Hong Kong-ASEAN FTA Could be Implemented by 2016

October 23, 2014 Posted by ASEAN Briefing Reading Time: 4 minutes

HONG KONG – According to Hong Kong government officials, a free trade agreement with the Association of Southeast Asian Nations (ASEAN) should be ready for implementation in 2016. The first round of the trade talks were completed in July of this year.

Hong Kong is eager to deepen its relationship with ASEAN. In recent years, the city has seen trade start to move away from the island as a result of exports from China now being able to move directly to ASEAN nations with reduced or zero tariffs. Previously, many of these products were exported through Hong Kong. As a result, manufacturers in Hong Kong have urged the city to become part of the ASEAN-China free trade network in order to hold onto its position as a key transit hub for trade from the mainland.

Currently, the tariff rates for ASEAN member states range from zero to 10.3 percent.

The chairman of the Federation of Hong Kong Industries, Stanley Lau, was quoted as saying that “China exports can go directly to the ASEAN countries with tariffs reduced or eliminated, without going through Hong Kong. Hong Kong’s position is being weakened. We need the ’10 plus two’.” Lau was referring to the “10 plus one” agreement which comprises the 10 ASEAN nations and China.

However, trade negotiations have been slow going so far due to the fact that Hong Kong is already a free port that does not impose tariffs on imports; therefore, the city has little in the way of bargaining power because it does not have much else it can offer to the ASEAN nations.

However, with or without the success of the current FTA negotiations, most analysts believe that Hong Kong should still be able to benefit from growing trade in the region with China. Chief economist at DBS, David Carbon, states that “Everybody wants to get rid of barriers, get rid of distortions, and so on. But minor changes on tariffs really don’t impact trade nearly as much as year-to-year growth [in China’s GDP].”

The FTA talks have also focused on the areas of:

Liberalization
Promotion and protection of investment
Intellectual property cooperation

The importance of ASEAN continues to grow, with 2015 set to see the implementation of the ASEAN Economic Community (AEC). The AEC seeks to “transform ASEAN into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.” Collectively, ASEAN represents a market of some 600 million people, with a combined GDP of about US$2.5 trillion and upwards of US$1.5 trillion in trade flowing throughout the region.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asean@dezshira.com or visit www.dezshira.com.

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