A perspective from the Pacific Basin Economic Council (PBEC) on the potential benefits for Hong Kong businesses in joining the Regional Comprehensive Economic Partnership (RCEP) trade area should its current application be finally approved:
The Pacific Basin Economic Council views Hong Kong’s application to join RCEP as a positive development that could deliver significant economic benefits for Hong Kong businesses. As an export-oriented economy with deep trade linkages across the Asia-Pacific region, Hong Kong’s membership in RCEP makes strategic sense.
However, we recognize there have been some attempts to delay or deter Hong Kong’s RCEP accession, likely stemming from concerns over the National Security Law and its implications. Nonetheless, we believe Hong Kong can provide the necessary reassurances to RCEP members and ultimately have its application approved, potentially within 2024.
The key advantages we see for Hong Kong businesses in joining RCEP include:
Expanded market access: RCEP will grant Hong Kong companies preferential access to the large and growing markets of member countries, including economic giants like China, Japan, and South Korea – markets where Hong Kong currently lacks bilateral trade agreements.
Tariff elimination: The progressive elimination of tariffs on a wide range of goods traded between RCEP members will lower costs and improve competitiveness for Hong Kong exporters.
Harmonized trade rules: RCEP’s common rules of origin, customs procedures, and other trade regulations will simplify processes and reduce compliance burdens for Hong Kong businesses operating across multiple RCEP markets.
Investment opportunities: RCEP’s investment facilitation provisions can benefit Hong Kong’s role as a major source of foreign direct investment in the region, aligning with the city’s future investment ambitions.
Alignment with existing agreements: By joining RCEP, Hong Kong can consolidate and streamline its existing web of bilateral FTAs under a single regional framework, enhancing trade relations.
Additionally, Hong Kong’s unique position as a trading and logistics hub in the heart of the Asia-Pacific can allow it to serve as a gateway for goods transiting to and from mainland China and other RCEP economies. The Customs and Excise Department’s existing efforts to support RCEP-qualifying transshipments demonstrate Hong Kong’s proactive approach.
From the PBEC’s perspective, several key sectors and industries in Hong Kong stand to benefit the most from expanded market access under the Regional Comprehensive Economic Partnership (RCEP) agreement:
Financial Services: Hong Kong’s world-class financial sector, including banking, asset management, insurance, and fintech, can leverage RCEP to deepen ties and increase business flows with financial hubs like Japan and South Korea, where Hong Kong currently lacks bilateral trade deals.
Trade and Logistics: As a leading global trade and logistics center, Hong Kong is uniquely positioned to facilitate the movement of goods throughout the RCEP region. Reduced tariffs and simplified customs procedures can further bolster Hong Kong’s role as a regional transshipment hub.
Professional Services: Hong Kong’s strengths in professional services such as legal, accounting, consulting, and engineering can be better leveraged across the RCEP markets, where Hong Kong firms may have faced market access barriers previously.
Technology and Innovation: Hong Kong’s growing technology and innovation ecosystem, spanning sectors like ICT, electronics, and advanced manufacturing, can benefit from expanded opportunities in RCEP markets to collaborate, source materials and components, and access larger consumer bases.
Consumer Goods: Hong Kong’s retail and e-commerce industries, with their expertise in sourcing, branding, and distribution, are likely to see increased demand from RCEP consumers for high-quality Hong Kong-made or Hong Kong-branded consumer products.
Food and Beverage: Hong Kong’s reputation as a global culinary hub, along with its food processing and packaging capabilities, can enable greater exports of Hong Kong’s specialty food and beverage products to other RCEP markets.
By leveraging RCEP’s provisions on tariff elimination, rules of origin, customs cooperation, and investment facilitation, Hong Kong businesses across these key sectors can enhance their regional competitiveness, diversify their supply chains, and capitalize on the growth opportunities presented by the RCEP trade bloc.
Overall, PBEC believes RCEP membership would significantly boost Hong Kong’s dynamism, resilience, and global economic presence by lowering trade barriers, simplifying processes, and expanding market access. This aligns with Hong Kong’s long-standing role as a major trading and investment hub in the Pacific basin.