Free Trade Agreement between Hong Kong and Australia
Consultation Document

The Government of the Hong Kong Special Administrative Region will pursue a Free Trade Agreement (FTA) (Note 1) with Australia. In this connection, it invites comments and suggestions from interested parties with a view to assisting the Government in formulating its strategies and positions.

BACKGROUND

2.Hong Kong has been seeking to forge FTAs with its trading partners in order to help expand its commercial and trading networks, and create more favourable conditions for Hong Kong enterprises to gain access to the Mainland and overseas markets.

3.So far, Hong Kong has signed four FTAs respectively with the Mainland, New Zealand, the Member States of the European Free Trade Association (comprising Iceland, Liechtenstein, Norway and Switzerland), and Chile. We are now negotiating FTAs respectively with the Association of Southeast Asian Nations (ASEAN) (Note 2), Georgia and Maldives, and discussing a closer economic partnership arrangement with Macao.

Bilateral Relation with Australia

4.Australia is an important trading partner of Hong Kong. In terms of trade in goods, Australia was Hong Kong's 19th largest trading partner in 2016, with total bilateral trade amounted to HK$52 billion. In 2015, Australia was Hong Kong's 7th largest services trading partner and bilateral services trade amounted to HK$41 billion.

5.At the end of 2015, Australia ranked 6th among destinations of Foreign Direct Investment (FDI) from Hong Kong (with cumulated stock of HK$135 billion). It also has considerable investment in Hong Kong. As of June 2016, there were 37 regional headquarters, 54 regional offices and 88 local offices set up by Australian companies in Hong Kong (Note 3).

6.Hong Kong and Australia signed an Investment Promotion and Protection Agreement (IPPA) in 1993. This IPPA gives additional assurance to Australian investors that their investments in Hong Kong are protected, and at the same time enable Hong Kong investors to enjoy reciprocal protection in respect of their investments in Australia.

ELEMENTS TO BE COVERED IN THE FTA

7.It is envisaged that the FTA with Australia will include, among others, the following key elements -

Tariffs

8.Hong Kong does not apply any tariff on imports. Australia's average applied tariff rate is 2.5% (Note 5). Under the FTA with Australia, we shall seek to agree on early elimination or reduction of tariffs for products of Hong Kong origin.

Views sought: we invite views on which sectors Hong Kong should particularly focus on in tariff negotiations with Australia.

Rules of Origin

9.The existing origin rules applicable to Hong Kong's domestic exports are based on the criterion of "last substantial transformation" (Note 6) and are applied for non-preferential purpose. To ensure that only goods of Hong Kong and Australia origin 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.

10.Under the FTA negotiations, the two sides will seek to agree on a set of simple and transparent rules of origin to facilitate trade in goods between Hong Kong and Australia. It is envisaged that both sides will also 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 Australia as well as the implementation aspects of such rules.

Trade in Services

11.Hong Kong's major services sectors include import and export trade, wholesale and retail trades (22.7% of GDP in 2015); financing and insurance services (17.6%); public administration, social and personal services (17.5%); real estate, professional and business services (10.9%); transportation, storage, postal and courier services (6.5%); and information and communications services (3.5%).

12.In the negotiations, we aim to seek better market access or more predictability for services and service suppliers of Hong Kong in Australia.

Views sought: we invite views on -

We also welcome comments and inputs on other matters relating to services trade (Note 7) with Australia.

Investment

13.Hong Kong is an investment hub. In 2015, our FDI inflow and outflow ranked 2nd and 9th in the world (Note 8). Hong Kong will seek to create a more favourable investment environment to facilitate mutual investment flows with Australia.

Views sought: we invite views on improvements that should be sought from Australia to its policies on, and treatments of, investments from Hong Kong.

Others

14.The FTA negotiations may also cover, among others, reduction of non-tariff barriers, customs facilitation procedures, intellectual property rights, competition, government procurement, 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

15.Interested parties are invited to send in their views and suggestions in writing by 27 May 2017 by mail, fax, or e-mail as indicated below. For enquiries, you are welcome to contact Mr. Benson BIN at 3403 6114 or email: fta@tid.gov.hk.

Mailing address:	Europe Division Trade and Industry Department Room 1325, 13/F Trade and Industry Tower 3 Concorde Road Kowloon City Hong Kong
Fax Number:	2789 9761 / 2789 2491
E-mail address:	fta@tid.gov.hk

Trade and Industry Department
The Government of the HKSAR
27 April 2017
 

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 tariffs and other restrictive measures in the trade in goods and services, investment, and other trade-related areas between the participating economies.

Note 2 :
ASEAN comprises Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam.

Note 3 :
Source: Census and Statistics Department.

Note 4 :
Non-tariff barriers are trade restrictive measures other than tariffs, such as quotas, import licensing systems, sanitary and phytosanitary measures, technical barriers to trade, prohibitions, etc.

Note 5 :
It is the latest average applied tariff rates as available in the World Trade Organization.

Note 6 :
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 7 :
Relating matters may include, among other issues, domestic regulation and electronic commerce.

Note 8 :
Source: United Nations Conference on Trade and Development.