To improve the utilization rate of FREE trade agreements requires multi-party cooperation

Signing the RCEP is very important to China's foreign trade and the multilateral trading system of the world. It has become the consensus of all parties. The biggest advantage of RCEP is that it effectively resolves the "Italian bowl effect" of free trade agreements within the region. Therefore, it is of great significance to guide enterprises to make full use of the preferential terms of RCEP and take this opportunity to improve the utilization rate of Chinese enterprises to other free trade agreements, thus promoting the high-quality development of China's foreign trade.

"Compared with general economic and trade relations, free trade agreements can provide more favorable terms of trade, especially lower tariffs. If enterprises make good use of them, they can reduce their trade costs and enhance their competitiveness." As Lu Xiankun, China's permanent resident advisor to the WTO and executive director of the Coe Centre in Geneva, put it in an interview with China Trade News, current use of free trade agreements between our countries is more variable. He said that the utilization rate of FTAs in the EU, Switzerland and other countries is over 70%, but that in developing countries such as ASEAN, only 26.7% of ASEAN's exports to South Korea from 2007 to 2011 used FTAs. China has also been at a low level of utilization of ftAs.

So, what factors will affect FTA utilization? Lu Xikun introduced the following several factors.

The first is the level of tariff preference and the degree of market opening provided by the FTA. The higher the level of tariff preferences, the more open the market to THE FTA partners, and the higher the utilization rate of the FTA.

The second is the rules of origin in the FTA. This is the core content of all the fta, its purpose is to prevent the fta outside the country to enjoy relevant preferential tariffs, often include standard, and direct shipment requirements, etc., determine product origin of regional free trade agreement will include in principle, allow related products production by using fta in other countries of raw materials, etc. The looser these rules are, the more efficient the fta will be.

Again is the government departments related to the promotion and services. The more government departments promote, the more accurate the services they provide, especially the more assistance they provide to small and medium-sized enterprises with weak capabilities, and the more willing the enterprises are to take advantage of the FTA.

Relevant empirical studies show that the more a country signs free trade agreements, the higher the utilization rate of its free trade agreements will be. For example, Lu Said That Chile has signed nearly 30 free trade agreements so far, and its utilization rate of free trade agreements has been at the leading level in the world. 95% of its exports to Australia and 93% of its exports to South Korea have used the preferential terms of free trade agreements.

Finally, for enterprises, whether or not to use FTA is mainly based on the calculation of costs and benefits, that is, the comparison between the costs they put in when applying for FTA preferential tariffs and the benefits they may obtain.

"For example, in addition to certificates of origin, importing countries often require applicants to provide materials including commercial invoices, bills of lading, air waybills, packing lists, etc., and require all these documents to be identical in terms of quantity and weight of goods, place of origin and port of origin. This often requires professional staff to prepare for it, and requires more investment in manpower and material resources." Lu Said that many enterprises, especially small and medium-sized enterprises, often choose to give up if the free trade agreement's tariff preferences are not large, or the value of goods is low, or the importing country does not accept electronic documents.

Lu Xikun also observed that other countries' efforts to improve the utilization rate of free trade agreements are similar, and they are all aiming at the above factors.

"Some countries and regions, such as Australia, Switzerland and the European Union, have conducted a study on the utilization rate of their fta agreements to find out the reasons for the low utilization rate and propose solutions." At present, there is still some time to go before RCEP comes into effect. During this period, relevant Chinese government departments, CERTIFICATE of Origin issuing agencies, enterprises, universities and research institutions need to make concerted efforts to jointly improve the utilization rate of THE FTA, Said Lu Xiankun.

Relevant Chinese government departments and the China Council for the Promotion of International Trade (CCPIT), which is responsible for issuing certificates of origin, can increase publicity on the RCEP, especially on tariff preferences, rules of origin and other key contents. On July 15, 2020, the Ministry of Commerce, the General Administration of Customs and the Council for the Promotion of International Trade (CCPIT) jointly issued the Notice on Further Improving the Implementation of Bilateral and Regional Free Trade Agreements. The purpose of the Notice is to mobilize the enthusiasm of local governments, industries and enterprises to make use of free trade agreements, and to pay attention to the implementation and track the results.

On the enterprise side, large enterprises should be encouraged and supported to take FTA as an important part of their development strategy. For small and medium-sized enterprises with weak capability, they should provide accurate services through relevant business associations, and provide unified services in terms of process understanding and material preparation. For provinces with more exports to relevant markets, it may be considered to set up special consultation points and service teams in local trade promotion agencies.

In addition, universities and research institutions should also play a role of related, rules of origin for RCEP content, such as China's exports to other members RCEP, China has been signed by the respective trade agreement utilization increased research, especially pay attention to the problems and some lessons learned to do more ground of empirical research, and set to improve the utilization ratio of the fta RCEP and other specific measures. For example, in 2017, The utilization rate of The China-Chile FTA in Wuxi, Jiangsu province exceeded 90%, and its experience should be studied and promoted.