RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/REG163/M/1 
21 March 2005 
 
 (05-1159) 
Committee on Regional Trade Agreements 
Thirty-Ninth Session  
 
 
 
EXAMINATION OF THE CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT 
BETWEEN CHINA AND MACAO, CHINA 
  
Note on the Meeting of 18 February 2005
 
 
Chairman: Mr. R. Saborío (Costa Rica) 
  
1. The meeting was convened in document WTO/AIR/2496. 
2. Under Agenda Item C.IX of its Thirty-N inth Session, the Committee on Regional Trade 
Agreements (hereinafter CRTA or the Committee)  took up the examination of the goods and services 
aspects of the Closer Economic Partnership Arrange ment (CEPA) between China and Macao, China.  
The following topics were discussed: 
 A. General Remarks 
Goods aspects
: 
 B. Background Information on the Agreement 
 C. Trade Provisions  D. Other  
 Services aspects
: 
 E. Background Information on the Agreement 
 F. Provisions Affecting Trade in Services  
3. The Chairman
 said that this was the first round of examination of the CEPA between China 
and Macao, China.  The Agreement had been signe d on 17 October 2003 and had entered into force 
on 1 January 2004.  It had been notified to the WTO on 12 January 2004 as document with double 
symbol WT/REG163/N/1 – S/C/N/265.  The text of th e Agreement and its supplement could be found 
in document WT/REG163/1 and Addendum 1.  He pr oposed to organize the examination by first 
asking the Parties and other Members for general comme nts, and then to turn to the specifics of the 
Agreement looking first at the goods aspects, fo llowed by the services aspects, using the respective 
Standard Formats (WT/REG163/3) and (WT/REG163/4) to guide the debate. 
A. GENERAL REMARKS  
4. The representative of China  said that China (also referred to  as the "Mainland") and Macao, 
China had signed the Mainland and Macao Closer  Economic Partnership Arrangement and six 
Annexes on 17 October 2003 in order to promote economic trade cooperation between the Mainland 
and the Macao Special Administrative Region. The implementation of the CEPA and its Annexes had 
begun from January 1, 2004.  The Supplement to the CEPA had been signed on 29 October 2004 and WT/REG163/M/1 
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 had been implemented from 1 January 2005.  The CEPA was a free trade arrangement signed 
according to GATT Article XXIV and GATS Article V with the aim to build a free-trade area 
between the Mainland and Macao, China and gradua lly liberalize trade in goods and services as well 
as promote trade and investment facilitation.  The CEPA covered trade in goods, trade in services and 
trade and investment facilitation.  It had six chap ters, 23 articles and six Anne xes.  With regard to 
trade in goods, Macao, China, would continue to apply zero tariffs on all imported goods of Mainland 
origin.  From 1 January 2004, the Mainland had a pplied zero tariffs on the import of goods of Macao, 
China origin which covered 273 items.  From 1 Ja nuary 2005, the Mainland had begun to apply zero 
tariffs on goods of Macao, China origin which covered 190 items.  Based on the Mainland's 2005 
tariff codes, a total of 509 items of Macao, China origin enjoyed zero tariffs, covering basically all 
existing Macao, China products.  Concerning the rul es of origin of the CEPA, goods wholly obtained 
were regarded as originating in the Parties.  Goods not wholly obtai ned needed substantial 
transformation. The criteria for substantial tran sformation included manufacturing or processing 
operations, change in tariff heading, value-added c ontent and other or mixed criteria.  Neither Party 
would apply non-tariff measures inc onsistent with WTO rules. The Mainland had eliminated tariff 
rate quotas on goods of Macao, China origin.  Th e Parties would not use anti-dumping measures or 
countervailing measures between each other, thou gh safeguard measures could be used when the 
conditions were met.  The CEPA  enhanced cooperation in areas such as commodity inspection and 
quarantine, food safety and quality and standardization. 
5. Regarding trade in services, the representativ e of China said that the CEPA and its 
Supplement set out the contents and timetable for th e mutual reduction or elimination of restrictions 
on trade in services and service suppliers.  Ther e were 31 sectors included in the CEPA, covering 
almost all services sectors of the Parties.  Fo r trade and investment facilitation, the Agreement 
promoted trade and investment facilitation thr ough customs clearance facilitation, standard 
conformity, enhanced information exchange a nd other measures.  The Parties would enhance 
cooperation in seven areas: trade and investment promotion; customs clearance facilitation; 
commodity inspection and quarantine; food safety and quality and standardization; electronic 
commerce; transparency in laws and regulations; cooperation of small and medium size enterprises; 
and industrial cooperation.  The Pa rties had already set up a Joint Steering Committee to supervise the 
implementation of the CEPA, interpret its provisions , and resolve disputes that might arise during its 
implementation.  In his concluding remarks, he said that his delegation would be pleased to answer 
questions by Members relating to the examination of the CEPA. 
6. The representative of Macao, China
 said that in order to strengthen trade and investment 
cooperation, the Mainland and Macao, China had established the Closer Economic Partnership 
Arrangement in October 2003.  CEPA was the firs t bilateral free trade agreement (FTA) that Macao, 
China had entered into with another WTO Member .  It was comprehensive in scope and covered 
goods and services sectors, as well as trade and invest ment facilitation.  More importantly, it had 
incorporated the basic foundations of the WTO Agreem ents, especially the provisions with respect to 
GATT Article XXIV and GATS Article V.  The CEPA increased neither trade barriers nor market access thresholds to non-party Members and its enforc ement would not lead to a deterioration in the 
trading environment for third parties.  He concl uded by saying that his delegation was ready to 
proceed with the examination of the Agreement. 
7. The Chairman
 recalled that the terms of reference for the examination of the goods aspects 
had been adopted on 26 January 2004 by the Council  for Trade in Goods, as contained in document 
WT/REG163/2. 
B. BACKGROUND INFORMATION ON THE AGREEMENT  
8. With regard to the scope of the Agreement, the representative of the European Communities  
asked the Parties whether the appr oach to trade liberalization in the CEPA between China and Hong  WT/REG163/M/1 
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 Kong, China discussed earlier in the Session also applied to the CEPA between China and Macao, 
China.  He asked the Parties whether they could provide some information on the coverage of the 
Agreement in terms of tariff lines.  He indicated  that his calculation, based on the information 
contained in Section II.1.1 and footnote 4 of the St andard Format, was of coverage of approximately 
6.6 per cent of the tariff lines of Mainland China's tariff schedule.  He wondered whether the Parties 
could confirm this and explain the di fferences between the two CEPAs.   
9. The representative of Australia  said that her delegation had questions with respect to the 
scope of the Agreement similar to those for th e CEPA between China and Hong Kong, China, and 
that she would submit them in writing.  She also sought confirmation in the opening statements by the 
Parties that Macao, China applied zero tariffs on imported goods of China origin on 273 items.  
Furthermore, she was interested in knowing wh ether the trade covered included agriculture and 
fisheries, and on which goods.   
10. The representative of Macao, China  said that imports of Macao, China origin into the 
Mainland which enjoyed zero-tariff treatment durin g the first phase of the CEPA amounted to 273 
tariff lines.  The supplement to the Agreement exte nded the zero-tariff treatment to an additional 190 
tariff lines, thus providing for a total of 509 tariff lines.  This amounted to over 95 per cent of Macao, 
China's total exports to Mainland China.  He i ndicated that under the Agreement, no later than 1 
January 2006 a zero tariff would be applied to all imports of Macao, Ch ina origin into the Mainland.  
Macao, China, for its part, had agreed to mainta in zero tariffs on all im ported goods of Mainland 
origin.  Hence, the CEPA complied with the requirement  of substantially all the trade.  With regard to 
agricultural trade, most of Macao, China's agricultural products had been covered by the Agreement.  
He stressed, however, that Macao, China was not a major exporter of agricultural and fisheries 
products.  The representative of China  explained that the mechanism with respect to the Annexes in 
both the CEPA between China and Macao, China and the CEPA between China and Hong Kong, 
China was based on the principle that whatever could be produced in Hong Kong, China and Macao, 
China and met the rules of origin of the respective CEPA, could be exported to China free of duty.  In 
his opinion that was the main point and not figures concerning tariff lines. 
C. GOODS ASPECTS – TRADE PROVISIONS  
11. The representative of Australia  said that her delegation ha d questions with respect to 
safeguards which she would submit in writing. 
D. OTHER  
12. The representative of Australia  asked the Parties what steps had been taken since the entry 
into force of the Agreement to further trade and i nvestment facilitation.  The representative of Macao, 
China  replied that trade and investment facilitation,  which was the Third Part of the Agreement, 
implemented a mechanism that allowed both Parties to take measures to promote facilitation in seven 
different areas.  Since the implementation of the CEPA from 1 January 2004, several working groups 
had been established to work on these seven areas an d had experienced different levels of progress.  
He referred, for instance, to the Parties' respec tive customs offices which had signed a co-operation 
agreement on how to streamline all custom clearan ce procedures.  Other activities which had taken 
place included promotion of small and medium size enterprises and trade and investment promotion.  He emphasised that the Parties would continue work ing on these seven areas of co-operation in order 
to achieve greater progress in the future. 
13. The Chairman
 said that the first round of examination of the goods aspects of the Closer 
Economic Partnership Arrangement between China and Macao, China had allowed the Committee to 
clarify a number of questions, but some others were pending.  He invited those delegations wishing to WT/REG163/M/1 
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 ask questions to forward them in writing to the Secr etariat by 11 March and Parties to submit replies  
in writing by 22 April . 
14. The Committee took note
 of the comments made. 
Services aspects 
 
15. The Chairman  recalled that the decision to refer the CEPA for examination to the CRTA had 
been taken on 25 March 2004 by the Council for Tr ade in Services, as contained in document 
S/C/M/72. 
E. BACKGROUND INFORMATION ON THE AGREEMENT  
16. The representative of Japan  said that his delegation had a ques tion related to the treatment of 
services and service suppliers from third parties to the Agreement which was very similar to the one 
posed in relation to the examination of the CEPA  between China and Hong Kong, China.  He asked 
the Parties whether he could assume that their res ponse would be the same as the one given by the 
delegation of Hong Kong, China, in the sense that e qual treatment would be given to service suppliers 
of third parties as long as they satisfied the c onditions set out by the CEPA.  He added that his 
delegation was especially interested in the treatme nt, under the CEPA of foreign banks operating in 
Macao, China.  The repres entative of Macao, China  replied that the situation was similar to that of the 
CEPA between China and Hong Kong China.  He a dded that all service suppliers had to fulfil the 
requirements set out in the CEPA.  His delega tion would provide more  details in writing. 
F. PROVISIONS AFFECTING TRADE IN SERVICES  
17. The representative of Japan  said that with respect to the difference between Article 11 of 
CEPA and Article XVI.2 of the GATS he had a sim ilar question to the one posed in relation to the 
examination of the CEPA between China and Hong K ong, China.  He informed the Parties that he 
would submit the question in writing. 
18. With respect to sector-specific pr ovisions, the representative of Japan  informed the Parties 
that his delegation had a question on tourism, simi lar to that on the CEPA between China and Hong 
Kong, China, that he would submit in writing. 
19. The Chairman  said that the first round of examination of the services aspects of the Closer 
Economic Partnership Arrangement between China and Macao, China had allowed the Committee to 
clarify a number of questions, but others were pendi ng.  He invited those delegations wishing to ask 
questions to forward them in writing to the Secret ariat by 11 March and Parties to submit replies  in 
writing by 22 April. 
20. The Committee took note  of the comments made. 
__________