic beverages, animal hides, etc. In addition, Japan has taken exceptions to its 1032 sensitive agricultural products tax items without reducing tariffs, accounting for about 40% of the total agricultural products tax items, mainly grains, vegetable oils, dairy products, beef, pork, etc.

At the same time, China promised to gradually abolish tariffs on 1273 Japanese agricultural products tax items, accounting for about 86.6% of the total Japanese agricultural products tax items. Japan's aquatic products, processed foods, and specialty alcohols will enjoy zero tariff treatment.

3.Make use of RCEP to deepen the main direction of China-Japan agricultural trade cooperation

The tariff reduction and exemption treatment under RCEP can help offset the negative impact of other free trade agreements on the export of our country's agricultural products to Japan. In addition to tariff concessions, RCEP has high-level commitments in terms of rules of origin, trade facilitation, service investment, and non-tariff barriers, creating conditions for expanding and deepening China-Japan agricultural trade cooperation. Agricultural trading companies can conduct comprehensive analysis and design development strategies based on their own conditions and relevant RCEP rules to make full use of preferential policies.

One is to actively expand exports of agricultural products to Japan. The tariff reduction and exemption policy is an "immediate" dividend for trading companies.  Agricultural products trading companies can gain in-depth understanding of Japanese agricultural product tax reductions and rules of origin under the RCEP, adjust the structure of products exported to Japan, and carry out marketing promotions for the Japanese market to maximize the use of Japan’s preferential tariffs on agricultural products to China and expand Japanese agricultural products exports. The second is to appropriately expand imports of high-end agricultural products from Japan. With the continuous improvement of residents' income level and the upgrading of consumption structure, our country's demand for high-end and characteristic agricultural products will expand. Companies can take advantage of RCEP to strengthen communication and docking with Japanese suppliers, "bring in" high-quality Japanese agricultural products, increase domestic consumer choices, and meet people's growing needs for a better life. The third is to carry out cross-border agricultural industry chain cooperation with Japan. Japan’s agricultural product processing industry is relatively developed, with a high degree of intensive and deep processing of products, a wide variety of products, and exquisite and fashionable packaging designs. Our country can take advantage of the RCEP signing opportunity to expand the introduction of excellent enterprises and technologies in the fields of Japanese agricultural product processing, testing, packaging, design, etc., to help our country's agriculture achieve high quality and efficiency, and to develop a large RCEP regional market using the loosely agreed rules of origin.