The trade deal will see Asean countries decrease or abolish customs duties on products from Hong Kong, which is known for being one of the region’s most open economies
Trade ministers from the Association of Southeast Asian Nations (Asean) signed two free trade and investment pacts with Hong Kong at the 31st ASEAN Summit on Sunday, a move they labelled as a strong indicator of their commitment towards free trade.
The Asean Hong Kong China Free Trade Agreement (AHKCFTA) is expected to come into effect by January 2019, and has the main aim of ‘strengthening economic relations between Asean as an integrated market and Hong Kong as one of the world’s leading trade and investment powerhouses,’ Asean ministers said in a joint statement.
The trade agreement – a long awaited result after almost three years of discussions – is intended to provide Asean and Hong Kong greater access to each others markets by eliminating or reducing tariffs, forming new business opportunities and setting guidelines to promote confidence in trade. The investment agreement will centre on the advancement, protection and acceleration of investment.
“The significance is not limited to building stronger bilateral trade and economic relations between Hong Kong and Asean,” Hong Kong Secretary for Commerce and Economic Development Edward Yau told reporters at the signing ceremony.
“In the face of protectionist sentiments in other parts of world, these two agreements are in fact a loud and clear vote from all of us here for freer and more open trade.”
The pacts will mostly likely benefit Hong Kong, who, despite being part of China, conduct economic and trade relations separately. The city was notably excluded in previous free trade agreements, such as the one negotiated between Asean and China back in 2010.
Previously goods were exported through Hong Kong, but the region has witnessed a shift in trade routes thanks to the Asean-China deal. The deal also allows for exports from China to move directly to Asean nations with significantly reduced tariffs.
Negotiations on the Asean-Hong Kong deal have lacked momentum in the past due to Hong Kong already being a free port, and the city having seldom else in the way of bargaining power.
The tipping point for the pact finally occurred after leaders at the Asia-Pacific Economic Cooperation (APEC) summit issued a statement on Saturday that vowed to confront “unfair trade practices” and “market-distorting subsidies” in the region’s trade landscape.
In 2016, Hong Kong was Asean’s sixth largest trading partner, whilst the Asean bloc was Hong Kong’s second largest trading partner.