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Free Trade Agreement between Hong Kong, China and Chile

Overview

Chile was Hong Kong's 4th largest trading partner in Latin America. Merchandise trade between Chile and Hong Kong amounted to HK$8.0 billion in 2014. In terms of services trade, Chile was our 3rd largest trading partner in Latin America, with bilateral services trade amounted to HK$1.3 billion in 2012.

Factsheet on Hong Kong's commercial relationship with Chile

agreement

Background

A joint feasibility study conducted by Hong Kong and Chile in July 2009 concluded that enhancing the trade and economic relationships between Hong Kong and Chile would bring positive impact to both economies. After three rounds of negotiation, the free trade agreement (FTA) between Hong Kong and Chile was signed on 7 September 2012. Alongside but separate from the FTA, Hong Kong and Chile have signed a Memorandum of Understanding (MoU) on Labour Cooperation to address labour matters of mutual interest.

The Agreement is comprehensive and of high quality, encompassing trade in goods and services, investment, and other related areas. Being the first FTA of Hong Kong with a South American economy, the Agreement will help Hong Kong businesses tap the Chilean market, which offers potential opportunities as an emerging market in itself, as well as opportunities as a gateway to the South American region. It will also expand Hong Kong's FTA network to the American region, in addition to our existing linkage with the Asia-Pacific and European regions.

The Agreement entered into force on 9 October 2014.

Full Text of the Agreement
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Key Outcomes

The FTA consists of 19 Chapters, covering a wide range of areas of mutual interest to Hong Kong and Chile. Major features and liberalisation measures of the Agreement are summarised below.

Tariff Measures
  • Chapter 3 (Trade in Goods) and the tariff schedules at Annex 3.4 to the Chapter provides for the reduction and elimination of customs duties on goods originating from Hong Kong and Chile.
  • 88% of Chile's tariff lines becomes duty free for Hong Kong origin products upon the entry into force of the Agreement.
  • Tariffs on an additional 10% of Chile’s tariff lines phased out by 1 January 2016 in three stages.
  • The remaining 2% tariff lines, comprising, for example, cereals, sugars, articles of iron or steel, will continue to be subject to import tariff because of domestic sensitivity in Chile.
  • Hong Kong commits to bind the provision of tariff free access to all Chile origin products.
Rules of Origin
  • Hong Kong exporters who comply with the relevant origin rules and fulfil the requirements set out in Chapter 4 (Rules of Origin) can benefit from the preferential tariff treatment for exports to Chile.
  • For the purpose of obtaining preferential tariff treatment for their exports to Chile, Hong Kong exporters may complete a pro forma origin declaration in accordance with Article 4.15 of Chapter 4 (Rules of Origin) and Annex 4.15 to the Chapter.
  • Imports from Chile are not required to be accompanied by an origin declaration or certification of origin in order for the goods to enjoy the tariff-free treatment.
Customs Procedures and Cooperation
  • Chapter 5 (Customs Procedures and Cooperation) provides for mutual cooperation in the administration of custom matters. It seeks to ensure that the customs procedures and practices applying to goods traded between the two sides are predictable, consistent, transparent and trade facilitating.
Sanitary and Phytosanitary Measures1 and Technical Barriers to Trade2 Trade Remedy Measures3
  • Chapter 8 (Trade Remedies) includes disciplines additional to the relevant WTO Agreements, which will better safeguard Hong Kong's interest.
     
1 Sanitary and phytosanitary measures are any measures applied: (i) to protect human or animal life from risks arising from additives, contaminants, toxins or disease-causing organisms in their food; (ii) to protect human life from plant- or animal-carried diseases; (iii) to protect animal or plant life from pests, diseases, or disease-causing organisms; and (iv) to prevent or limit other damage to a country from the entry, establishment or spread of pests.
2 Technical barriers to trade include technical regulations, standards and conformity assessment procedures that may directly or indirectly affect trade in goods.
3 Trade remedy measures refer to anti-dumping, countervailing and safeguard measures. Imposition of these measures by the importing economy could result in additional duties (being one of the usual forms) on top of tariffs and other charges or other import restrictions on certain imports.

View full text of Chapters and Annexes relating to Trade in Goods:

Chapter 8:
  • The Agreement covers a comprehensive and diverse scope of service sectors.
     
  • The Agreement will provide better business opportunities and legal certainty for service providers of Hong Kong and Chile in each other's market.
     
  • Many of the commitments made by Hong Kong and Chile go beyond their existing commitments in the WTO.
     
  • In terms of market access, subject to specific exceptions or conditions, service providers of Hong Kong and Chile and the services they provide will enjoy the following benefits in each other's market in a variety of service sectors:
  • There will not be any restriction on foreign capital, the number of service providers or operations, the value of service transactions, the number of persons employed, types of legal entity or joint venture requirements for various service sectors.
     
  • The service providers will be treated no less favourably than their counterparts of the other side in similar circumstances.
     
  • Without compromising legitimate immigration control, business visitors and intra-corporate transferees of Hong Kong and Chile will be granted temporary entry into each other's area in accordance with the two sides' commitments.
  • Chile's commitments encompass sectors where Hong Kong has traditional strengths or has potential for development, such as financial services, telecommunications services, various business services (such as accounting, auditing and bookkeeping services, architectural services, engineering and integrated engineering services, computer and related services, management consulting services, and services incidental to manufacturing), tourism and travel-related services, environmental services, and services related to innovation and technology.
     
  • Hong Kong's commitments also cover a wide variety of services. These commitments address Chile's priority interests, such as architectural services, engineering services, audiovisual services, and construction services.
     
  • Apart from specific market access commitments, the Agreement also includes other general obligations to facilitate trade in services. In particular, the rules and disciplines developed under the Agreement will improve transparency of domestic regulations and ensure that they do not constitute unnecessary barriers to trade in services.

View full text of Chapters and Annexes relating to Trade in Services:

  • The Agreement provides investors of both sides with legal certainty on national treatment in respect of their investments in specified non-services sectors. The provisions complement those in the Trade in Services Chapter which cover investments in service sectors. All these provisions will help facilitate mutual investment flows between Hong Kong and Chile and expand related economic activities in the two places.
  • To further enhance investment flows between Hong Kong and Chile, the two sides have agreed to negotiate a separate agreement on investment. The negotiation covers additional elements of investment promotion and protection, including but not limited to non-discrimination, minimum standard of treatment for investments, protection from unlawful expropriation, and protection of transfers.
  • The Investment Agreement between Hong Kong and Chile was signed on 18 November 2016.

View full text of Chapter and Annexes relating to Investment:

  • To facilitate access to each other's Government Procurement (GP) market, the two sides have agreed in Chapter 9 (Government Procurement) on rules governing their GP activities, including non-discrimination and transparency in the GP process.
     
  • In essence, Hong Kong has committed to treating suppliers of Chile like suppliers from a party of the WTO Agreement on GP, in respect of the procurements of Hong Kong's government bureaux and departments.
     
  • In return, Chile will provide comparable market access opportunities to Hong Kong suppliers.

View full text of Chapter and Annexes relating to GP:

  • The two sides have agreed to promote competition, and to encourage cooperation and information exchange between their competition authorities. Upon request by either party, the two sides will consult on particular anti-competitive practices that adversely affect trade or investment.

View full text of Chapter relating to Competition:

Chapter 13:
  • The two sides have agreed on a set of shared principles and measures, including through encouraging sound environmental policies and practices, to promote environmental protection.

View full text of Chapter relating to Environment:

Chapter 14:
  • The two sides have agreed to establish a transparent and comprehensive mechanism to provide for consultations and settlements of possible disputes that may arise from the Agreement.
     
  • An arbitral panel may be established if consultations fail to resolve the issue.

View full text of Chapter relating to Dispute Settlement:

Chapter 17: