FTA vs. CEPA

Difference Between FTA and CEPA

Most of us don’t even have an idea as to what FTA and CEPA means. We do stumble at these terms sometimes while read the newspaper but we just tend to ignore it and not even look it up as to what these two terms mean. Both terms are used to describe economic pacts between countries that are planned to improve bilateral trade.

What is FTA?

FTA stands for Free Trade Agreement. It is an agreement between some countries wherein the members are granted an exclusive favor. FTA has violated the principle of multilateral trading system of the MFN or Most-Favored-Nation. However, the world trade organization or WTO accepts FTA but should follow some requirements which are namely:

  1. All of the trades must be applied and no trade sector will be excluded.
  2. Other restrictions including tariffs shall be lifted within 10 years.
  3. These restrictions for non-members shall be the same with those made before agreement.

What is CEPA?

The term CEPA means Comprehensive Economic Partnership Agreement. CEPA was officially signed on June 29, 2003 at Wen Jiabao’s visit to Hong Kong and was of use on January 1, 2004. This agreement was made to lower trade barriers than totally eliminating them. For the past few years, it has indeed offered better deals compared to China’s WTO commitments for the manufacturers in China are able to use Hong Kong services which are faster and easier solutions.  You may ask what may be the qualifications, so here they are:

  1. Your company must be incorporated in Hong Kong.
  2. The business should be existing for 3-5 years.
  3. Should be liable for Hong Kong profits tax.
  4. 50% of your employees should be living locally.
  5. Any nationality of company could be eligible.