Mainland and Macao Closer Economic Partnership Arrangement (CEPA)
CEPA is an FTA-like arrangement concluded between two separate customs territories of a single sovereign state, in conformity with the World Trade Organization (WTO) rules, with the objective of promoting joint economic prosperity and development of the Mainland and the Macao Special Administrative Region.
The Mainland and Macao signed the Mainland and Macao Closer Economic Partnership Arrangement in 2003,which has been officially implemented since 2004, and have since signed 10 Supplements until 2013. CEPA covers three economic and trade areas, namely Trade in Goods, Trade in Services and Trade and Investment Facilitation.
In 2014, the two sides signed the Agreement between the Mainland and Macao on Achieving Basic Liberalisation of Trade in Services in Guangdong to achieve liberalisation of Trade in Services between the Mainland and Macao in advance in Guangdong Province; the signing of the Agreement on Trade in Services in 2015 symbolises the full achievement of basic liberalisation of Trade in Services between the Mainland and Macao.
On 18 December 2017, the two sides signed the Investment Agreement and Agreement on Economic and Technical Cooperation, which are integral parts to the enhancement of CEPA, marking a new phase of economic and trade cooperation and exchange between the Mainland and Macao.
On 12 December 2018, the Mainland and Macao signed the Agreement on Trade in Goods under the Closer Economic and Trade Agreement between the Mainland and Macao, which marks the complete the enhancement of CEPA.
Trade in Goods
The Mainland agrees to apply zero tariff to all goods of Macao origin, starting from 1 January 2006, except for goods that are prohibited from imports into the Mainland. To enjoy zero tariff treatment, goods of Macao origin exporting to the Mainland must fulfill the rules of origin stipulated under CEPA and to obtain the specific "Certificate of Origin" (CO) to be qualified as "Made in Macao".
The Agreement on Trade in Goods of CEPA was signed on 12 December 2018 between the Mainland and Macao. The Agreement comes into effect on the date of signature and will be officially implemented from 1 January 2019. The Agreement has systematically integrated the relevant provisions in the previous CEPA and its 10 Supplements, and enriched the content of cooperation, including the establishment of the criterion of origin and more flexible methods for determining the origin for all products classified under the Mainland tariff codes, and further enhancing the level of customs clearance facilitation for trade in goods, so as to promote the movement of goods between the two places and to foster the continuous development of Macao's manufacturing industry. The Agreement has also established a special chapter for the Guangdong-Hong Kong-Macao Bay Area to implement groundbreaking measures for customs clearance of goods within the Bay Area on a pilot basis with a view to assisting Macao’s business sector to integrate themselves into the national development strategies, so as to join force to promote the development of the Guangdong-Hong Kong-Macao Bay Area.
Trade in Services
The Mainland has progressively provided preferential treatment on market access to the following service sectors: legal, accounting, construction and real estate, medical and dental, advertising, management consulting, convention and exhibition, telecommunications, audiovisual, distribution, insurance, banking, securities and futures, tourism, transport, freight forwarding agency, storage and warehousing, logistics, air transport, information technology, professionals qualification examinations, cultural and recreational, trade mark agency, patent agency, job referral agency, job intermediary, individually owned stores, computer and related services, market research, services related to management consulting, public utility, building-cleaning, photographic, printing, translation and interpretation, environmental, social, sporting services, services incidental to mining, related scientific and technical consulting services, research and development services, technical testing, analysis and product testing services, specialty design services, interdisciplinary research and experimental development services, services incidental to manufacturing, library, archive, museum and other cultural services, education services, railway transport services, duplicating services as well as after-death facilities services.
In compliance with the WTO principles and rules, CEPA provides the Macao service suppliers with an earlier access to the Mainland market, ahead of the timetable China has committed to the WTO. In some sectors, such as audiovisual services, transport services as well as medical and dental services, the concessions are actually more favorable than those of China's WTO commitments.
CEPA Agreement on Trade in Services is the first free trade agreement which liberalizes trade in services to the whole Mainland with market access provisions for national treatment and the management approach of negative listings. It also re-states the existing liberalization content under CEPA and its Supplements, signifying full liberalization of trade in services between the whole Mainland and Macao. The number of services sub-sectors from Macao, to those national treatment will be applied, under the Agreement is 62, including advertising, photography, convention, hotels and restaurants, tourist guides, road transport, and so on. Upon implementation of the Agreement, the Mainland has opened up 153 services trade sub-sectors to the Macao services industry, accounting for 95.6 % of the 160 sub-sectors under WTO Services Sectoral Classification System. According to the standards of WTO services classification, a basic liberalization of trade in services has been achieved between the two places, and the target to basically achieve liberalization of trade in services in the Mainland for Macao by the end of the National 12th Five-Year Plan period is completed.
The Mainland and Macao Closer Economic Partnership Arrangement Investment Agreement (hereafter referred to as the CEPA Investment Agreement) is a new subsidiary agreement under CEPA which covers comprehensively admission of investments and protection and promotion of investment, etc., conforms to international rules and combines the features of the two places. Offering a high level of liberalisation and strong protection, it will provide a more systematic institutionalised protection for economic and trade exchange and cooperation between the two places.
In terms of admission of investments, the CEPA Investment Agreement will further enhance the level of facilitation of investment liberalisation between the two places. As a form of liberalisation, the Mainland applies the “Negative List” to Macao in the area of market access again after the CEPA Agreement on Trade in Services, only reserving 26 non-conforming measures in the non-services investment sectors. By adopting liberalisation measures which are more favourable in the areas of common ships and aircrafts manufacturing, energy exploitation, etc., ensuring the according of most-favoured treatment to Macao in the area of Investment, and including multiple pragmatic investment liberalisation measures, the Mainland continues to maintain the highest level of liberalisation to Macao as they do to Hong Kong. In terms of investment protection, the CEPA Investment Agreement offers an internationally high level of investment protection treatment for compensation on expropriation, and transfer, etc. of investments. Regarding dispute settlement between investors and the side where the investments are located, a dispute resolution mechanism consisting of amicable consultation, complaint coordination, notification and coordination, mediation, judicial means, etc. is designed jointly by the Mainland and Macao in conformity with the principle of “One Country, Two Systems” and the needs of the two places with a view to putting in place comprehensive and effective systematic arrangements for remedy and protection of the rights of investors of the two places.
Economic and Technical Cooperation
The Mainland and Macao Closer Economic Partnership Arrangement Agreement on Economic and Technical Cooperation (hereafter referred to as the CEPA Ecotech Agreement), which has a total of 8 chapters and 30 articles, involves sorting, categorising and consolidating the economic and technical cooperation activities set out in CEPA and its 10 Supplements, as well as combining the respective levels and features of economic development of the Mainland and Macao at the current stage. It focuses on highlighting Macao’s features, incorporates new cooperation areas and supplements new cooperation activities.
Among which, a new specific chapter on deepening the development of Macao as a commercial and trade cooperation service platform between China and Portuguese-speaking countries (PSCs) is added with a view to promoting Macao’s continuous enhancement of its international competitiveness through deepening the economic and trade cooperation between China and PSCs by means of advancing the development of Macao as a “Commercial and Trade Cooperation Service Platform between China and PSCs” on the basis of Forum Macao. Another new chapter on deepening economic and trade cooperation areas of the “Belt and Road” Initiative is added with a view to supporting Macao to participate in the development of the “Belt and Road” Initiative by means of establishing operational and liaison mechanisms, enhancing information communication channels, building exchange platforms, and jointly participating in production capacity cooperation as well as exploring the markets along the “Belt and Road”, etc.
The 14 key areas of cooperation of the CEPA Ecotech Agreement, including tourism, convention and exhibition, traditional Chinese medicine and Chinese medicinal products, finance, electronic commerce, environment, legal and dispute resolution, accounting, culture, innovation and technology, education, small and medium enterprises, intellectual property, and trademark and branding, connect to the elements of the Five-Year Development Plan highlighting China’s needs and Macao’s strengths, promote the development of featured finance, convention and exhibition with a priority on convention, traditional Chinese medicine and Chinese medicinal products and other emerging industries in Macao, as well as support Macao to nurture new areas of economic growth with a view to facilitating moderately diversified economic development in Macao.
With a view to providing a broader prospect to micro, small and medium enterprises and youth of Macao for integrating themselves into China’s national development strategies, a specific chapter on sub-regional economic and trade cooperation is set out in the CEPA Ecotech Agreement to, based on Macao’s needs, support the development of the Demonstration Zone for Comprehensive Cooperation between Guangdong and Macao and the Jiangsu-Macao Cooperation Park, explore new modes of cooperation between the two places under the “One Country, Two Systems” framework, and comprehensively take forward mutually beneficial cooperation between the Mainland and Macao in addition to jointly promote economic and trade cooperation in the Pan-Pearl River Delta Region, Guangdong-Hong Kong-Macao Bay Area and Pilot Free Trade Zones.
Furthermore, the CEPA Ecotech Agreement will provide impetus to the two places to actively explore cooperation in the areas of workforce training and youth entrepreneurship with a view to providing new opportunities for Macao youth’s innovation and entrepreneurship.
CEPA in Figures
From 1 January 2004 to 31 December 2018, Macao Economic Bureau has issued 5,474 CEPA certificates of origin, in which, 4,873 certificates have been exercised, involving products of total export value of MOP957,540,361.37 with an estimate tariff saving amounting to MOP67,080,123. These goods include cement, textiles and clothing, yarn, plastic bags, recordable compact discs, printing ink, food and beverage (confectionery, biscuits, nuts, coffee beans, coffee powder and distilled water for human consumption), refined copper foil, electric conductors, chemicals(thinners, glue, salt of tetracyclines, etc), postages, ribbons for typewriters, footwear, crude glycerol, recycled plastics, cosmetic products, other industrial monocarboxylic fatty acids and fiberglass cloth, etc. With respect of trade in services, Macao Economic Bureau has approved 631 "Macao Service Supplier" certificates, which primarily engaged in service sectors of transport and logistics, convention and exhibition, management consulting, construction, distribution, telecommunications, legal, advertising, sales and marketing services for air transport, real estate, audiovisual, travel agency, medical and dental, job referral agency, trade mark agency, printing and publishing, research and development services on natural sciences, banks and other financial services, highway passenger transportation services, services auxiliary to insurance, hotels and restaurants as well as other educational services, etc.