A diary about the 10th of Ramadan Railway:
New responsibility after a decade of working abroad
Seize RCEP opportunities to promote high-quality development of Sichuan’s Baijiu industry
text Jiang Wenchun Deputy General Manager of Wuliangye Group Company, Secretary of the Party Committee and Chairman of Push Group
Jiang Wenchun, Department General Manager of Wuliangye Yibin Co., Ltd., and Party Chief and Chairman of Sichuan Yibin PUSH Group Co., Ltd.
Chen Keyu, Department Director of Foreign Affairs Group, Office of Wuliangye Yibin Co., Ltd., Ltd.
Since its official implementation on January 1, 2022, the driving role of the " Regional Comprehensive Economic Partnership Agreement " (RCEP) on regional trade is gradually emerging. All industries are seizing policy dividends and actively integrating into the RCEP "circle of friends". As China's largest liquor brewing province, Sichuan accurately grasps the current development situation of import and export trade of liquor, rationally analyzes opportunities and challenges, and actively integrates into the international market. This is of great practical significance for enhancing the influence of Sichuan liquor brand and the international competitiveness of liquor companies, and promoting the high-quality development of Sichuan liquor industry.
1. Development status of Sichuan liquor export trade
liquor industry is a traditional advantageous industry in Sichuan Province, with the highest output in the country, high market share and outstanding contribution. From 2009 to 2020, Sichuan's total export trade volume was approximately US$1.3846 billion, ranking second in the country, with a total volume of approximately 19.682 million liters, ranking third in the country. The development of export trade shows the following three characteristics:
First, the total export volume has remained at a low level all year round. From 2009 to 2020, Sichuan liquor's annual export trade volume and trade volume fluctuated in medium and low range. On the overall trend, the trade volume grew slowly, and the trade volume did not change much. In terms of trade volume, Sichuan's liquor export trade volume was the highest in 2015, about US$176.6 million; the lowest in 2009, about US$52.9 million.
Second, the total export volume accounts for a small proportion of the total national volume. The annual export trade volume and trade volume of Sichuan liquor in the country's liquor exports are generally declining, and they stabilize after 2014. Sichuan liquor's annual export trade volume market accounted for 21.6% to 93.8%, of which, the market share of trade volume from 2009 to 2010 was higher than 90%, sharply dropped to 52.4% in 2011, to 24.1% in 2013, and stabilized and slightly increased after 2014. The annual export trade volume market accounted for 8.7% to 36.5%. In 2009, the annual export trade volume market accounted for 36.5%, which dropped sharply to 9.4% in 2013. It has stabilized after 2014, stably between 8.7% and 12.5%.
Third, the export destinations are relatively concentrated. Sichuan liquor export trade destination market is mainly in Asia, mainly in East Asia and Southeast Asian countries and regions. In 2020, the trade volume and trade volume exported to Asia were the highest, at 80.6% and 73.1% respectively; the trade volume exported to Africa was the lowest, at only 0.2% and 1.3%. There are 43 export destination markets (country or region) in Sichuan. The export trade volume exceeds 10 million US dollars is Hong Kong (52.1, 49.4%) and Singapore (13.3, 12.6%). The two are mainly re-export trade; Japan, Australia, etc. for more than one million US dollars are Japan, Australia, etc.
2. Opportunities faced
RCEP signing is another major opening-up result after China joined WTO. It is conducive to promoting liberalization of goods trade, accelerating the opening up of service trade, promoting the construction of a more reasonable international business environment, and helping to build a batch of Sichuan wine regional brands into internationally renowned brands.
First, tariff preferential treatment improves the competitiveness of the international market of products. After the RCEP comes into effect, Japan will exempt import Chinese liquor from tariffs (base tax rate 16%) within 21 years, which will gradually reduce the trade costs and market sales prices of liquor exported to the Japanese market, which will help enhance the competitive advantage of Sichuan liquor in the international market and bring certain trade opportunities. At present, other RCEP members except Japan have achieved zero tariff reduction or implemented non-tax reduction arrangements under different tariff agreements. The entry into force of the agreement has little impact on the tariff cost of exported products from wine companies in the province to other member states. However, with the in-depth implementation of RCEP, it is worth looking forward to whether more member countries will implement tax reduction policies in the future.
Second, the cumulative rules of the region of origin lower the threshold for enjoying goods. Generally speaking, bilateral free trade agreements require that goods meet value-added standards or production requirements in exporting countries before they can enjoy preferential tariffs from importing countries. However, with the continuous refinement of international division of labor and the continuous development of the modern industrial chain, most of the products participating in international trade will be distributed in multiple countries, objectively increasing the difficulty of some products to enjoy tariff preferential treatment. The advantage of RCEP lies in the adoption of regional cumulative rules. That is, if Sichuan's liquor industry layout promotes the construction of a global industrial chain, when liquor products are exported to other RCEP member countries, the intermediate products of multiple member countries can be included in the value-added standards, which will significantly lower the threshold for product preferential policies, and encourage more products to have the opportunity to enjoy preferential policies such as tariff concessions and customs clearance convenience.
Third, customs clearance facilitation brings a good export environment. After RCEP comes into effect, measures such as shortening release time and simplifying customs clearance procedures in the agreement will provide Sichuan liquor companies certified by AEO (certified operator). At the same time, the agreement ensures that the laws and regulations in the entire customs are open and transparent, and strengthens customs cooperation and other provisions will more effectively maintain regional trade order and create a favorable external environment for Sichuan liquor companies to enter the international market. At the same time, relevant departments are currently sorting out the list of obligations involving customs procedures and trade facilitation, and conducting research on the requirements of remote entry and exit supervision documents such as Japan, South Korea, and New Zealand. These supervision documents and requirements will help Sichuan liquor companies deepen their understanding of the policies of member countries when carrying out export trade, formulate response measures in advance, and effectively respond to risks and challenges.
Fourth, the service investment and opening up help the overseas marketing network become increasingly sound. After the agreement comes into effect, RCEP member states will make different degrees of open commitments to distribution, retail, wholesale services, etc., which will provide certain convenience for Sichuan liquor manufacturers to build overseas marketing service outlets within the RCEP area and further establish and improve overseas marketing and service guarantee systems, which will help enterprises carry out a series of work such as marketing, brand communication, and after-sales services overseas to enhance the market influence of the product.
5: High-standard intellectual property protection clauses help manufacturers protect their legitimate rights and interests. False and shoddy behavior has always been a "difficult" problem in the liquor industry, and the protection of intellectual property rights has attracted widespread attention from market entities. The intellectual property chapter of RCEP is the most comprehensive intellectual property chapter included in the free trade agreement signed by China so far, covering various fields such as copyright, trademark, geographical indication, patent, and anti-unfair competition. It provides strong support for Sichuan liquor to strengthen brand output while ensuring product output and safeguard the legitimate rights and interests of production enterprises through legal means.
3. Challenges faced
World Distilled liquor is divided into six categories: Brandy , Whiskey , Vodka , Rum , gin and Chinese liquor. Among them, Chinese liquor is the distilled liquor with the most complex craftsmanship and richest flavor in the world. It has obvious cultural attributes, but it is challenged in international trade such as technical support, institutional guarantees, cultural communication, and policy research. At the same time, other spirits categories have largely impacted the domestic market with the entry into force, bringing more severe challenges to the liquor industry.
First, the spread of influence of China's international liquor market is limited. Data shows that China's liquor has an international influence that is significantly lower than that of whiskey and other spirits, and its "presence" in the international market is relatively low. In 2019, China's liquor export trade volume was about 1/20 of whiskey, 1/11 of brandy, 1/3 of vodka, and 1/2 of gin and rum. There are three main reasons. First, Chinese liquor has no independent HS encoding (customs code). Although the State Council Tariff Commission formulated the Liquor HS code 22089020 in 2009, this is not an independent or general HS code , but is subdivided from the category "Other strong liquors (coded as 220890)" and is only applicable to China's import and export trade of liquor.At present, most importing countries have not set up separate categories for Chinese liquor. For example, South Korea's code for Chinese liquor is 2208906000, the category name is displayed as Kaoliang Wine (sorghum wine), and Indonesian 's code for Chinese liquor is 22089040, which is placed under the entry "Other spirits with alcohol content exceeding 40%". Second, China's liquor exports lack international standards. Chinese liquor has not yet obtained standards from international organizations such as International Organization for Standardization and United Nations Food and Agriculture Organization , resulting in a lack of relevant standard basis for international trade. Third, Sichuan Liquor failed to achieve "grouping to go overseas". Sichuan liquor has many flavors, including strong fragrance, sauce fragrance, mixed fragrance, etc., which are mostly reflected in competitive relationships in the global market. When promoting brands, they emphasize too much on the differences in their respective brand history and fragrance, and do not pay enough attention to leveraging each other to open up the international market and jointly creating Chinese liquor brands.
Second, the market impact of other spirits categories is still strong. As import tariffs gradually decrease, sake , whiskey, wine and other categories have largely impacted the domestic market based on their already dominant market share and position. After the implementation of RCEP, China's sake tax rate will eventually be reduced from 40% to zero tariffs. The import cost of a single bottle of Japanese sake will be reduced by about 10 to 20 yuan, and will continue to be reduced to zero tariffs in the next 20 years; the import tariff of Japanese whiskey will be reduced from 5% to 4.1%, and will achieve zero tariffs in the next 11 years; wine production areas represented by New Zealand may take advantage of the momentum of RCEP taking effect, expand production capacity, capture the domestic market, usher in a new round of development peak, and bring severe challenges to the Sichuan liquor industry.
Third, the promotion of Sichuan wine culture is not enough. Sichuan liquor has a long history, unique production area, unique style of wine, and a profound cultural background, but there are still problems that are not thorough in related research and exploration and practice. On the one hand, the construction of overseas marketing system is still in its infancy, and some leading enterprises in the province have not even established overseas marketing outlets; in the marketing process, they rely on traditional forms such as light box display boards and sponsorship activities, which lack appeal to international consumers. On the other hand, Sichuan wine, Sichuan cuisine, Sichuan tea, and other related advantageous industries that are well-known at home and abroad have not yet formed obvious synergistic advantages, resulting in international consumers knowing Sichuan culture well and knowing little about Sichuan liquor. In addition, the production companies do not summarize and refine the historical heritage of Sichuan liquor culture, craftsman spirit, , and the beauty of humanities, and there are not many channels and methods to tell the "Sichuan liquor story".
Fourth, the research level of policy research on production and operation entities needs to be improved. Some wine companies have obvious "basin awareness" and are doing their best to occupy domestic and provincial market share, but they lack forward-looking and confidence in opening up the international market, and do not pay enough attention to integrating into RCEP. Most policy research is still in its infancy, especially in the cumulative rules of origin outside of tariff preferential treatment, policies such as service trade and customs clearance facilitation, and there is no way to understand the contents of agreements such as relief measures and dispute settlement, which leads to the lack of subjective initiative of Sichuan liquor entering the international market.
4. Countermeasures and measures suggestion
In recent years, the Sichuan Provincial Party Committee and the Provincial Government have attached great importance to the development of the liquor industry and included it in the key areas of the "5+1" modern industrial system for cultivation. Promoting the Sichuan liquor industry to seize the new opportunities for RCEP to take effect and promote the internationalization of liquor is one of the important paths to implement the decisions and deployments of the provincial party committee and government and achieve high-quality development of Sichuan's industry. Comprehensively analyze the opportunities and challenges brought by RCEP, and put forward the following countermeasures and suggestions:
First, we will focus on expanding overseas markets. On the one hand, we must seize the historic opportunities brought by China's establishment of multilateral free trade relations with RCEP member states and promote Sichuan wine products to further enter the international market. On the other hand, we should focus on cultivating famous and high-quality brands and encourage leading Sichuan wine enterprises to take the lead in "going out". Support leading enterprises to deepen their efforts in the international consumer market of liquor, strengthen their main products and promote brands, and enhance the market share and reputation of international large products. Guide leading enterprises to keep up with the new trend of internationalization and youthful liquor consumption, and create a new generation of internationalized large items in line with the needs of overseas consumers, and continuously enhance the international competitiveness of well-known Sichuan liquor brands.Leading enterprises are encouraged to take the lead in setting up marketing service outlets overseas, improve overseas marketing and service guarantee systems, and broaden marketing channels.
The second is to integrate and promote Sichuan wine culture. Support Sichuan wine enterprises to participate in foreign exhibitions, sales and publicity activities, and appear in international activities organized by relevant provincial departments. It is encouraged to build the China International Famous Liquor Expo into a national wine culture and product trade promotion platform, support famous and high-quality liquor enterprises and high-quality capital mergers and reorganizations of small and medium-sized liquor enterprises, further improve production capacity concentration, and expand and strengthen well-known brands and leading enterprises. Explore and leverage the synergistic advantages of Sichuan liquor and other Sichuan characteristic industries, and promote and export "drinke Sichuan liquor, eat Sichuan cuisine, and taste Sichuan tea" as important cultural labels in Sichuan to improve the "exposure" and "presence" of Sichuan liquor in the international market.
The third is to stimulate the linkage effect between market cultivation and business travel. The "Belt and Road" initiative has formed a three-dimensional pattern of "government-led, enterprise participation, and private promotion", laying a good foundation for liquor to go global. Relevant Chinese institutions should help build an exchange and cooperation platform between Sichuan wine companies and countries and regions along the "Belt and Road", and support Sichuan wine companies to bring Sichuan wine into the "Belt and Road" business activities through various forms such as sponsorship and tasting, laying the foundation for the continuous development of Sichuan wine brand marketing activities in countries and regions along the "Belt and Road" and creating a new international "going out" model.
Fourth, improve the mechanism to reduce trade barriers . Relevant departments of major liquor production areas in Sichuan Province, such as Yibin City , Luzhou City , etc., are encouraged to take the lead in organizing the international standardization application for China liquor, and actively apply for independent HS code of Chinese liquor through Chengdu Customs , and promote the establishment of hard indicators of Chinese liquor's influence in the global situation. General Administration of Customs supports the integration of Chengdu Customs’ “National Liquor Testing Key Laboratory” and Wuliangye “National Liquor Product Quality Supervision and Inspection Center” technical resources, jointly build a liquor testing service platform in industrial agglomeration areas such as Yibin Comprehensive Bonded Zone, and set up a “Liquor International Technical Trade Measures Review Base” to solve the technical trade barriers faced by liquor exports in the entire chain.
Fifth, implement precise policies and strengthen corporate guidance. Increase government training and guidance efforts, help wine companies accurately grasp the specific regulations of RCEP in reducing tariffs, opening up the market, reducing barriers, etc., and actively build bridges for wine companies to communicate and connect with relevant international departments. Relevant departments should appropriately consider adopting tax cuts, subsidies and other methods to encourage liquor enterprises to develop and create liquor export products that adapt to the technical standards and cultural characteristics of foreign markets in accordance with international standards. Guide and support the provincial wine companies to conscientiously implement the "Several Measures to Promote the High-Quality Development of Sichuan Liquor Industry" (Chuan Office [2021] No. 33), and implement precise policies in promoting industrial agglomeration and development, consolidating and expanding high-quality production capacity, and accelerating technological transformation and upgrading, so as to promote Sichuan liquor products to leave the domestic market in a strong and orderly manner.
6: Fully explore the trade effect brought by the accumulation rules of the region of origin. Liquor enterprises in Sichuan are encouraged to learn and understand the rules of cumulative origin, and deeply explore the important source countries for importing raw materials and intermediate products of the Sichuan wine industry among RCEP member countries. Analyze the characteristics of the Sichuan wine industry chain, combine import tariff concessions and supporting trade facilitation measures, actively expand the import of raw materials, packaging materials, and important equipment, promote the import of productive services such as energy conservation and environmental protection, and environmental services, improve the quality of the Sichuan wine supply system, and fully enjoy the trade dividends and the cooperation effect of the industrial chain brought by the rules.
Source: "Belt and Road Report (Chinese and English)" 2022 Issue 5
Editor: Jia Qi
Review: Xiangwen
Proofreading: Lei Lu
Editor: Deng Zhuo
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