Hong Kong and Australia tie up bilateral trade and services agreement, offering respite from global trade war
- Deal concluded at the Apec Ministerial Meeting in Papua New Guinea is the fifth closed by the current Hong Kong government
- Hong Kong products will be guaranteed zero tariffs in Australian market
Hong Kong and Australia reached a deal at a regional summit on Thursday to allow bilateral free trade and services at a time when global economies are under the shadow of a trade war.
The pair concluded 18 months of negotiations over a free-trade agreement and an investment agreement, which will cover trade in goods, trade in services, investment and other related areas and boost mutual trade and services flow.
It is Hong Kong’s ninth free-trade agreement.
“This document with Australia is important because the service industries in both Australia and Hong Kong are highly complementary,” Secretary for Commerce and Economic Development Edward Yau Tang-wah said on the sidelines of the 30th Asia-Pacific Economic Cooperation (Apec) Ministerial Meeting in Port Moresby, Papua New Guinea.
He said the free-trade agreement sent “a positive message” to the world in the face of the raging US-China trade war and rising protectionism.
Yau signed a declaration of intent to conclude the deal with Australian Trade Minister Simon Birmingham. Hong Kong and Australia will proceed to the administrative process to finalise and sign the agreements in the first half of next year.
“Hong Kong has set clear objectives in launching the negotiations – to achieve zero tariffs for Hong Kong products in the Australian market and to secure Australia’s best commitments for Hong Kong services,” Yau said.
“Our objectives have been largely met with the successful conclusion today of the negotiation of the very comprehensive free-trade agreements and investment agreement, thereby bringing our bilateral trade and investment relationship with Australia to new heights.”
Hong Kong has been caught in the crossfire of the US-China trade war, which has been raging since the summer. The city, which has almost half of its US exports from China affected by punitive tariffs, is in urgent need for a way out.
Jimmy Kwok Chun-wah, chairman of one of the city’s largest business chambers, the Federation of Hong Kong Industries, welcomed the agreement.
“We also welcome more trade deals with our core markets, such as Indonesia and the European Union,” he said. “The more free-trade agreements, the more allies and the fewer barriers to trade.”
The Australian trade pact is the fifth signed by the current Hong Kong administration, following those with Georgia, the Maldives, Macau and Asean, or the 10-member Association of Southeast Asian Nations, in the past year.
Last year Australia was Hong Kong’s 19th largest trading partner in merchandise trade, valued at HK$54.2 billion (US$6.9 billion), and the city’s seventh largest trading partner in services trade in 2016, valued at HK$41.7 billion.
In 2016, Australia ranked sixth among Hong Kong’s destinations for outward direct investments and 19th among Hong Kong’s sources for inward direct investment.
In meeting ministers at Apec, Yau urged them to redouble efforts in containing the effects of the trade war through constructive dialogue.
“Hong Kong’s greater worry is for an inflicted wound of a systemic nature, seeing the proliferation of unilateral tariff increases and individual members tackling disputes outside the WTO mechanism,” he said and hinted at the tit-for-tat tariffs the US and China imposed on each other.
Yau said the trade war not only hurt the rival parties, but also imposed a heavy toll on world trade and economic development.
“Given the complexity of global supply chains, trade barriers – be they tariff or non-tariff – will result in a higher cost of business that would be borne not just by the producers or exporting party, but equally, if not more significantly, by the importing and consumer end,” he said.
“With the likely escalation of trade frictions, the uncertainties in the external environment have increased significantly.
“This could weigh on global economic sentiment as well as trade and investment growth, and the collateral damage will be borne by most, if not all, members of our global trading communities.”
Kinling Lo is reporting from Papua New Guinea