26th ASEAN Summit sees Progress on AEC and FTA with Hong Kong

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The 26th ASEAN Summit was recently held in Malaysia on April 26-27. During the meeting, leaders from the member nations discussed the progress of the ASEAN Economic Community (AEC) and the ongoing free trade agreement negotiations with Hong Kong.

As it now stands, there is a 90.5 percent ASEAN-wide implementation rate of the 506 measures within the AEC Scorecard. ASEAN leaders therefore expressed their optimism that the AEC will be ready for full implementation by January 1, 2016.

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Chief among the trade measures of the economic community is the elimination of tariffs. The ASEAN-6 countries have already eliminated tariffs on 99.65 percent of tariff lines. The remaining CLMV countries have reduced tariffs to a zero to five percent range on 98.6 percent of their tariff lines, and will eliminate tariffs on these goods by the end of this year.

Hong Kong FTA

The ASEAN Summit also included discussions related to the ongoing negotiations on the Hong Kong-ASEAN Free Trade Agreement. Negotiations on the FTA were opened in July 2014 and the third round was recently concluded last month. According to Hong Kong’s Chief Executive C Y Leung, the trade talks are progressing smoothly and he expects them to conclude early next year.

The trade relationship between the two parties is already significant. In 2014, there was US$106 billion in goods trade between ASEAN and Hong Kong – a 10 percent year-on-year increase. ASEAN is Hong Kong’s second largest goods trading partner and fourth largest service trading partner. In return, Hong Kong is ASEAN’s eight largest goods trading partner.

Once implemented the FTA will include the following benefits:

  • Eliminate or reduce tariffs and non-tariff barriers
  • Provide preferential rules of origin
  • Liberalize trade in services
  • Liberalize, promote, and protect investment
  • A dispute settlement mechanism (still under negotiation)

Chief Executive Leung explained the benefits to ASEAN businesses of a closer relationship with Hong Kong: “[they can] set up manufacturing operations in Hong Kong, produce goods that meet CEPA (Mainland and Hong Kong Closer Economic Partnership Arrangement) origin rules,” which will allow their “products [to] enter the Mainland tariff-free.” Or, companies can “simply partner with a Hong Kong company to take advantage of all that CEPA can offer to your products and services.”

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ASEAN is also engaged in ongoing negotiations for the Regional Comprehensive Economic Partnership (RCEP) – a trade agreement between ASEAN, China, South Korea, India, Japan, Australia, and New Zealand. It is hoped that negotiations will be finished by the end of this year.


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