Australia and Hong Kong enter free trade agreement
Hong Kong is Australia’s fifth largest source of foreign investment ($116.6 billion in 2017) and the tenth largest destination for Australian foreign investment abroad ($47.4 billion in 2017). Trade investment between Hong Kong and Australia is $18.8 billion (in 2017-2018), representing 2.4% of Australia’s total trade. As a result, Australia has recently signed a free trade agreement with Hong Kong known as the Australia - Hong Kong Free Trade Agreement and associated Investment Agreement.
According to the Australian government, the A-HKFTA will provide greater business certainty to Australia’s bilateral trade with Hong Kong by locking in zero tariff levels for goods exported into Hong Kong and improving market access for Australian services. Both Hong Kong and Australia will follow the applicable domestic treaty-making processes to fully ratify the agreements.
The A-HKFTA joins the free trade agreements already entered into by Australia with Japan, China and the Republic of Korea. Relevantly for the Australian business community, trading rules have been modernised for e-commerce including data flows and data storage, financial services, telecommunications and intellectual property giving rise to greater regulatory certainty in these areas.
In the event of uncertainty, the newly negotiated A-HKFTA and Investor Agreement allows for investors from Australia and Hong Kong to have access to an independent arbitral tribunal to resolve disputes.
The new Investment Agreement will replace the 1993 Investment Agreement previously struck between the two parties. Significantly, the word “investor” has been redefined, making it a requirement for the investor to be an entity carrying on substantial business activities in their area of operation.
Investors in both Hong kong and Australia will be free to take measures to ensure that environmental impacts are considered, public morals are preserved and the protection of human, animal or plant welfare issues are observed.
A table outlining the details of the key outcomes of the A-HKFTA is provided below.
Hong Kong does not currently apply tariffs on imported Australian goods. However, under World Trade Organisation rules, Hong Kong has discretion over 52.3 per cent of tariff lines including imports such as coal, gold, zinc ores and liquefied natural gas. There is now an agreement to bind all tariffs at zero from entry into force.
Harmonised rules and technical requirements for food products and wine.
Commitment to process perishable goods as quickly as possible.
|Financial services||Financial service providers (including banking and insurance providers) are guaranteed current open settings through ambitious access commitments.|
|Education services||Guaranteed market access to Hong Kong for the provision of adult, higher, primary and secondary education services.|
|Professional services||Guaranteed market access for Australian architects, engineers and accountants.|
Requirement that investment-related capital transfers can occur freely and without delay.
The right for an investor to bring a claim associated with appropriation of investor funds to an independent arbitrator for dispute resolution.
Reduced regulatory burden on electronic transactions.
Adoption and maintenance of consumer protection laws to proscribe fraudulent and deceptive commercial practices.
Enhanced protection of personal information.
Increased acceptance of paperless trading.
Allowance for cross-border transfer of business information by electronic means.
If you require further information on what the implications of the A-HKFTA and associated Investment Agreement are for your business activities, please contact HopgoodGanim Lawyers’ Corporate Advisory and Governance team.