RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/REG162/M/3 
15 May 2006 
 (06-2357) 
Committee on Regional Trade Agreements 
Forty-Second Session  
 
 
 
EXAMINATION OF THE CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT 
BETWEEN CHINA AND HONG KONG , CHINA, GOODS AND SERVICES 
 
Note on the Meeting of 4 April 2006  
 
Chairman:  Mr. A. Egger (Switzerland) 
  
1. The meeting was convened in document WTO/AIR/2786/Rev.1. 
2. Under Agenda Item C.IX of its 42
nd Session, the Committee on Regional Trade Agreements 
(hereinafter CRTA or the Committee) took up the th ird round of examination of the (CEPA) between 
China and Hong Kong, China, Goods and Services. 
3. The Chairman  noted that the proceedings of the firs t and second rounds of examination of the 
CEPA between China and Hong Kong, China, Goods  and Services (hereinafter the Agreement), 
which had taken place in February 2005 and January  2006, had been distributed respectively in 
documents WT/REG162/M/1-2.  Since then, the Par ties had provided replies to questions put by 
delegations which had been circul ated in document WT/REG162/6.   
A. G OODS ASPECTS  
4. Given the advanced stage of the examination, the Chairman  asked delegations wishing to 
comment or ask questions on the Agreement to iden tify the relevant section of the Standard Format 
contained in document WT/REG162/3. 
5. Under Section I.3, Background Information on the Agreement, the representative of the 
United States  noted that in view of the limited number of actual lines for which rules of origin existed 
and hence, tariff-free products, she wondered if this  Agreement would allow Parties to broaden their 
trading relationship into new products.  In relation to  this, she pointed out that in response to question 
three of document WT/REG162/6, the Parties had men tioned that four per cent of trade from Hong 
Kong into China was not duty free, so she asked wh ether that amount related to products for which 
rules of origin did not exist or to products that failed to meet the origin requirements.  The representative of Hong Kong, China
 said that it was the firm intention of the Parties to broaden their 
trade through this Arrangement.  CEPA was an  open and ongoing process in which new products 
could be included into the Arrangement for tari ff-free treatment, as long as they met the rules of 
origin.  Since the implementation of the third ph ase of CEPA, at the beginning of 2006, 96 per cent of 
exports from Hong Kong, China to Mainland China enjoyed zero tariff treatment, as long as these 
products met the rules of origin.  As regards the question on the remaining four per cent that had yet 
to enjoy tariff-free treatment because manufacturers had to submit applications which the Parties 
would discuss and then agree upon the rules of origin so the products could be granted zero tariff 
treatment into Mainland China, he said that this  underlined the open character of CEPA, whereby 
products could always be included for zero tariff.   WT/REG162/M/3 
Page 2  
 
  6. The representative of Japan
 asked the Parties to provide the approximate number of 
applications for the inclusion of products into the coverage of the Agreement that had been received, 
how many had been accepted, and how many remained outstanding.  The representative of Hong Kong, China
 answered that when CEPA had been fi rst implemented in 2004, the Parties had 
agreed on the rules of origin for 372 tariff codes.   Subsequently, under the second and third phases of 
CEPA, implemented in 2005 and 20 06 respectively, Hong Kong, China's authorities had received a 
total of 226 applications from their manufacturers.  Most of these applications had now been included 
in CEPA and, as a result there was now a total of 1, 370 tariff codes for which rules of origin had been 
agreed.  Out of the 226 applications, only 15 re mained outstanding and the Parties were still 
negotiating on the rules of origin for these products so  they could be included into CEPA.  This very 
small number of products could not affect the vol ume of free trade between the Parties.  The 
representative of the United States  asked whether there had ever been a rejected application or if, on 
the contrary, the Parties always ag reed.  The representative of China  said that so far there had been no 
rejected applications.  Generally speaking, it took around four months to process the applications but 
it could eventually take more, which did not mean  that they would from there accept or reject the 
applications. 
7. The representative of the European Communities  said that since the first examination of the 
Agreement his delegation had not considered it to c over "substantially all trade".  The representative 
of Hong Kong, China  was of the view that CEPA satisfied the "substantially all trade" requirement 
based on the following:  96 per cent of Hong Kong , China's exports to Mainland China had been 
included in CEPA.  As for the remaining four pe r cent, discussions between the Parties would be 
started as soon as manufacturers submitted their applications with a view to agree upon the rules of 
origin and include the products in CEPA;  unde r CEPA, no product had been carved out of the 
Agreement; CEPA had been implemented for just over two years.  Within this short time, the 
overwhelming majority (96 per cent) of trade volume from Hong Kong, China into Mainland China 
had already been included, which represented a qu ick and efficient process for inclusion of the 
products into a tariff-free arrangement; and under C EPA, tariff-free really meant tariff-free, since for 
instance, the process and procedures were simple, there were no tariff-rate quotas (TRQs) and the rules of origin were readily usable and easily adopted.   
8. The representative of China
 supported the answers to questions  provided by the representative 
of Hong Kong, China.  With regards to the EC  representative's remark, he emphasized that the 
number of products covered under CEPA met the "substantially all trade" requirement of 
GATT Article XXIV.  He considered that ther e was some misunderstanding because although the 
amount of products covered under CE PA represented about one fourth of total tariff lines, those 
products were not produced by Hong Kong, China, so it was irrelevant whether they were covered by 
the Agreement or not.   
9. The Chairman  observed that the Committee seemed to have exhausted the factual inquiry and 
proposed that the Secretariat begin drafting the re port for this examination.  It was so agreed . 
10. The Committee took note  of the comments made. 
B. SERVICES ASPECTS  
11. Given the advanced stage of the examination, the Chairman  asked delegations wishing to 
comment or ask questions on the Agreement to iden tify the relevant section of the Standard Format 
contained in document WT/REG162/4. 
12. The representative of the European Communities  said that since the first examination of the 
Agreement his delegation had not considered it to c over "substantially all trade".  He viewed this 
Agreement more as a framework agreement to provi de future liberalization rather than an actual WT/REG162/M/3 
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  liberalization agreement.  The representative of Hong Kong, China  said that the commitments under 
CEPA taken by both sides were part of an open process and did not include any a priori exclusion. 
13. The Chairman  observed that the Committee seemed to have exhausted the factual inquiry and 
proposed that the Secretariat begin drafting the re port for this examination.  It was so agreed . 
14. The Committee took note  of the comments made. 
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