Last month, on 17 January 2020, the Australia-Hong Kong Free Trade Agreement (A-HKFTA) entered into force.
What is a Free Trade Agreement?
For those wondering what a free trade agreement – or FTA – is, an FTA is essentially an agreement between at least two countries in which they agree to mutually reduce or eliminate trade barriers such as tariffs and import quotas, on goods and services, between themselves. Depending on how broadly worded the FTA is drafted, the range of products/services can vary widely.
With Australia and Hong Kong already having a strong trade relationship, the A-HKFTA will, among other things, increase certainty and transparency for businesses trading, or looking to trade, with Asia. It also reaffirms the value Australia places on the high degree of autonomy enjoyed by Hong Kong through the "One Country, Two Systems" framework.
What does the A-HKFTA mean for SMEs?
With Hong Kong acting as a strategic location as a gateway to China and the North Asian markets, the A-HKFTA has potential to deliver strong benefits to businesses keen to take advantage of growing markets within the broader Asian region.
According to Asialink Business CEO, the A-HKFTA will support Australia's relationship with one of our strongest trade partners and will help Australian businesses go global.
To realise the benefits of the A-HKFTA though, many Australian organisations will need to develop a deeper understanding of Hong Kong's diverse market and business culture, as well as a technical understanding of the skills and capabilities needed to develop effective partnerships.
In the meantime, what are some of the benefits we can expect from the A-HKFTA?
Increased certainty for Australia SME exporters
Under the A-HKFTA, Australia and Hong Kong will eliminate import tariffs, giving certainty for Australia exporters that wish to export to Hong Kong with duty-free entry.
The A-HKFTA also includes a legal mechanism to improve cross-border dispute resolution. This is significant for exporters of perishable goods, as the new rules will facilitate speedy resolution should consignments of goods be delayed
Continued ability for service businesses to access the Hong Kong market
According to the submission by the Business Council of Australia, the A-HKFTA will help encourage trade in new areas of services and digital trade. With Hong Kong being Australia's eight largest services export market in 2017-18, the A-HKFTA provides certainty to Australia service business that this trade can continue.
Facilitation of investment between Australian and Hong Kong
The A-HKFTA will promote two-way investment flows between Australia and Hong Kong, and will help attract vital capital into new and existing industries. By providing a modern regulatory regime, the A-HKFTA will provide protections for substantial investments in each other's economies, including rights to compensation for expropriation and protection against discrimination.
Making the most of the A-HKFTA
To help Australian SMEs make the most of the A-HKFTA, the Department of Foreign Affairs and Trade has released a number of resources to help businesses navigate the A-HKFTA and identify opportunities for trade, including Asia trade guides, interactive portals and comprehensive exporter resources. (available here)
These A-HKFTA resources will help you:
- Identify new trade opportunities
- Learn more about Free Trade Agreements
- Find accurate tariffs for your product
- Explore services commitments
- Check your eligibility for government benefits
- Access the latest trade data
We particularly recommend you check out DFAT's Free Trade Agreement Portal, available here: https://ftaportal.dfat.gov.au/
For more information on how your business can benefit from the A-HKFTA get in touch with Mark Gustavsson at Mark@businesshouseaustralia.com.au