The Closer Economic Partnership Arrangement (Cepa) between Mainland China and Hong Kong - Legal and Economic Analyses

Abstract:     
On 29 June 2003, the Central Government of the People's Republic of China (the Mainland) and the Hong Kong Special Administrative Region (HKSAR) signed the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA). As the first Regional Trade Agreement (RTA) for both sides, the CEPA provides a model for China to use the arrangements allowed under the rules of the World Trade Organization (WTO) to further trade liberalisation and promote economic development. This article discusses the legal issues raised under the WTO rules as well as the possible economic implications of CEPA. Legally speaking, the CEPA probably satisfies the requirements for a Free-trade Area (FTA) under Article XXIV of the GATT 1994 and an Economic Integration Agreement (EIA) under Article V of the GATS. Several provisions of the CEPA, however, might lead to potential legal disputes in the WTO. Economically speaking, the CEPA is unlikely to solve the economic problems in Hong Kong.

Keywords: CEPA, WTO, China, Hong Kong, FTA, RTA, EIA, GATT, GATS, Dispute Settlement, Closer Economic Partnership Arrangement

JEL Classifications: F17, H63, K34

Accepted Paper Series