WT/REG322/2  
 
9 September 2013  
(13-4694)  Page: 1/3  
Committee on Regional Trade Agreements  Original: English  
 
FREE TRADE AGREEMENT HONG KONG, CHINA AND THE EFTA STATES 
(GOODS AND SERVICES) 
QUESTIONS AND REPLIES 
 The following communication, dated 4 September 2013, is being circulated at the request of 
the delegations of Hong Kong, China and the EFTA States.  
 This document reproduces the questions addressed to the Parties and the responses 
submitted. 
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Questions from the delegation of Australia 
 
Provisions on Trade in Services 
 
General Comments 
 1.1.  Australia is interested in the appr oach Hong Kong, China and the EFTA States 
adopted towards structuring the Agreement.  
 Could the Parties explain why they ch ose to incorporate a Telecommunications 
Annex and a Financial Services Annex, rath er than a Telecommunications Chapter and a 
Financial Services Chapter?  
The Agreement follows the structure of the Gene ral Agreement on Trade in Services (GATS) 
in incorporating annexes on telecommunications services and financial services.  
1.2.  Australia is concerned that the Parties,  particularly the EFTA States, do not appear 
to have made many commitments that go beyond existing GATS commitments, and in 
some cases have made lesser commitments under the Agreement than under the GATS. For example: 
a. Under the GATS, Iceland, Norway and Switzerland have committed to fully open 
construction and related engineering services. Why have these countries 
chosen to introduce non-conforming me asures in these sectors under the 
Agreement? 
b. Iceland, Switzerland and Norway made full commitments on telecommunication 
services under the GATS. Why have Iceland and Switzerland chosen to introduce reservations on telecommunica tion services under the Agreement? 
Construction and related Engineering services:  
 
The level of commitment is the same as under the GATS. No non-conforming measures in 
this sector have been introduced with regard to the EFTA-Hong Kong, China FTA. 
 
Telecommunications services: 
 
The level of commitment is the same as under the GATS. WT/REG322/2 
 
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  In substance, there are no GATS-minus in this FTA in these sectors. Since negative lists do 
not spell out explicitly the actual commitments, this may create difficulties in evaluating them. 
 Denial of benefits 
 1.3.  The Agreement does not contain any sp ecific provision on denial of benefits 
(paragraph 4.6). However, as the Secretaria t's report outlines, the definition of a 
"juridical person of another Party" seems to imply that a Party may deny the benefits of 
the relevant chapters to a service supplier or investor, constitute d or organized under 
the domestic law of a Party if that service su pplier or investor is an enterprise owned or 
controlled by persons of a third party and if  such persons of a third party have no 
substantive business activities in the Area of any Party.  
 Do the Parties agree with the Secretariat's interpretation of a "juridical person of 
another Party"? If not, how is this phrase  to be interpreted, and could the Parties 
outline their approach to denial of benefits under the Agreement? 
 
For the purpose of trade in services under HKC-EF TA FTA, the definition for "juridical person 
of another Party" is set out in Article 3.3(d) of the Agreement, which generally shares the spirit of 
GATS Article V:6. 
General provisions on trade in services: 4.3.3 Local presence 
 
1.4.  Australia notes that there are no specif ic provisions on local presence requirements 
in the Agreement (paragraph 4.12), but Part ies have listed non-conforming measures in 
Annex X that make reference to  local presence requirements. 
 Could the Parties explain why they have taken this approach? 
 
The Lists of Reservations under Annex X set out the Parties' reservations on Market Access 
and, in this case, National Treatment in committed sectors, in line with the Scheduling Guidelines 
developed under the GATS.   
 Regulatory provisions: 4.6.1 Domestic regulation 
 1.5.  Australia notes that all Parties ex cept Norway shall develop and conclude 
disciplines on domestic regulation (paragra ph 4.66), covering licensing requirements 
and procedures, qualification requirements and procedures and technical standards, 
within 12 months, which the other Parties have  agreed to incorporate into Annex VII of 
the Agreement.  
a. Could Norway explain why it is excluded  from the obligation in Annex VII?  
 Norway is not part to the mandate to develop disciplines on domestic regulation under the 
FTA, because Norway does not foresee to undertake any further new commitments concerning domestic regulation beyond what will be the outc ome of the negotiations under GATS Article VI, 
paragraph 4.  
 
b. What progress has been made towards th e development of these disciplines for 
other Parties? 
The Parties concerned have begun discussions on taking forward the domestic regulation 
negotiation in the context of the Agreement. An y additional disciplines in this area will be 
considered by the Joint Committee.  
 
1.6.  Australia is interested in the specific disciplines on domestic regulations that have 
been developed for financial services (par agraph 4.67). Could the Parties explain the 
scope of these disciplines? 
These disciplines apply to financial services as defined in Article 1 of that Annex. WT/REG322/2 
 
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  Questions from the delegation of the European Union 
 
GENERAL PROVISIONS OF THE AGREEMENT 
 
Provisions on Investment 
 
1.7.  Out of the EFTA countries only Switze rland has a bilateral investment treaty (BIT) 
with Hong Kong, China. 
 Is it envisaged under the FTA's rendezvous  clause on investment that investment 
protection will be extended to cover the other EFTA countries? 
 
The Free Trade Agreement between Hong Kong, China and the EFTA States (HKC-EFTA FTA) 
and the Investment Promotion and Protecti on Agreement between HKC and Switzerland 
(HKC-Switzerland IPPA) are two separate agreem ents. Article 4.10 (Review) of the Investment 
Chapter of HKC-EFTA FTA provides that "This Chapter shall be subject to periodic review within the 
framework of the Joint Committee regarding the possibility of further developing the Parties' commitments". There has been no discussion between the two parties on including investment 
protection provisions in the FTA. 
 1.8.  The investment provisions in the FTA on ly refer to national treatment and its lists 
of reservations, but not to protection stan dards enforceable through investor-to-state 
dispute settlement (ISDS), which are only available to Switzerland and Hong Kong, 
China by virtue of their BIT.  
a. Can this situation lead to a de facto di scrimination of investors and investments 
depending on their country of origin? 
HKC-EFTA FTA and HKC-Switzerland IPPA are two separate agreements with different 
coverage. As in similar international agreements, provisions in the HKC-Switzerland IPPA, including 
those on investor-Party dispute settlement, are a pplicable to investors and investments covered by 
the IPPA.   
b. Is it envisaged to allow investors from the Parties recourse to ISDS at a later 
stage? 
The investment chapter in HKC-EFTA FTA does not contain provisions on investor-to-Party 
dispute settlement. There has been no discussion between the two parties on inclusion of such 
provisions in the chapter. 
 
c. Does EFTA negotiate as a grouping agreements including investment 
protection? Will it do so in the future? 
The EFTA countries have so far followed different patterns as to coverage of investments. 
While rules regarding liberalization of the establishment of investments and/or on the promotion of investments are often included, investment protection is left to individual bilateral investment 
treaties.  
 d. Would the rendezvous clause on sustai nable development consider including 
provisions to encourage investors to be have in accordance with the highest 
principles and standards of responsibl e business conduct, such as the OECD 
Guidelines for multinational enterprises or the UN principles for responsible 
investment? 
There has been no discussion on this matter between the two Parties. 
 
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