China-ASEAN FTA 3.0 Talks Substantially Conclude, Unveils New Regional Cooperation & Rule Development Plan

On October 10th, the leaders of China and the ten ASEAN countries announced the substantial conclusion of negotiations for the China-ASEAN Free Trade Area (FTA) 3.0 version and issued a joint statement on the substantial conclusion of the negotiations.

The head of the International Department of the Ministry of Commerce introduced that the negotiations have spanned nearly two years, nine formal rounds of negotiations, and over 100 working group meetings. Both sides have achieved fruitful results in nine areas. Based on the existing China-ASEAN FTA and the Regional Comprehensive Economic Partnership Agreement (RCEP), they have comprehensively expanded mutually beneficial cooperation in emerging areas, strengthened the integration and interconnection in the field of standards and regulations, and promoted trade facilitation and inclusive development.

According to the Ministry of Commerce, the China-ASEAN FTA is China's first FTA negotiated and established with foreign countries and also ASEAN's first FTA. Both sides unanimously believe that the substantial conclusion of the 3.0 version negotiations indicates that both sides are firmly committed to maintaining a trade environment based on rules and are dedicated to deepening economic integration and practical cooperation in a complex global environment, and accelerating economic recovery after the pandemic. The aforementioned upgrade results will comprehensively expand China and ASEAN's mutually beneficial cooperation in emerging areas, strengthen the integration and interconnection in the field of standards and regulations, and promote trade facilitation and inclusive development.

At present, the negotiation teams of both sides have formulated a work plan before the signing of the 3.0 version upgrade protocol, which will accelerate the completion of the formulation of the upgrade protocol, text legal review, and domestic procedures to prepare for the signing of the agreement in 2025.

Yuan Bo, the director and researcher of the Asian Research Institute of the Research Institute of the Ministry of Commerce, said in an interview with the First Financial Daily reporter that the most important upgrade of this 3.0 version negotiation is the establishment of a new rule system in emerging areas, especially the addition of three new chapters on the digital economy, green economy, and supply chain interconnection.

"The China-ASEAN FTA 3.0 version is more like a new cooperation plan or a new plan for rule development given by China and ASEAN in the context of a new round of technological and industrial revolutions and global major changes," said Yuan Bo.

New plan for rule development

In 2010, the China-ASEAN FTA was established. In 2015, both sides reached an upgrade agreement, forming the FTA 2.0 version, which was fully implemented in 2019. In November 2022, both sides officially launched the 3.0 version upgrade negotiations and listed it as a priority in China-ASEAN economic and trade cooperation. The head of the International Department of the Ministry of Commerce said that under the drive of the FTA, China has maintained ASEAN as its largest trading partner for 15 consecutive years, and ASEAN has been China's largest trading partner for four consecutive years. It can be said that the FTA has become the institutional cornerstone of China-ASEAN economic and trade relations.

According to the General Administration of Customs, in the first eight months of this year, ASEAN was my largest trading partner, with a total trade value of 4.5 trillion yuan, an increase of 10%, accounting for 15.7% of my total foreign trade value. Among them, exports to ASEAN were 2.69 trillion yuan, an increase of 13.1%; imports from ASEAN were 1.81 trillion yuan, an increase of 5.7%.

The 3.0 version upgrade covers nine areas, including both the existing areas of the China-ASEAN FTA and emerging areas with great cooperation potential between the two sides, specifically: digital economy, green economy, supply chain interconnection, standard technical regulations and conformity assessment procedures, sanitary and phytosanitary measures, customs procedures and trade facilitation, competition and consumer protection, small and medium-sized enterprises, and economic and technical cooperation.The head of the International Department of the Ministry of Commerce stated that the achievement of the aforementioned outcomes holds significant pioneering importance. Firstly, it expands mutually beneficial cooperation in emerging fields. For the first time, both sides have reached the highest level of digital economy, green economy, and supply chain interconnectivity chapters in their respective trade agreements. Secondly, it strengthens the integration and interconnectivity in the fields of standards and regulations. Both sides have reached the highest level of standard technical regulations and conformity assessment procedures chapters in their contracting practices. Thirdly, it promotes trade facilitation and inclusive development.

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Specifically, in the field of the digital economy, both sides have agreed to promote the "hard connection" of digital infrastructure and enhance the "soft connection" of systems such as electronic invoices and electronic payments. The inclusion of high-level rules and clauses on personal information protection, digital trade standards, paperless trade, and cybersecurity will establish institutional arrangements for deepening cooperation in the digital economy between the two sides.

In the field of the green economy, it is clear that both sides take the Global Development Initiative and other principles as the basic principles for cooperation, carrying out in-depth experience sharing and policy exchanges in eight priority areas such as green trade, green investment, and green standards, and promoting trade and investment cooperation in green industries such as sustainable energy. In the field of supply chain interconnectivity, both sides have committed to jointly promoting the free flow of key products and services, strengthening the interconnectivity of infrastructure construction, and jointly addressing supply chain disruptions to build a secure, stable, smooth, and efficient regional supply chain cooperation network.

Yuan Bo explained that in emerging fields such as the digital economy, green economy, and supply chain interconnectivity, mature international trade rules and standards have not yet been formed. Some economies are working hard to establish and improve domestic standards and regulations in these fields, while others directly adopt European and American standards. "It is precisely because the entire region lacks unified or mutually recognized international standards that enterprises need to adapt to the rules and standards recognized by local markets when entering different markets. This situation has brought many obstacles to enterprises' trade and investment, and has also invisibly increased transaction costs," she said.

She cited the field of electric vehicles as an example: "China and ASEAN have differences in rules and standards in areas such as charging infrastructure standards and battery testing and certification. Therefore, when Chinese enterprises export their products to these markets or invest in local production, they need to undergo re-testing and certification. This not only takes time but also has relatively high costs."

Yuan Bo said that the China-ASEAN Free Trade Area 3.0 version also proposed to prioritize standard cooperation and mutual recognition in fields such as new energy vehicles and electrical appliances. "In fact, China and ASEAN have already carried out some cooperation in these fields, and this negotiation further clarifies these contents. This will help solve the problem of inconsistent industry standards between China and ASEAN countries, reduce the threshold and cost for enterprises to enter each other's markets, and strengthen cooperation between enterprises. In a sense, it will also promote better integration and docking between the Chinese market and the ASEAN market."

For example, in terms of strengthening the integration and interconnectivity in the fields of standards and regulations, according to the head of the International Department of the Ministry of Commerce, the Free Trade Area 3.0 version will allow enterprises from both sides to participate in the formulation of each other's standards, technical regulations, and conformity assessment procedures through a public opinion solicitation process in accordance with the law. For the first time, both sides have committed to using each other's standards when formulating their own standards, encouraging the recognition of each other's conformity assessment results, jointly developing conformity assessment procedures, and prioritizing standard cooperation in fields such as new energy vehicles and electrical appliances, establishing institutional guarantees for promoting the alignment of standards between the two sides. For the first time, both sides have established a separate chapter on competition and consumer protection, established a special committee, strengthened cooperation in competition legislation and law enforcement, and included new rules and clauses such as online consumer protection and tourism consumer protection, which is conducive to promoting cross-border consumption between the two sides, better protecting the rights and interests of enterprises and consumers, and creating a fair competitive market environment for economic and trade exchanges between the two sides.

Mutually Promote Development with RCEP

According to a statement from the Ministry of Commerce, the 3.0 version achieves significant value-added on the basis of the existing China-ASEAN Free Trade Agreement and the Regional Comprehensive Economic Partnership Agreement (RCEP), covering fields such as the digital economy, green economy, supply chain interconnectivity, standard technical regulations and conformity assessment procedures, customs procedures and trade facilitation, sanitary and phytosanitary measures, competition and consumer protection, micro, small and medium-sized enterprises, and economic and technical cooperation.

For example, the head of the International Department of the Ministry of Commerce said that the 3.0 version has achieved value-added in aspects such as customs procedures and trade facilitation, sanitary and phytosanitary measures compared to the existing bilateral free trade agreements and RCEP, including further strengthening smart customs cooperation, optimizing cargo release, express consignments, pre-shipment inspection, and other clauses, and strengthening information exchange and technical cooperation on inspection and quarantine to truly improve the level of trade facilitation between the two sides. The two sides have also promoted inclusive development by establishing chapters on micro, small and medium-sized enterprises and economic and technical cooperation.Yuan Bo stated: "We often say that there is a mutually reinforcing development relationship between the China-ASEAN Free Trade Agreement and the RCEP, especially in the field of rules, where they complement and promote each other. The negotiations for the 3.0 version of the free trade area not only absorbed some rules from the RCEP, but more importantly, innovated and developed on the basis of RCEP rules, and these innovations can also provide experience and reference for future RCEP negotiations."

Yuan Bo gave an example: "Regarding the mutual recognition of rules and standards, the RCEP agreement has already proposed encouraging member parties to further strengthen the mutual recognition of rules and standards through bilateral negotiations. This time, the 3.0 version of the free trade area has taken another step forward on the basis of RCEP."

Yuan Bo believes that in the future, some successful experiences accumulated by China and ASEAN in this regard may have a positive impact on the follow-up negotiations of RCEP and new free trade agreements within the region. In this sense, the 3.0 version of the free trade area can indeed play a demonstrative and leading role within the region.