Australia and Hong Kong's trade deal: What is it and how will it work?

Legislation | 27 March 2019

The Australia-Hong Kong Free Trade Agreement (A-HKFTA) has now been signed in Sydney. Let's take a closer look at what it is and what it will mean for trade.


Australia and Hong Kong have signed a new trade deal designed to open up markets for both nations and make it easier for businesses to compete overseas.

The Australia-Hong Kong Free Trade Agreement (A-HKFTA) and the associated Investment Agreement were signed in Sydney this week and will now join the Indonesia and Peru agreements waiting to be ratified by the new Australian parliament following the May federal election.

Background to the deal

Australia and Hong Kong launched negotiations for an FTA in early 2017. Hong Kong is a Special Administrative Region of the People's Republic of China and able to enter into its own trade agreements, plus it was Australia's twelfth largest trading partner overall that year.

It had also proved to be a significant export destination for Australia, having become its sixth most important destination for merchandise exports and seventh-largest services market.

However, Australia's trade relationship with Hong Kong had been governed by the latter's obligations under the World Trade Organization (WTO) Agreement. This meant it was bound by less open and liberal market settings for goods, services and investment - and although it did have a tariff-free import regime in place, it could increase tariffs to any level on many Australian products without breaching its WTO commitments.

A stronger relationship with Hong Kong was in the long-term strategic interests of both countries.

The new FTA

Now an FTA has been signed, Australian investors and service providers will enjoy continued access to the Hong Kong market with increased certainty and guarantees that Hong Kong will not apply tariffs to Australian goods exports.

It will ensure digital trade remains free of barriers; confirm simple rules of origin procedures which minimise the administrative burden on traders; confirm and encourage global value chains; and address non-tariff measures and streamline customs procedures, resulting in smoother and simpler bilateral transactions.

Prior to this, Hong Kong had been one of the few economies in northern Asia without an FTA with Australia. Now, the bilateral agreement offers great prospects for delivering improved outcomes across the goods, services and investment sectors in both nations.

Commenting on the FTA, Australian trade minister Simon Birmingham said: "We also agreed to a series of cutting-edge rules - particularly on data flows and data storage - to facilitate trade and investment and provide certainty and confidence to Australian investors."

"The agreement will create opportunities for Australian business that extend beyond Hong Kong to the Greater Bay Area, which also includes nine mainland [Chinese] cities and Macau," HSBC Australia chief executive Martin Tricaud told SBS News.

The appeal of Hong Kong

Since its independence in 1997, Hong Kong has enjoyed a high degree of autonomy and has maintained its own currency and a busy stock exchange. It has also become a leading regional and international centre of trade and finance and an interface between China and the rest of the world.

Hong Kong is also proving to be a safe and reliable base for foreign companies thanks to its fully internationalised market, a regulatory regime aligned with international standards and free flows of information and capital.

It may be that more countries soon follow Australia's lead and build strengthened relationships with the Asian nation in the future.