On April 1st, Japan officially ended its GSP treatment for China. The adjustment of this policy will have a significant impact on Zhejiang export enterprises, especially textile and chemical enterprises.

China has been granted GSP treatment since 1980, and it is a GSP-giving country with large tariff preference. In December 2018, Japan's Ministry of Finance officially announced that it would readjust the target countries of the preferential tariff system, excluding China, Mexico, Brazil, Thailand and Malaysia from the list of tariff reduction and exemption for developing countries, which meant that China's export enterprises to Japan would be greatly impacted.

Take Zhejiang as an example, Japan is the third largest country in Zhejiang's foreign trade export, second only to the United States and Germany. According to the data of Hangzhou Customs, in 2018, Zhejiang exported 83.7 billion yuan to Japan. In that year, Hangzhou Customs issued 24,569 GSP certificates for Zhejiang products exported to Japan, with a value of 6.1 billion yuan, and enjoyed a tariff reduction of about 180 million yuan in Japan. The main visa products are textiles, chemical industrial products, plastic products, aquatic products, steel products, meat and fish products, mechanical and electrical products, etc.

In the past, the average preferential tariff rate of GSP exported to Japan was about 3%. After the abolition of GSP treatment, the average tariff rate of goods exported to Japan will rise by about 3 percentage points, and some products will even rise by more than 10 percentage points.

Affected by the cancellation of GSP treatment in Japan, Zhejiang's textile and chemical industries bear the brunt. According to the statistics of Hangzhou Customs, in 2018, there were 3,785 visas for chemical industrial products exported to Japan in Hangzhou Customs District (except Ningbo, Zhejiang Province), with a value of 1.867 billion yuan, and 6,078 visas for textile products with a value of 808 million yuan, accounting for about 44% of the value of visas in Zhejiang Province. After the implementation of the New Deal, only these two types of export products will enjoy a tariff reduction of 80 million yuan in Japan. For example, resorcinol exported to Japan by a chemical company in Zhejiang will increase the tariff cost by nearly 3 million yuan every year.

At present, textiles, shoes and boots, umbrellas, bags and so on, which are exported from China to Japan, account for about 60% of the Japanese import market, and these are also the superior export products of Zhejiang.

After April 1st, Japan still retains the GSP treatment granted to Vietnam, Indonesia, India and other countries. The price competitiveness of these countries' products has increased, and Zhejiang's export products are facing fierce competition.

In addition, the investment strategies of Japanese companies in China will also be affected. Some Japanese-funded enterprises set up production bases in China and buy domestic raw materials to manufacture products and then sell them back to Japan. The increase in tariff costs may make Japanese-funded enterprises reconsider the allocation of global production bases and cancel plans to expand investment in China.

In this regard, Hangzhou Customs suggested that enterprises in the customs area should constantly optimize product structure, improve product quality and brand value, and gradually get rid of price advantage dependence; On the other hand, we should continue to make full use of preferential policies of origin to enhance the international competitiveness of products.

First, we should actively explore new overseas markets, especially the markets of countries along the Belt and Road, and make full use of the 15 free trade agreements and three preferential trade arrangements that China has signed with foreign countries to fully enjoy the tariff preferences given to China products by ASEAN, Australia, South Korea, Switzerland, Chile and other free trade partners.

Second, make full use of other countries' GSP treatment to "borrow ships to go to sea". For example, enterprises that have set up production lines in Japan's GSP beneficiary countries such as India, Indonesia and Vietnam are encouraged to "borrow ships to go to sea" and fully enjoy Japan's GSP tariff preferences.

Third, at present, China is actively promoting the regional economic partnership agreement (RECP) and China-Japan-Korea Free Trade Area negotiations with Japan and other countries. Enterprises and industry associations should actively provide industry advice to relevant departments to strive for better opportunities and environment for export products. (From: China Guomen Times)