Hong Kong and Australia aim to remove non-tariff barriers through a new FTA, but a DTA is still not on the cards.
(Photo: Australian Minister for Trade and Investment Steven Ciobo (left) with Secretary for Commerce and Economic Development Gregory So.)
Hong Kong and Australia announced talks aimed at establishing a “comprehensive” and “modern” free trade agreement (FTA).
While a zero tariff agreement between Hong Kong and Australia already exists, the FTA will focus on better market access for bilateral trade in services.
“When you look at the future relationship, […] the real driver […] will be around services. And Hong Kong knows the value of services like Australia knows the value of services,” visiting Australian trade minister Steven Ciobo said on Tuesday (16 May) at the official launch of the negotiations, noting a great disparity between the share of the services sector in GDP (76%) and the share of service exports (22%) from Australia.
Ciobo added that the most ambitious result he anticipated arising from the negotiations would be the establishment of a mutual recognition mechanism to break non-tariff barriers blocking access to Hong Kong’s public health sector and other professional sectors.
Hong Kong, meanwhile, will look into expanding its current tariff exemption regime with Australia for its prestigious export and re-export markets.
“Hong Kong and Australia have respective strengths in different business areas, in which some are complementary to each other. We see tremendous room for us to further our co-operation and deepen our trade and economic liberalisation with a view to bringing our economies to new heights,” Secretary for Commerce and Economic Development Gregory So stated.
Hong Kong’s bilateral services trade with Australia amounted to HK$41 billion in 2015, and bilateral goods trade amounted to HK$52 billion in 2016. Around 100,000 Australians live in Hong Kong and more than 600 Australian businesses have a major presence in the harbour city.
Both Ciobo and So also highlighted opportunities to collaborate on infrastructure and management projects under the Belt and Road Initiatives.
“Hong Kong’s economy is 93% services so we see enormous opportunity for Australian service providers who are actively engaged in banking, transport and logistics, employment consultancies, engineering, construction, aviation, architecture, accountancy, legal services, insurance, tourism, and retailing to benefit from this initiative. Australia has important interests in Hong Kong and Hong Kong is Australia’s largest business base in East Asia,” Professor Richard Petty, Chairman of the Australian Chamber of Commerce in Hong Kong and Macau (AustCham), said following the announcement of negotiations this morning.
AustCham is the second-largest foreign business chamber in Hong Kong, and the largest Australian Chamber of Commerce outside Australia. For years, the Chamber advocated for the implementation of a Double Taxation Agreement (DTA) between Hong Kong and Australia but little progress has been made. Australia and the United States are the only two major economies with which Hong Kong has not been able to establish a Double Taxation Agreement for reasons that have eluded their respective business communities.
“[…] These things are always under constant review. Being able to put in place a comprehensive FTA with Hong Kong; being able to take a second look and arrange different initiatives between us and our bilateral basis whether that’s double taxation arrangements or other arrangements […] All these becomes areas we can look at and engage constructively,” said Ciobo. He is hoping to seal the deal in 12 months and preferably by the end of this year.
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