Services Regionalism in the WTO: China's Trade Agreements with Hong Kong and Macao in the Light of Article V(6) GATS
Legal Issues of Economic Integration, No. 4, 2006
28 Pages Posted: 9 Apr 2007 Last revised: 20 Jul 2010
Date Written: July 12, 2010
In 2003, China entered into two regional trade agreements (RTAs) with its newly re-gained territories of Hong Kong and Macao - the Closer Economic Partnership Arrangements (CEPA).
This commentary examines whether the CEPA complies with a specific rule of WTO law - Article V(6) GATS. That article makes the establishment of an RTA subject to the condition that RTA benefits are made available to service providers from all WTO members, as long as they have substantive business operations in Hong Kong or Macao.
The CEPA establishes several specific criteria to add flesh to the terms substantive business operations: the scope of business activities, a minimum duration of establishment, the payment of taxes, local presence and employment of local staff. In essence, this commentary aims at analyzing whether the CEPA's criteria can be accommodated within the ordinary meaning of the terms substantive business operations, read in their context and in the light of the object and purpose of GATS. The examination is equally guided by the findings of the WTO's Appellate Body in the Turkey - Textiles case.
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