Hong Kong Australian Free Trade Agreement - What happens now? | Article – HSBC VisionGo
The outcome of the A-HKFTA summarised.
On the 26th of March 2019, Hong Kong and Australia signed a Free Trade Agreement (A-HKFTA) and an Investment Agreement. The A-HKFTA enables traders and investors in both Hong Kong and Australia more favourable access to each market while protected by a layer of legal certainty and security. The Hong Kong Trade and Industry Department in a statement said that the “commitments [Hong Kong and Australia] made to each other far exceed our World Trade Organisation commitments, thereby enabling our goods, services and investments to enter each other’s market under more preferential terms”. In layman’s terms, this is a joyful proclamation that as a result of the A-HKFTA—at least from the point the agreement is ratified and implemented—goods and services from both countries will be less hampered by bureaucracy, be cheaper, and will move more freely. The new agreement makes it easier for traders and investors in both countries to deal with their overseas trading partners both at home and abroad.
The greatest impact of the A-HKFTA might not actually be the liberalisation of trade between Hong Kong and Australia, but instead the codification of previous trade initiatives and policies into law. The agreement will likely provide legal security and better legal recourse to traders and investors in the foreseeable future.
Facts and Figures
Here are some informative points about trade between Australia and Hong Kong, if that’s not of interest, skip straight to the juicy outline of benefits arising from A-HKFTA just below this section. Hong Kong has long been known as the bastion of free trade, promoting and upholding a free trade policy that prevents barriers on trade.
In 2017, Australia was Hong Kong’s 19th largest trading partner and Hong Kong was Australia’s 12th ranking trading partner, with the total trade worth 18.8 billion Australian dollars. The net worth of trade between the two countries has also been steadily increasing in recent years, up 3.7% from 2016 to 2017.
Hong Kong mainly re-exports goods from Mainland China to Australia serving as a node of trade, but also exports a wide range of services to Australia. Here are the numbers for 2017.
- Transport services: $1.4b AUD
- Professional, technical & other business services: $772m AUD
- Personal travel (excluding education): $728m AUD
- Financial services: $162m AUD
Australia exports a range of goods and services to Hong Kong, gold being the primary source of export, but with travel and educational related travel comprising a hefty chunk as well. Here are the numbers for 2017.
- Gold: $8 billion AUD
- Personal travel (excluding education): $820m AUD
- Education-related travel: $798m AUD
- Transport services: $613m AUD
Suffice to say, a significant part of the economic relations between Hong Kong and Australia centres around investment. Hong Kong was Australia’s fifth largest source of foreign investment at the end of 2017 with $116.6 billion AUD invested. In the same year, it was the 10th largest destination for Australian foreign investment abroad at $47.4 billion AUD.
The A-HKFTA will be one of the few bilateral trade agreements that Hong Kong has signed. With both countries conducting such a significant amount of trade and investment with each other, even small steps to streamline the flow of goods and services can bring sizeable increase in trade.
The Good(s), The Services and The Investment
Now for the good stuff. Here are some key points on what will be changing—broken down into relevant categories. Do keep in mind that everything below generally goes both ways between Hong Kong and Australia.
- Tariff-free entry into the Hong Kong market for all Australian originating goods and vice versa
- Easier to claim zero import tariffs
- A self-declaration by the manufacturer that goods originated in Australia will suffice
- Further simplified customs clearance procedures
- While Hong Kong as matter of policy, does not impose at tariffs on goods originating from Australia, tariffs can still be legally be imposed; A-HKFTA ensures that Australia’s existing duty-free access is enshrined in a legal instrument
- Market access with treatment no less favourable than local services providersunder similar conditions
- Includes providers of emerging fields of financial services such as Fintech
- Reduced regulatory restrictions on Australian firms already established in, or looking to access, Hong Kong
- Tariff-free undertaking for all electronic transmissions and other facilitation measures for e-commerce
- No need to store electronic data locally—meaning no need for extra hardware for firms abroad
- Commitments to streamline banks seeking to become fully incorporated banks
- 40% more sectors in the services committed
- Continued progress on mutual recognition of professional qualifications and registration
- Transparency of domestic regulations and streamlining of application procedures = less paperwork
- Guaranteed access for Australian lawyersto provide legal advice on Australian and international law
- Both sides have agreed to negotiate regarding lawyers practicing Australian and international law based in Hong Kong within one year of A-HLFKA’s entry into force
- Guarantee current market access arrangementsfor:
- book keepers,
- engineers and integrated engineers,
- professional planners, and
- landscape architects
- Liberalisation commitments (further deregulation and removal of trade barriers) set for the fields of:
- conciliation and mediation services, and
- rail transport services
- Promotes competition and ensure effective protection of intellectual property rights
- Transparent mechanism for consultations and settlement of disputes under the FTA
- Future work programmes—enhanced cooperation between educational institutions and relevant government agencies in areas including
- Mutual recognition of qualifications
- Quality assurance
- Online education
- Hong Kong has guaranteed market access for Australian suppliers of flight training and some aspects of ground handling services
- Hong Kong has guaranteed access under current levels of openness for rail, road and pipeline transport
- Better access to both markets
- Investments thresholds in non-sensitive sectors are reviewed by the Foreign Investment Review Board has been increased from $266 million AUD to $1,154 million AUD
- The thresholds of $15 million AUD and $58 million AUD will continue to apply to investments in agricultural land and agribusiness
- New dispute resolution mechanism—The “Investor-State Dispute Settlement (ISDS)
- Independent arbitral tribunal to resolve disputes for breaches of the investment rules
- A-HKFTA replaces the 1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments
Freedom of Movement
- Enhanced benefits for Australian citizens and permanent residents seeking entry into Hong Kong
- Business visitors: 90 days
- Intra-corporate transferees
- Senior manager: One year plus extension of up to five years
- One year plus extension of up to five years
- Independent executives: Three months in any 12-month period
- Spouses and dependants’ intra-corporate transferees and independent executives: Linked to the length of stay of the primary applicant
Sikhei Leung is a law student and freelance writer. He holds a LL.M. in Human Rights from the School of Oriental and African Studies and a LL.B. from BPP University London. He also has a Psychology degree from Durham University.
This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.