LCQ4: Regional Comprehensive Economic Partnership
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Question:
In January this year, the Government applied for accession to the Regional Comprehensive Economic Partnership (RCEP), which came into effect in the same month. After joining this free trade agreement which is signed by 15 signatories and is so far the largest of its kind in the world, Hong Kong may benefit from the measures under RCEP such as tariff reduction and market access. In this connection, will the Government inform this Council:
(1) of the details of the complementary development plans for industries upon Hong Kong's accession to RCEP; whether, in the Northern Metropolis under planning, it will put emphasis on the development of those industries which may benefit from RCEP, and take advantage of the opportunities brought about by RCEP to further drive Hong Kong's innovation and technology development as well as re-industrialization;
(2) whether it will discuss with the State Ministry of Commerce the updates and amendments required to be made to the trade policies between the Mainland and Hong Kong (including the Mainland and Hong Kong Closer Economic Partnership Arrangement) upon Hong Kong's accession to RCEP; and
(3) given that the free trade measures to be implemented under RCEP will spur the facilitation of trade between the Mainland and regions such as the Association of Southeast Asian Nations, whether the Government has assessed the challenges to be posed by this situation to Hong Kong as an international trade centre?
Reply:
President,
The Regional Comprehensive Economic Partnership (RCEP) is at present the world's largest free trade agreement (FTA), covering more than 30 per cent of the global population and total gross domestic product. Possessing huge economic potential and opportunities, RCEP has a pivotal role in terms of its trade volume, population in the markets covered, size of membership, etc. According to the report published by the Asian Development Bank in October last year, RCEP could increase the global total revenue by US$263 billion and the global export by US$496 billion by 2030.
All 15 member economies of RCEP are major trading partners of Hong Kong, accounting for over 70 per cent of Hong Kong's total merchandise trade in 2021, and about 50 per cent of Hong Kong's total trade in services and total investments (including inward direct investment and outward direct investment) respectively in 2020. In addition, except Japan and Korea, Hong Kong has signed various bilateral FTAs with 13 of the 15 member economies of RCEP.
The HKSAR Government has been actively seeking to join RCEP. On January 1 this year when RCEP entered into force for most of the member economies, I immediately wrote to the RCEP Depositary, i.e. the Secretary-General of ASEAN (Association of Southeast Asian Nations) to make the formal accession request on behalf of Hong Kong. At the Asia-Pacific Economic Cooperation Ministers Responsible for Trade Meeting held in Bangkok last month, I took the opportunity to meet individually with a number of economic ministers of RCEP member economies and lobby for their support of Hong Kong's early accession, and received positive responses in general.
With regard to the three parts of the Hon Yim's question, my reply is as follows:
(1) With RCEP providing a crucial platform for deepening regional economic integration, Hong Kong must grasp the opportunity to join RCEP and bring about greater room for development for various industries, otherwise, we would miss the opportunity to bring Hong Kong up to the next level on this important regional economic and trade platform. Hong Kong is an important financial, transportation, trade, and innovation and technology centre in the region, and provides quality professional services to international markets. We can leverage our strengths to join RCEP, a goal which also aligns with our positioning under the National 14th Five-Year Plan.
We will seize the opportunities on all fronts, for instance, in developing Hong Kong into an international innovation and technology hub, the HKSAR Government seeks to take advantage of the proximity of the Northern Metropolis to Shenzhen, to promote Hong Kong's integration into the overall development of our country and the Greater Bay Area (GBA). As such, the development of industries in the Northern Metropolis will emphasise on connecting Hong Kong and Shenzhen, promoting a closer and more comprehensive partnership between the two regions, while engaging with the GBA and the Mainland market, achieving greater synergy. This development strategy shall also strengthen the connections between Hong Kong and RCEP member economies, reinforcing Hong Kong's role as the bridgehead connecting with and fostering the development of the Mainland and the GBA.
(2) Serving as the hub to connect the Mainland with other economies underlines Hong Kong's strengths and contribution to regional economic development and RCEP. Signed in 2003 and regularly updated, the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) could best demonstrate the close relations between the two places. Over the years, the Mainland and Hong Kong have kept on enhancing the contents of the CEPA, which encompasses four major areas, namely trade in goods, trade in services, investment and economic and technical cooperation. The CEPA is a high level and comprehensive FTA, and is currently the most liberal FTA of the Mainland. Under the CEPA, goods exported from Hong Kong to the Mainland already enjoy zero tariff, while the Mainland has also opened up to Hong Kong services industry substantially. Of all 160 trade in services sectors, 153 have been fully or partially opened up. According to the most-favoured treatment provision in the CEPA, any commitments made by the Mainland under RCEP to other RCEP members that are more preferential than those under the CEPA will also be extended to Hong Kong, thereby ensuring that Hong Kong enterprises will continue to access the Mainland market under the most favourable conditions. We will keep on reviewing if there is a need to further enhance the terms of the CEPA in light of other new regional economic cooperation agreements.
(3) RCEP comprises members of huge economic size with rapid growth rate. Among them, the Mainland and ASEAN are Hong Kong's largest and second-largest trading partners respectively. From 2017 to 2021, the average annual growth rates of bilateral merchandise trade between Hong Kong and the Mainland, and that between Hong Kong and ASEAN were 6.8 per cent and 7.4 per cent respectively, reflecting a steady growth of the mutual economic and trade ties between Hong Kong and these economies.
Hong Kong has faced multiple challenges brought about by geopolitical tension and the pandemic in recent years, while the multilateral trading system under the World Trade Organization has also been under repeated challenge. As a staunch supporter of free and open trade and investment, not only will Hong Kong's accession to RCEP highlight RCEP's importance as the most open FTA in the world, but with our inherent advantages, Hong Kong could consolidate its position as the global financial centre, and further integrate into the regional industry chain. Hong Kong's goods, enterprises and services industry would also benefit from the series of measures under RCEP, including rules of origin, tariff concessions, market access commitments and streamlined customs procedures, which will lower the trading costs for businesses and enhance competitiveness. Upon joining RCEP, Hong Kong will also make its own commitments in opening up various industries, which we believe would attract enterprises of RCEP member economies to invest in Hong Kong or to go for our quality and professional services, thereby promoting bilateral and regional trade in services and electronic commerce, creating more business opportunities in Hong Kong.
Ends/Wednesday, June 1, 2022
Issued at HKT 17:53
Issued at HKT 17:53
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