As reported earlier, Hong Kong has asked to
accede to the ASEAN-China Free Trade Agreement (ACFTA). The ASEAN Economic Ministers meeting in
Cambodia this week will consider the request, with the ASEAN Summit in November
making the final decision.
The Singapore Straits Times today
(link after the pay wall) reports that Singapore and other ASEAN member states
want Hong Kong to sweeten its offer. According
to the article, a study conducted by the Asian Strategy and Leadership
Institute (ASLI) projects that Vietnam, Cambodia, Malaysia, the Philippines and
Thailand would benefit, in descending order of magnitude. Singapore would be the only ASEAN member
state adversely affected, according to ASLI.
As Hong Kong and Singapore
are similarly strong in services and capital, Singapore would face increased
competition within ASEAN in these sectors if Hong Kong were to accede to the
ACFTA. This was noted by Mr Lee Yi Shyan, Singapore’s
Senior Minister of State (Trade and Industry):
"Given the similarities between Hong Kong and
Singapore, an amount of competition is unavoidable. The question is, how can we
find a way to strike a win-win situation?
And if Hong Kong alone cannot make that offer, then we will see if the
China side can provide some of the potential benefits to make this a more
favourable deal for Asean members." This, he said, could include looking
at how China's services industry can be opened further to Asean companies.
Such an augmented offer
would not necessarily benefit Singapore, which already has its own FTA with
China with deep and broad commitments in services and investment, but benefit
all of ASEAN.
Mr. Lee also expressed
concern that Hong Kong’s joining an existing FTA sets a precedent:
"This is an important technical and procedural question
as there are very few precedents. Would
it mean a renegotiation of an FTA already in existence?"
For example, what would
happen if North Korea re-united with South Korea? Would the North Korean territory immediately
accede to the ASEAN-Korea Free Trade Agreement?
When the Federal Republic of
Germany (e.g., West Germany) absorbed East Germany, East Germany immediately
was covered by the EU treaties, so this is a valid, if not immediate, concern.
I would add two other
possible areas of concern for Singapore that arise from the proposed Hong Kong
accession.
First, to some extent, the
market access and dispute resolution commitments of the ACFTA exceed those
provided by the ASEAN Framework Agreement on Services (AFAS) and the ASEAN
Comprehensive Investment Agreement (ACIA) for ASEAN members. If Hong Kong were to accede to the ACIA, it
could result in the discouraging prospect (for Singapore) of Singapore’s main
regional competitor for trade and capital operating within ASEAN but with
better protection and access than Singapore itself has under AFAS and the ACIA.
This represents a fundamental need in the AEC, the need to mesh together the
ASEAN internal market agreements with the ASEAN FTAs with its trading
partners. In other words, this is an
indigenous ASEAN problem that ASEAN needs to resolve on its own, which does not
arise from Hong Kong or China.
Second, if Hong Kong were
to accede to the ACFTA, its companies would have access to the investment
protection and dispute resolution provisions of the ACFTA. Philip Morris Asia (PMA), a Hong Kong
company, has used similar provisions under the 1993 Agreement between the
Government of Australia and the Government of Hong Kong for the Promotion and
Protection of Investments to bring an investment arbitration
proceeding against Australia’s law requiring plain packaging for tobacco
products.
Hence, theoretically, PMA could bring a similar action under Article 14
of the Agreement on Investment of the Framework Agreement on
Comprehensive Economic Co-operation between ASEAN and the People's Republic of
China, part of the ACFTA, against labeling requirements imposed
by Singapore, Thailand and other ASEAN member states on tobacco products. The
possibility of opening themselves up to a Hong Kong-based arbitration claim
must be on the minds of ASEAN officials.
These considerations, together with the overall tensions
between ASEAN and China regarding the South China Sea territorial dispute, may
delay Hong Kong’s accession to the ACFTA. Eventually these will issues will be
resolved, but perhaps not by the ASEAN Summit in November.
