Australia is to pursue a free trade agreement (FTA) with Hong Kong in a bid to get even greater access to the Chinese market.
While Australia already has an FTA with China, a comprehensive agreement with the Special Administrative Region (SAR) of Hong Kong would likely offer Australian service providers the ability to set up in the more highly-regulated and protected business environment there, while trading freely with China.
Australia’s trade minister Steve Ciobo said this week: “Hong Kong is an important trade and investment partner for Australia, in its own right and as a global hub for the movement of capital and goods between the mainland and the rest of the world. An FTA with Hong Kong would complement our FTA with China and further integrate the Australian economy with Asia.”
Barring a number of goods – such as alcoholic spirits – Hong Kong is already a free port. Goods can be traded into the city without import tariffs, and this makes it a huge re-export hub for the region.
A comprehensive FTA, however, would allow for Australia’s non-merchandise trading companies, such as engineering and financial services companies, to do business without being subject to import levies. Furthermore, if it follows the model of Hong Kong’s existing deal with New Zealand, it will offer Australia parity with Hong Kong’s other trading partners as and when further FTAs are secured.
“There are parallels with New Zealand. There would be greater access into the Hong Kong services market, including business services, environmental services and logistics. Another area is the parity in other areas such as intellectual property protection, future protecting of rules that ensure services would have similar treatment to any other trade partners of Hong Kong in the future. You will be treated no less favourably than any other trade partners,” Dickson Ho, the chief economist at the Hong Kong Trade Development Council (HKTDC) tells GTR.
In Hong Kong’s case, its zero-tariff environment is not reciprocated by Australia. By entering into an FTA with Hong Kong, Australia would be opening its markets to a range of low-priced imports from one of the world’s greatest re-export markets.
Around 30% of Hong Kong’s exports to Australia already enjoy tariff breaks through the World Trade Organisation’s Information Technology Agreement. But this does not include goods such as optical equipment, textiles, jewellery and sporting items – the trade of which runs into billions of dollars each year.
Hong Kong currently has a few FTAs: with China, Chile, New Zealand and the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland). It is negotiating deals with Georgia and the Maldives, but has yet to confirm formal negotiations with Australia.
An agreement on goods alone could be complete within three years, Ho says. But a more comprehensive deal on services – akin to that of New Zealand, which took eight years to complete – would be more complex and drawn out.
Ciobo, however, is bullish that Australia’s aggressive free trade policy in Asia can continue with what he considers to be an important market for its companies.
“Hong Kong is Australia’s leading business base in East Asia. More than 600 Australian businesses have a major presence there. It was Australia’s eighth-largest export market, worth A$8.31bn last financial year. Overall it was Australia’s 12th-largest trading partner, with total two-way trade in goods and services worth $11.56 billion,” he said.