Free trade agreements (FTAs) are important to every country and territory in the world. FTAs facilitate trade activity and thus allow economies all over the world to remain globally active. This in turn leads to economic growth and the promotion of business activity in all countries and territories involved in the FTAs concerned. FTAs may also be used for political purposes. They may be used to deepen political and diplomatic ties between countries or territories. Hong Kong is a part of several notable FTAs with countries and multi-country entities located all over the world.
Hong Kong’s Current FTAs
Hong Kong has made much use of FTAs for its own economic benefit. Its government has been actively expanding the FTA network of Hong Kong. This network expansion has increased the possibility for goods and services originating from Hong Kong to enter markets all over the world.
Today, Hong Kong is part of eight different FTAs. Hong Kong is part of FTAs with mainland China, New Zealand, Chile, Georgia, Australia, and the China-owned territory of Macau. It has also signed FTAs with the member states of the European Free Trade Association (EFTA) as well as the Association of Southeast Asian Nations (ASEAN). Hong Kong’s longest-lasting FTA is its FTA with mainland China. This FTA was signed in 2003. Its most recent FTA is that with Australia. Hong Kong and Australia’s FTA was signed in 2019.
Of Hong Kong’s eight FTAs, three are significant enough to warrant closer analysis. These are its FTAs with mainland China, New Zealand, and the EFTA.
Hong Kong and Mainland China’s FTA
Hong Kong’s FTA with mainland China is known as the Closer Economic Partnership Agreement (CEPA). As noted, it is Hong Kong’s first FTA. The CEPA is comprised of four different agreements. These agreements relate to trade in goods, trade in services, investment, and economic and technical cooperation. The CEPA has gradually reduced or eliminated all tariffs and non-tariff barriers related to trade of goods between Hong Kong and mainland China. It has also served to liberalize trade by reducing or eliminating all previously existing discriminatory measures.
The CEPA has done much to facilitate trade activity between Hong Kong and mainland China. Today, most of Hong Kong’s imports are from mainland China and most of its exports are sent there. Just over 54% of its exports are sent to mainland China, while almost 45% of the goods imported into Hong Kong originate from the mainland.
Hong Kong and New Zealand’s FTA
Hong Kong and New Zealand signed the CEP Agreement in 2010. The CEP Agreement is significant as it is Hong Kong’s first FTA with a Western country. The CEP Agreement eliminated all tariffs on products exported from Hong Kong to New Zealand by 2016. It also allowed products from New Zealand to benefit from tariff-free treatment. This lack of tariffs was to apply even if neither a certification of origin nor an origin declaration were present.
One important effect of the CEP Agreement is an increase in investment in Hong Kong by New Zealand-based businesses and business owners. New Zealand, meanwhile, would benefit from greater integration within the Asia-Pacific region. Through the CEP Agreement, New Zealand gained more access to markets in Asia
Hong Kong and the EFTA’s FTA
Hong Kong’s FTA with the EFTA is its first with a multi-country organization. The EFTA is comprised of Norway, Liechtenstein, Switzerland, and Iceland. It is also Hong Kong’s first FTA involving a country or body from outside the Asia-Pacific region. It caused the EFTA countries to eliminate all tariffs on Hong Kong’s industrial and marine products which were to enter those countries. It would also require Hong Kong to grant tariff-free access to all products entering Hong Kong which originated from an EFTA country.
It should be noted that according to the details of this FTA, different trade remedy measures apply to Norway than those which apply to the other EFTA countries. This fact is due to the inherent differences between Norway’s economy and those of the three other EFTA countries. Nevertheless, the other provisions of the FTA apply equally to all four EFTA countries.