context: PRC and ASEAN leaders announced the conclusion of their 3.0 FTA (free trade agreement) upgrade talks on 10 October. After two years of negotiations, the agreement is set to deepen trade ties between the two economies based on their existing FTA and RCEP (Regional Comprehensive Economic Partnership). The FTA is targeted to be signed in 2025. ASEAN has been the PRC's largest trading partner for four years, accounting for some 16 percent of PRC foreign trade in the first eight months of 2024. Beijing is testing new ways to open up trade via FTAs with partners as part of its 'institutional opening' exploration push.
The most important part of the 3.0 FTA (free trade agreement) upgrade is the setting up of a new rule system in emerging areas, says Yuan Bo 袁波 MofCOM Research Institute Asian Research Centre director. Against global changes in this round of tech and industrial revolution, the 3.0 FTA is a new cooperative plan for rules development jointly presented by the PRC and ASEAN, adds Yuan.
Yuan further shares his insights on the 3.0 FTA
- relevance for new emerging trade areas
- in new emerging areas like digital economy, green economy and supply chain interconnectivity, there are currently no established international trade rules and standards
- some economies are working on establishing and improving domestic standards and rules in these areas, while others are directly adopting standards from Europe and America
- as the entire region lacks unified or mutually recognised international standards, businesses need to adapt to locally accepted rules and standards when entering different markets, which creates numerous obstacles for businesses in trade and investment and increases transaction costs indirectly
- in electric vehicles, there are differences in rules and standards between the PRC and ASEAN in areas such as charging infrastructure standards and battery detection certifications
- when PRC companies export products to these markets or invest in local production, they need to undergo retesting and certification again
- Yuan highlights that the 3.0 FTA proposed prioritising standard cooperation and mutual recognition, particularly in new energy vehicles and electronics
- the PRC and ASEAN have already started some cooperation in these areas, and this round of negotiations further solidified these aspects
- this will help address inconsistencies in industry standards between the two economies, reducing barriers and costs for businesses and strengthening trade ties
- in new emerging areas like digital economy, green economy and supply chain interconnectivity, there are currently no established international trade rules and standards
- relevance with RCEP (Regional Comprehensive Economic Partnership)
- the 3.0 FTA demonstrates the complementary relationship between PRC–ASEAN FTA and RCEP
- the 3.0 FTA incorporated and built on some rules from RCEP
- RCEP encourages members to further strengthen mutual recognition of rules and standards through bilateral negotiations
- the 3.0 FTA has made progress on this front
- RCEP encourages members to further strengthen mutual recognition of rules and standards through bilateral negotiations