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Free Trade Agreement between Hong Kong, China and the Member States of the European Free Trade Association

Overview

The European Free Trade Association (EFTA), taken as a single entity, was Hong Kong’s 14th largest trading partner. Merchandise trade between the EFTA and Hong Kong amounted to HK$84.5 billion in 2016. In terms of services trade, the EFTA was our 16th largest trading partner, with bilateral services trade amounted to HK$13.5 billion in 2015.

Leaflet on Free Trade Agreement between Hong Kong, China and the Member States of the European Free Trade Association

Group photo of Mr So and other signatories, including Minister for Foreign Affairs and External Trade of Iceland, Mr Ossur Skarphedinsson (second left); Minister of Foreign Affairs of Liechtenstein, Dr Aurelia Frick (third right); State Secretary of the Ministry of Trade and Industry of Norway, Ms Rikke Lind (second right); and Federal Councillor and Head of the Federal Department of Economic Affairs of Switzerland, Mr Johann N Schneider-Ammann (right).

Background

Hong Kong and the Member States of the European Free Trade Association (EFTA States), namely Iceland, Liechtenstein, Norway and Switzerland, signed a comprehensive Free Trade Agreement (the Agreement) on 21 June 2011 in Liechtenstein. This Agreement is Hong Kong's first free trade agreement (FTA) with the European economies. It is an important milestone in our trade relations with the four EFTA States. It will serve as a catalyst to enhance the bilateral trade and investment ties between the two sides.

The Agreement covers trade in services and goods as well as investment, and other trade related issues such as protection of intellectual property. It is fully consistent with provisions of the World Trade Organization.

The dates of entry into force of the Agreement are as follows:

  • 1 October 2012 - between Hong Kong, Iceland, Liechtenstein and Switzerland
  • 1 November 2012 - between Hong Kong and Norway

 

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Key Outcomes

The Agreement consists of 11 Chapters, covering a wide range of areas of mutual interest to Hong Kong and the EFTA States. Major features and liberalisation measures of the Key Chapters are summarised below.

Tariff Measures
  • The EFTA States will eliminate tariffs on all industrial products as well as fish and certain marine products of Hong Kong origin once the Agreement takes effect.
  • Processed agricultural products of Hong Kong origin will also enjoy tariff concessions when imported into the EFTA States.
  • Trade in basic agricultural products is governed by separate bilateral agricultural agreements between Hong Kong and the individual EFTA States. Under these agreements, Hong Kong's basic agricultural products in which we have export interests will enjoy tariff free entry into the EFTA States.
  • On the other hand, Hong Kong commits to granting tariff free access to all products originating in the EFTA States.
Rules of Origin
  • Hong Kong exporters who comply with the relevant origin rules and fulfill the requirements set out in the Annex on Rules of Origin can benefit from the preferential tariff treatment for exports to the EFTA States.
  • In particular, for the purpose of obtaining preferential tariff treatment for their exports to the EFTA States, Hong Kong exporters may complete an origin declaration in accordance with Article 12 of the Annex on Rules of Origin and Appendix 2 to that Annex. The origin declaration may be provided on an invoice or any other commercial document that identifies the exporter and the originating goods.
  • Imports from the EFTA States 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.
Trade Remedy Measures1
  • Hong Kong and the EFTA States agree to prohibit the use of anti-dumping measures in the bilateral trade.
  • For the bilateral trade between Hong Kong and Norway:
    • Hong Kong and Norway will not apply countervailing, global safeguard and bilateral safeguard measures against the originating products of each other.
  • For the bilateral trade between Hong Kong on the one part and Switzerland, Liechtenstein or Iceland on the other:
    • Provisions are in place to restrict the application of countervailing measures for products originating in these parties.
    • Originating products of these parties will not be subject to global safeguard actions, if such imports of products do not cause or threaten to cause serious injury to the domestic industry of the importing party.
    • Bilateral safeguard investigations can be initiated if products originating in Hong Kong, Switzerland or Iceland are being imported in such increased quantities that constitute a substantial cause of serious injury or threat thereof to the domestic industry of the importing party.
Trade Facilitation Measures
  • Hong Kong and the EFTA States commit to implementing the trade facilitation measures in the Annex on Trade Facilitation which aims at facilitating goods traded between the two sides. Apart from the general provisions on transparency and co-operation, the Annex also includes specific trade facilitation measures such as simplification of international trade procedures, advance rulings, risk management, authorised economic operator system, as well as publication of information on fees and charges.
  • The application of the Annex will provide a more expeditious and efficient release and clearance of goods at borders through simplification of customs formalities and documentation requirements, and more transparent and predictable trade-related laws and regulations in all parties.
Sanitary and Phytosanitary Measures2 and Technical Barriers to Trade3
  • In addition to reaffirming the rights and obligations of the parties under the WTO, mechanisms are established to enhance communication and cooperation on these two areas.
Others
  • The two sides reaffirm their rights and obligations under the WTO in respect of the import and export restrictions, internal taxation and regulations, state trading enterprises, balance of payments, etc.
1 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.
2 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.
3 The disciplines of technical barriers to trade cover all technical regulations, standards and conformity assessment procedures that may directly or indirectly affect trade in goods between parties to a free trade agreement, regardless of the origin of the goods.

Main Text of the Agreement, and Annexes relating to Trade in Goods:

  • The Agreement covers a comprehensive and diverse scope of service sectors, ranging from business and professional services, communication services, financial services and transport services to construction and related engineering services, distribution services, educational services, environmental services, health and social services, tourism and travel related services, as well as recreational, cultural and sporting services.
  • The Agreement will provide better business opportunities and legal certainty in market access for service providers of Hong Kong and the EFTA States and the services they provide in each other's market.
  • In terms of market access, subject to specific reservations or exemptions, service providers of Hong Kong and the EFTA States 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. For some service sectors where such requirements have to be in place for regulatory or other reasons, the requirements will not become more restrictive than the level agreed in the Agreement.
    • They will be treated no less favourably than their counterparts of the other side as well as other economies in similar circumstances.
    • Without compromising legitimate immigration control, business visitors, intra-corporate transferees, installers or maintainers, contractual service suppliers and independent professionals of Hong Kong in specified service sectors will be granted temporary entry into relevant EFTA States in accordance with the commitments of individual EFTA States. On the other hand, business visitors, intra-corporate transferees and installers or servicers of the EFTA States in specified service sectors would be granted temporary entry into Hong Kong in accordance with Hong Kong's commitments.
  • The market access commitments made by Hong Kong and the EFTA States are broad and substantive, going beyond their existing commitments in the WTO. Many of their commitments essentially lock in their regulatory regimes for the service sectors concerned.
  • The EFTA States' commitments encompass:
    • sectors of Hong Kong's traditional priority, such as telecommunications services, logistics and related services including maritime transport services, audiovisual services, financial services and various professional and business services (such as accounting, auditing and bookkeeping services, architectural services, computer and related services, management consulting services, services incidental to manufacturing and convention services); as well as
    • areas identified with potential for further development in Hong Kong, namely, education services, medical services, testing and certification services, environmental services, innovation and technology, and cultural and creative industries.
  • Hong Kong's commitments are comparable to those of the EFTA States, covering areas of particular interest to the EFTA States, such as:
    • financial services, telecommunications services, logistics and related services including maritime transport services, business services, construction and related engineering services, energy related services, as well as tourism and travel related services.
  • Apart from specific market access commitments, the Agreement also includes:
    • disciplines on domestic regulation (DR) to ensure that measures affecting trade in services are transparent and administered in a reasonable, objective and impartial manner. Hong Kong and the EFTA States concerned will also further develop and conclude a comprehensive set of DR disciplines, covering licensing requirements and procedures, qualification requirements and procedures, technical standards, and other related matters, within one year after the entry into force of the Agreement; and
    • specific provisions to further facilitate trade of Hong Kong and the EFTA States in financial services and telecommunications services, which are important sectors of the two sides.

Main Text of the Agreement, and Annexes relating to Trade in Services:

  • The Investment Chapter of the Agreement provides investors in non-service sectors with legal certainty on national treatment, facilitates their temporary entry and stay in Hong Kong and the EFTA States, and provides them with safeguards on movement of capitals and other aspects.
  • 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 and expand related economic activities between Hong Kong and the EFTA States.

Main Text of the Agreement, and Annex relating to Investment:

Agreement:
  • Apart from reaffirming their obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights and other applicable international IP agreements, the two sides agree on the standard level of protection for individual IP rights and on certain aspects of IP rights enforcement.
  • The two sides also agree to enhance their cooperation in the field of IP. Upon request of either side, they would hold expert meetings on relevant IP issues with a view to developing a mutually supportive trade relationship in the IP context.

Main Text of the Agreement, and Annex relating to Intellectual Property:

  • The two sides reaffirm that their rights and obligations in respect of GP will be governed by the GP provisions in WTO agreements applicable to them.

Main Text of the Agreement:

Agreement:
  • For promoting competition, the two sides agree on an arrangement to cooperate and consult in their dealings with anti-competitive practices that may affect trade between them.

Main Text of the Agreement:

Agreement:
  • The two sides agree to establish a transparent and comprehensive mechanism to provide for consultations and settlements of possible disputes that may arise from the Agreement. The procedures of the arbitration panel shall be governed by a set of Model Rules of Procedures to be agreed by the two sides within one year from the entry into force of this Agreement.

Main Text of the Agreement:

Agreement: