While Australia already has an FTA with China, a comprehensive agreement with the Special Administrative Region (SAR) of Hong Kong would offer Australian service providers the ability to set up in the more highly-regulated and protected business environment there, while trading freely with China.
Barring a number of goods – such as alcoholic spirits – Hong Kong is already a free port. Goods can be traded into the city without import tariffs, and this makes it a huge re-export hub for the region. A comprehensive FTA, however, would allow for Australia’s non-merchandise trading companies, such as engineering and financial services companies, to do business without being subject to import levies. In Hong Kong’s case, its zero-tariff environment is not reciprocated by Australia. By entering into an FTA with Hong Kong, Australia would be opening its markets to a range of low-priced imports from one of the world’s greatest re-export markets.
Around 30% of Hong Kong’s exports to Australia already enjoy tariff breaks through the World Trade Organisation’s Information Technology Agreement. But this does not include goods such as optical equipment, textiles, jewellery and sporting items – the trade of which runs into billions of dollars each year.
Hong Kong currently has only a few FTAs: with China, Chile, New Zealand and the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland). It is Australia’s leading business base in East Asia. More than 600 Australian businesses have a major presence there. It was Australia’s eighth-largest export market, worth A$8.31bn last financial year. Overall it was Australia’s 12th-largest trading partner, with total two-way trade in goods and services worth $11.56 billion. An added bonus of an FTA is that it would allow Australian businesses to operate without having a physical presence in Hong Kong.
