The reporter learned from the Quanzhou Inspection and Quarantine Bureau that on November 25, the Japanese Ministry of Finance stated that it would re-examine the conditions for the target countries of the preferential tariff system and complete the revision by 2019. According to the new regulations, China will be excluded from preferential tariffs. In other words, Japan will completely terminate the GSP policy for my country starting from 2019, and Chinese original products exported to Japan will no longer enjoy GSP tariff preferences.
“Preferential tariff system” refers to the tariff reductions and exemptions granted by Japan to developing countries, namely the Generalized System of Preferences. Japan is my country’s fourth largest export destination country. It has granted China GSP treatment since 1980 and is the GSP granting country with the largest tariff preference for exports to China.
According to reports, from January to October 2016, the Quanzhou Inspection and Quarantine Bureau issued a total of 957 Japanese GSP certificates of origin for Quanzhou enterprises, with a total amount of US$12.57 million. The main products include resin handicrafts, food, umbrellas, toys, ceramic products, chemical fiber cloth, footwear and clothing, iron products, gardening mud, etc., involving 50 export companies. Assuming that the average tariff reduction range is 5%, by issuing a Japanese GSP certificate of origin, US$628,500 in tariff reductions can be obtained for products exported to Japan.
It is understood that this adjustment will have an impact on Chinese export companies. First of all, it will weaken the competitiveness of some products exported to Japan. According to Japan’s latest GSP policy, more than 35-90% of traditional advantageous products such as organic chemicals and plastic products originating from 2019 will no longer enjoy Japan’s GSP treatment.
It is estimated that the increase in Japan’s import tariff rate will increase the tariff cost of China’s exports to Japan by nearly US$300 million, seriously weakening the competitiveness of export products in the Japanese market. The profit margins of Chinese export companies will shrink, especially those exporting processing trade products, labor-intensive products and other Chinese products with low added value.
Secondly, speed up the relocation of some Japanese manufacturing companies in China. my country’s labor costs and price levels are constantly rising, and the trend of Japanese-funded enterprises withdrawing from my country is becoming more and more obvious.
According to a survey last year by the Japan External Trade Organization, the proportion of Japanese companies planning to reduce the scale of investment, withdraw or transfer to a third country exceeded 10% for the first time, reaching 10.5%. Since chemical products exported from China to Japan can be exempted from import tariffs of 3.1%-6.5% with the GSP certificate of origin, the chemical industry has become one of the key industries for Japanese investment in China. The new policy will have an impact on Japanese companies that import raw materials from China or some companies that have transferred their production lines to China.
Finally, it has a greater impact on the textile industry. Vietnam, Indonesia, Bangladesh, and Cambodia are my country’s main competitors in the Japanese textile and raw material market. While Japan canceled my country’s GSP treatment, it retained the GSP treatment of the above-mentioned countries. After the implementation of the New Deal, the import tariff rate of my country’s original textiles and raw materials in Japan will be 1.06-14.2 percentage points higher than that of Vietnam, Indonesia, Bangladesh, and Cambodia. At the same time, due to the continuous rise in my country’s labor costs and price levels in recent years, labor costs in textile and other industries are on average 1-3 times higher than those in Southeast Asian countries. Japan’s cancellation of the GSP will cause Chinese-related products to face an even more unfavorable competitive situation in Japan.
The relevant person in charge of the Quanzhou Inspection and Quarantine Bureau stated that it is necessary to pay close attention to the impact of the cancellation of Japan’s Generalized System of Preferences on export companies to avoid loss of interests and loss of customers due to policy adjustments; optimize the structure of export commodities, increase the added value of export products, and Make full use of the new free trade area agreement to open up new foreign markets and enhance international competitiveness; encourage qualified enterprises to invest and build factories in Southeast Asia and other countries, make full use of the cost advantages and preferential treatment of third countries, borrow ships to go to sea, and expand exports. Japan will cancel China’s “preferential tariffs” and the textile industry will be greatly affected
