Trade Agreements in Hong Kong

A Hot Tip about Trade Agreements in Hong Kong SAR

Posted on: 29 Mar 2010

Hong Kong is a founding member of the World Trade Organization (WTO) as well as a member of the Asia-Pacific Economic Cooperation (APEC).


Even following mainland China’s accession to the WTO, Hong Kong is well positioned to play a key role for U.S. firms wishing to expand exports to one of the world’s fastest-growing markets. Hong Kong is a trading hub for mainland China and the region; its trading firms are experts at promoting imported products and services in mainland China. Similarities in linguistic and cultural traditions have enabled Hong Kong traders to maximize opportunities for U.S. firms, and in particular for small and medium-sized enterprises and first-time exporters.


On June 29, 2003, Hong Kong and mainland China signed the Closer Economic Partnership Arrangement (CEPA), a free trade agreement granting Hong Kong’s manufacturers export to mainland China free of mainland Chinese tariffs and granting Hong Kong’s service suppliers preferential access to the mainland Chinese market. CEPA was implemented on January 1, 2004, providing tariff-free treatment for Hong Kong-origin goods in 374 categories as well as preferential access to 18 mainland service sectors. Preferential access for five types of valueadded telecommunications services was implemented on October 1, 2003.


Hong Kong and mainland China signed the second phase of CEPA on August 27, 2004, to liberalize further trade in goods and services. At that time, Hong Kong-origin goods in 529 additional categories could be exported to mainland China tariff-free; in January, 2006, another 184 products enjoyed this privilege.


The third phase of CEPA took effect in 2006. As a result, all Hong Kong-origin goods in 27 sectors (e.g. logistics and distribution) were entitled to preferential treatment in mainland China.


The fourth phase, announced in July 2007, expanded access for service providers. Service providers in 38 sectors (e.g., logistics, distribution) now enjoy preferential treatment on the mainland.


The fifth and sixth phases, respectively announced in July 2008 and May 2009, further facilitated market access for service providers. A total of 29 new liberalization measures were implemented covering 20 CEPA services sectors and two new services sectors (services incidental to mining, and related scientific and technical consulting services). As a result, the total number of services sectors covered by CEPA was expanded from 40 to 42.


In order to qualify as a Hong Kong company under CEPA, the company (including a subsidiary of a foreign company) must incorporate in Hong Kong, have been engaged in substantial business operation here for more than three years, and employ at least half of its staff in Hong Kong. In addition, foreign companies that have acquired or merged with a Hong Kong company on or after June 29, 2003, qualify after one year of operation as a Hong Kong company.


With the January 1, 2005 elimination of all remaining quotas on textile and apparel imports from WTO members, Hong Kong textile and apparel exports are no longer subject to quantitative restrictions.



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Posted: 29 March 2010

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