China And Hong Kong Hold Free Trade Talks

by Mary Swire, Tax-News.com, Hong Kong

28 January 2002

Talks have taken place between Hong Kong and mainland China on a proposal for the creation of a joint free trade area made by Chief Executive Tung Chee-hwa last year when China's entry to the WTO became assured.

Financial Secretary Antony Leung Kam-chung met with An Min, Vice-Minister of Foreign Trade and Economic Co-operation in Beijing, but the talks encountered difficulties, and ended without setting a timetable for the agreement to take effect. Mainland representatives also dropped earlier descriptions of the proposed relationship as a "free-trade area".

Mr An admitted future discussions would encounter difficult issues, but said that five principles for future discussions had been agreed upon, one being that easy issues would be dealt with before more difficult ones. "I think there will be obstacles met in every negotiation in the world. These include some technical conditions," Mr An said, adding: "Our ultimate goal is to reach a win-win situation."

The other principles are that the arrangement be beneficial to both sides, that it meet WTO rules and the principle of "one country, two systems", that political, business and academic circles should be widely consulted, and that the agreement follow long-term economic and development trends.

Mr An said the new formal name of the proposed arrangement - the Closer Economic Partnership Arrangement - better described the relationship than "free-trade agreement" because Hong Kong was already part of China. Mr Leung added: "The name is not important, it is the content."

Both sides said the arrangement would cover liberalisation of trading of goods and services, and easing restrictions on trade and investment. Hong Kong business groups hope that the deal will give the service sector early access to the Chinese market before it fully opens up in five years under the WTO timetable.

Mr An rejected suggestions that the arrangement would not benefit the mainland. "Hong Kong has acted as a window and a bridge in our opening up in the past 20 years. Its function could not be replaced. How can one say this issue is not beneficial to the mainland? It is beneficial to both sides," he said.

Mr Leung and Mr An will hold their second meeting in Hong Kong in March.

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