Free Trade Agreement between Hong Kong and Peru - Consultation Document

The Government of the Hong Kong Special Administrative Region (HKSAR) announced on 16 November 2022 the launch of negotiation for a Free Trade Agreement (FTA) (Note 1) with Peru. To assist the Government in formulating its negotiation strategies and positions, interested parties are invited to provide comments and suggestions.

BACKGROUND

  1. Hong Kong has so far signed eight FTAs respectively with the Mainland of China, New Zealand, the Member States of the European Free Trade Association (viz. Iceland, Liechtenstein, Norway and Switzerland), Chile, Macao, the Association of Southeast Asian Nations (ASEAN) (Note 2), Georgia and Australia. Hong Kong has been actively seeking to accede to the Regional Comprehensive Economic Partnership (RCEP) (Note 3) and to engage in exploratory talks with other potential FTA or investment agreement partners.

Bilateral Relation with Peru

  1. Peru is an important trading partner of Hong Kong in Latin America. It is also an emerging market with huge potential. Peru ranked 5th among our merchandise trading partners in Latin America in 2021. Bilateral merchandise trade between Hong Kong and Peru amounted to HK$7.1 billion in 2021 and grew at an average annual rate of 12.2% from 2017 to 2021. Furthermore, Peru is a member of the Pacific Alliance (Note 4), with which Hong Kong has also been exploring the initiation of FTA discussions.

ELEMENTS TO BE COVERED IN THE FTA

  1. It is envisaged that the FTA negotiation with Peru will cover, among others, the following -

    1. elimination or reduction of tariffs;
    2. reduction of non-tariff barriers (Note 5);
    3. preferential rules of origin;
    4. customs facilitation procedures;
    5. market access for trade in services;
    6. market access and treatment of investment;
    7. other subjects such as electronic commerce, government procurement, intellectual property, competition, cooperation and small and medium sized enterprises; and
    8. legal and institutional arrangements, including dispute settlement mechanism for the FTA.

Tariff

  1. Hong Kong does not apply any tariff on imports. Peru's average applied tariff rate is 2.4% (Note 6). Under the FTA negotiation, we will seek to achieve early elimination or reduction of tariffs by Peru on products of Hong Kong origin.

    Views sought: we invite views on which products Hong Kong should particularly focus on in tariff negotiation with Peru.

Rules of Origin

  1. The existing origin rules applicable to Hong Kong's domestic exports are mainly based on the criterion of "last substantial transformation" (Note 7) and are applied for non-preferential purpose. To ensure that only goods of Hong Kong and Peruvian origins will benefit from the preferential tariff rates under the FTA, it will be necessary for both sides to agree on a set of origin rules to prevent circumvention.

  2. Under the FTA negotiation, we will seek to agree on a set of simple and transparent preferential rules of origin. It is also envisaged that both sides will draw up implementation details of the origin rules, including the documentation requirements for products to substantiate claim of origin and preferential tariffs on importation.

    Views sought: we invite views on the origin rules under the FTA with Peru as well as the implementation aspects of such rules.

Trade in Services

  1. Hong Kong's major services sectors include financing and insurance services (23.3% of Gross Domestic Product in 2020); import and export trade, wholesale and retail trades (18.5%); real estate, professional and business services (9.6%); transportation, storage, postal and courier services (4.5%); information and communications services (3.7%); and accommodation and food services (1.5%).

  2. Under the FTA negotiation, we aim to seek better market access or more predictability for services and service suppliers of Hong Kong in Peru.

    Views sought: we invite views on -

    1. which services sectors and services measures of Peru Hong Kong should particularly focus on in the services negotiation, e.g. whether there are any existing or foreseeable trade barriers to the provision of services in Peru; and
    2. whether there are any services sectors, areas or measures which Hong Kong should be more cautious in undertaking commitments, including those commitments to maintain our current regime for access of services or services suppliers of Peru.

    We also welcome comments and inputs on other matters relating to services trade (Note 8) with Peru.

Investment

  1. Hong Kong is an investment hub. In 2021, our inflow and outflow of direct investment ranked 3rd and 7th in the world respectively (Note 9). We will seek to create a more favourable investment environment to facilitate investment flows between Hong Kong and Peru.

    Views sought: we invite views on -

    1. which sectors in Peru are of particular interests to Hong Kong investors;
    2. what improvements we should seek from Peru regarding its policies and measures affecting Hong Kong investments; and
    3. any sectors, areas or measures which Hong Kong should be more cautious in undertaking commitments.

Others

  1. The FTA negotiation will also cover, among others, reduction of non-tariff barriers, customs facilitation procedures, government procurement, intellectual property, competition, cooperation, small and medium sized enterprises, as well as legal and institutional arrangements including a mechanism for settlement of disputes.

    Views sought: we invite views on the above subjects and any other particular areas or measures which Hong Kong should focus on.

VIEWS AND SUGGESTIONS

  1. Interested parties are invited to send in their views and suggestions in writing by 24 December 2022 by mail, fax, or e-mail as below. For enquiries, you are welcome to contact Miss Priscilla CHEUNG at 3403 6467 or email: fta@tid.gov.hk.

    Mailing address: Trade and Industry Department
    Room 1415, 14/F
    Trade and Industry Tower
    3 Concorde Road, Kowloon City
    Hong Kong
    Fax Number: 2789 9761
    E-mail address: fta@tid.gov.hk

    Trade and Industry Department
    The Government of the HKSAR
    24 November 2022

Note 1:
An FTA is an agreement concluded by two or more economies that provides preferential access to each other's markets by eliminating or reducing trade and investment barriers (such as tariff).
Note 2:
ASEAN comprises Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam.
Note 3:
RCEP was signed among ten Member States of the ASEAN and five of ASEAN's FTA partners (viz. Australia, Japan, Korea, New Zealand and the Mainland of China) in November 2020.
Note 4:
PA is a regional economic bloc in Latin America. Its members include Chile, Colombia, Mexico and Peru.
Note 5:
Non-tariff barriers are trade restrictive measures other than tariffs, such as quotas, sanitary and phytosanitary measures, technical barriers to trade, etc.
Note 6:
It is the latest average applied tariff rates as available in the World Trade Organization.
Note 7:
The "last substantial transformation" criterion, when applied to manufactured goods involving multiple country/place materials and/or processing, refers generally to the manufacturing process (or processes) which has changed permanently and substantially the shape, nature, form or utility of the basic materials used in manufacture.
Note 8:
Relating matters may include, among other issues, electronic commerce.
Note 9:
Source: United Nations Conference on Trade and Development.
2025-02-24
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