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Prime Minister Helen Clark announced on 18 April 2001 that New Zealand and the Hong Kong Special Administrative Region had agreed to commence negotiations on a Closer Economic Partnership (CEP) Agreement.
The Ministry has prepared a discussion paper on the proposed agreement and would like feedback from businesses.
Hong Kong is New Zealand's seventh largest export destination with exports worth $772 million in 2000, equivalent to 2.76 percent of our total exports. Imports from Hong Kong were $171 million in 2000, equivalent to 0.56 percent of total imports.
A CEP with Hong Kong would have a key objective of increasing bilateral trade flows and generating new employment opportunities in New Zealand through export-led growth in the economy. It would also aim to attract increased flows of productive new investment from Hong Kong to New Zealand industries to assist the Government's economic development priorities.
By entering into a CEP with Hong Kong, New Zealand would be taking an important step to reinforce linkages to North Asia and to raise our profile as a business partner within the region.
As Hong Kong currently maintains zero tariffs on all imports, there are no immediate commercial gains from tariff elimination for New Zealand. A CEP would however provide New Zealand with a commitment that our exports will continue to face zero tariffs on a permanent basis.
A CEP would have implications for New Zealand's protected industries, including the textiles, clothing and footwear sectors. The challenge arises mainly from the possibility that non-Hong Kong origin goods may claim tariff preferences on the basis of a CEP with Hong Kong. Concerns over circumvention would need to be countered by the design and application of a robust rules of origin regime. Officials are working closely with industry to devise an effective and practical system.
Trade gains can be made not only through the removal of tariffs, but by the reduction of non-tariff barriers, including administrative "red tape".
A CEP would set in place a process to reduce compliance costs for business through the elimination or reduction of technical or sanitary/phytosanitary barriers to trade (this would not affect our ability to maintain in place a robust biosecurity regime).
A CEP would also promote greater bilateral consultation and transparency in areas such as business law and competition policy, making it easier for New Zealanders to do business there.
A CEP with Hong Kong would offer more open and secure access to the Hong Kong market for New Zealand services exporters, as Hong Kong's current WTO commitments on services are limited in scope. Hong Kong is a major service trader, with a large international trade surplus. Both of New Zealand's major services sectors, tourism and education, can be expected to gain from closer linkages. A CEP on services would also provide a framework for pursuing full bilateral liberalisation of all services sectors.
Hong Kong is an important source of direct investment into New Zealand. This has been historically linked to business migrants, who have declined in numbers in recent years. A CEP with Hong Kong would act as a stimulus to encourage Hong Kong and other Asian investors to increase flows of productive new investment into New Zealand.
An examination of Hong Kong's labour laws shows that these are not dissimilar to New Zealand's. Although it does not apply a statutory minimum wage, its per capita income remains significantly higher than that of New Zealand. Hong Kong has also recently embarked on an intensive effort to improve its levels of environmental protection.
A CEP agreement with Hong Kong would need to include a range of standard exceptions, eg to protect human, animal or plant life or health. A provision would also need to be included to enable the New Zealand Government to adopt measures deemed necessary to accord more favourable treatment to Maori including in fulfilment of its obligations under the Treaty of Waitangi.
This will depend in large part on the final shape of the specific provisions on goods, services and investment to be negotiated in the CEP Agreement. Apart from the implications of tariff elimination for protected sectors, the adjustment costs involved for New Zealand would appear to be minimal.
A discussion paper on the CEP, prepared by the Ministry of Foreign Affairs and Trade with input from other government agencies is on the Ministry's website.
or for a hard copy, contact:
Trade Negotiations Division
Telephone: (04) 439 8596
The discussion paper provides an initial analysis of the bilateral trade and economic relationship between New Zealand and Hong Kong. It looks at the negotiating issues and likely impacts of a Closer Economic Partnership Agreement between the two economies. By the end of June 2001, 37 substantive submissions had been received from the public. A summary of these submissions is available on request.
The Hong Kong authorities have also provided additional background information on labour standards, customs procedures/rules of origin and border control. These papers can be made available on request.
