China and Nicaragua have officially signed a free trade agreement, just now

On August 31st, Minister of Commerce Wang Wentao and Advisor to the President of Nicaragua on Investment, Trade, and International Cooperation Laureano signed the Free Trade Agreement between the Government of the People's Republic of China and the Government of the Republic of Nicaragua via video on behalf of the governments of China and Nicaragua, respectively, in Beijing and Managua. Wang Shouwen, the International Trade Negotiation Representative and Deputy Minister of the Ministry of Commerce, Bemudes, Minister of Development, Industry and Trade of Nepal, and Acosta, Minister of Finance and Public Credit of Nepal, attended the event.

The signing of the China Nepal Free Trade Agreement is an important measure to implement the consensus reached by the leaders of the two countries. China and Nepal launched free trade agreement negotiations in July 2022. Subsequently, the working teams of both sides conducted intensive consultations and advanced the negotiations at a high speed and with high standards. The negotiations were completed within a year. Through the free trade agreement, the two countries will achieve high-level mutual openness in areas such as goods trade, service trade, and investment market access. The text rules in various fields of the agreement fully reflect modernization, high level, and inclusiveness.

The signing of the Free Trade Agreement is an important milestone in the history of China Nepal bilateral economic and trade relations, which is conducive to continuously unleashing the dividends of the resumption of diplomatic relations between the two countries, further stimulating the potential of bilateral trade and investment cooperation, promoting the upgrading of China Nepal economic and trade cooperation, and benefiting the two countries and their peoples.

After the agreement is signed, both parties will fulfill their respective domestic procedures to promote the early entry into force and implementation of the agreement.

Interpretation of the China Nicaragua Free Trade Agreement by the Head of the International Department of the Ministry of Commerce

On August 31, 2023, Chinese Minister of Commerce Wang Wentao and Nicaraguan President's Investment, Trade and International Cooperation Advisor Laureano, representing their respective governments, officially signed the Free Trade Agreement between the Government of the People's Republic of China and the Government of the Republic of Nicaragua through video conferencing. In order to enable the public and enterprises to have a more comprehensive and accurate understanding of the China Nepal Free Trade Agreement, the head of the International Department of the Ministry of Commerce provided a detailed introduction and interpretation of the relevant background and content of the China Nepal Free Trade Agreement.

1、 The significance of signing the China Nepal Free Trade Agreement

The China Nepal Free Trade Agreement is the 21st free trade agreement signed by China with foreign countries. Nepal is China's 28th free trade partner and China's fifth free trade partner in Latin America after Chile, Peru, Costa Rica, and Ecuador. China and Nepal have strong economic complementarity and enormous potential for trade and investment cooperation. In 2022, the bilateral trade volume between China and Nepal reached 760 million US dollars. China is Nigeria's second largest trading partner and the second largest source of imports. Nigeria is an important economic and trade partner of China in Central America and an important partner in jointly building the "the Belt and Road".

The signing of the China Nepal Free Trade Agreement is a specific measure proposed by the 20th National Congress of the Communist Party of China to promote high-level opening up to the outside world, and is the latest practice and cooperation achievement in expanding the network of high standard free trade zones facing the world. The China Nepal Free Trade Agreement is conducive to continuously unleashing the dividends of the resumption of diplomatic relations between China and Nepal, creating a better business environment for enterprises in both countries, further stimulating the potential of bilateral trade and investment cooperation, promoting further improvement and upgrading of China Nepal economic and trade cooperation, and continuously enhancing the well-being of the people and enterprises of both countries. At the same time, the signing of the China Nepal Free Trade Agreement also reflects the common will and firm determination of the two countries to promote trade and investment liberalization and facilitation, sending a positive signal to the international community to support multilateralism and free trade, and promote global economic stability and recovery.

2、 The negotiation process of the China Nepal Free Trade Agreement

On May 1, 2023, the "Early Harvest" arrangement of the China Nepal Free Trade Agreement officially came into effect. To advance the negotiation process of the China Nepal Free Trade Agreement, both sides have established 15 working groups, conducted 4 rounds of ministerial level negotiations, and more than 40 consultations at the department and working group levels. On July 3-5, 2023, the fourth round of negotiations was held in Managua, the capital of Nepal. The two sides held in-depth consultations on topics such as goods trade, cross-border service trade, financial services, and temporary entry of business personnel, achieving breakthrough progress. Finally, the two sides announced the substantive completion of the negotiations on July 25. Afterwards, both parties jointly completed the legal review and translation of the agreement text, and respectively followed their respective domestic procedures. On August 31, 2023, the China Nepal Free Trade Agreement was officially signed.

Overall, the China Nepal Free Trade Agreement covers a wide range of areas, and negotiations on some issues are also complex. However, both sides completed the negotiations in just one year, which is very efficient. This cannot be achieved without the close cooperation and joint efforts of the negotiation teams of both sides.

3、 The main contents of the China Nepal Free Trade Agreement

The China Nepal Free Trade Agreement covers areas such as trade in goods, cross-border trade in services and investment, rules, etc., including the preamble and 22 chapters, as well as 15 annexes including tariff commitment forms, import and export restrictions, tariff quotas, product specific rules of origin, certificates of origin, negative lists for cross-border trade in services and investment, negative lists for financial services, cross-border trade in financial services, temporary entry commitment forms for business personnel, and arbitration procedure rules.

The field of rules related to goods trade includes 6 chapters. The Goods Trade Chapter stipulates the basic rights and obligations of both parties in the field of goods trade, including national treatment, tariff concessions, import and export restrictions, tariff quotas, etc. Chapter One of the Rules of Origin and Implementation Procedures provides detailed provisions on the rules of origin, including standards of origin, regional value components, minor content, minor processing or processing, complete sets of goods, and direct transportation; The second is to make specific requirements for the implementation procedures of origin certificates, origin verification, etc. Regarding the standards for identifying originating goods, it is stipulated that the main rule is based on a 40% regional value component, supplemented by brief product specific rules of origin. The Customs Procedures and Trade Facilitation Chapter, based on the rules of the World Trade Organization, makes specific provisions on facilitation, tariff classification, pre ruling, goods release, risk management, transparency, etc., and simplifies customs clearance procedures as much as possible. Both sides agree to deepen cooperation between the customs agencies of the two countries. The chapter on sanitary and phytosanitary measures reaffirms the rights and obligations of both parties within the framework of the World Trade Organization, and makes provisions on regionalization, equivalence, risk analysis, transparency, and other aspects. The Chapter on Technical Barriers to Trade stipulates aspects such as equivalence, conformity assessment, border measures, transparency, etc., highlighting the mutual coordination of standards and conformity assessment procedures between China and Nepal. The trade remedy chapter provides provisions on the conditions, forms, scope and duration of bilateral safeguard measures, investigation procedures, notifications and consultations, trade compensation, procedural rules, and other aspects. For global safeguard measures, both parties agree to retain their rights and obligations under the WTO Safeguards Agreement and other agreements. For anti-dumping and countervailing measures, both parties agree to retain their rights and obligations under the WTO Agreement on Subsidies and Countervailing Measures, and not use substitute country data to determine normal value in anti-dumping investigations.

The field of cross-border service trade and investment related rules includes four chapters. The Cross border Service Trade Chapter stipulates rules such as national treatment, most favored nation treatment, market access, local presence, non-compliance measures, domestic regulations, and public telecommunications services, creating conditions for both parties to further expand cross-border service trade. The Financial Services Chapter stipulates the contents of national treatment, most favored nation treatment, market access for financial institutions, cross-border provision, executive and board of directors, new financial services, and financial information transmission for both parties. The Temporary Entry Seal for Business Personnel stipulates the provisions for both parties to allow temporary entry of business personnel, fast application procedures, transparency, etc., and agrees to carry out exchanges and cooperation related to immigration management between the two countries. The investment chapter includes two sections: investment and investor state dispute resolution mechanisms. The investment related clauses stipulate national treatment, most favored nation treatment, minimum treatment, loss compensation, collection and compensation, transfer, performance requirements, senior management and board of directors, non-compliance measures, special procedures and information requirements, subrogation, refusal of benefits, information disclosure, financial services, tax collection, etc. The relevant provisions of the investor state dispute settlement mechanism provide for consultation procedures, arbitration procedures, arbitration applicable law, awards, expert reports, domestic remedies, document delivery, definitions, etc.

The other rule areas include a total of 6 chapters. Both parties in the Digital Economy Chapter have reached an agreement on the electronic transaction framework, electronic signatures, personal data protection, and digital economy cooperation. Both parties in the competition policy chapter have reached an agreement on the principles of competition law enforcement, information exchange, and technological cooperation, and recognize the independence of their competition law enforcement. The Intellectual Property Chapter aims to enhance the benefits of trade and investment through intellectual property protection and enforcement. Both parties agree to deepen cooperation in the protection and implementation of intellectual property rights. Both sides of the Environment and Trade Chapter have made provisions on the level of environmental protection, implementation of environmental regulations, multilateral environmental agreements, environmental impact assessments, cooperation, and other aspects, reflecting the commitment of China and Nepal to promote economic and social development and environmental protection. Both parties promise not to encourage trade and investment by lowering environmental standards, and not to enforce environmental protection laws for the purpose of trade protection. Both parties have reached an agreement on information sharing and cooperation related to small and medium-sized enterprises, supporting the development of small and medium-sized enterprises in both countries. Both parties agree to encourage cooperation between government departments, industries, and relevant institutions in multiple fields such as agriculture, fisheries, small and medium-sized enterprises, tourism, technology, culture, education, environment, and traditional medicine.

In addition, the agreement also includes six legal and institutional chapters, including initial provisions and definitions, transparency, general provisions and exceptions, institutional provisions, dispute resolution, and final provisions.

4、 The characteristics and highlights of the China Nepal Free Trade Agreement

Firstly, the China Nepal Free Trade Agreement has created multiple firsts. For example, for the first time, China has signed a free trade agreement that opens up cross-border trade in services and investment through a negative list; Both parties have reached a high-level arrangement for the exchange of business personnel, and for the first time, they have made commitments to each other regarding the accompanying residence of business personnel's parents; The agreement was first included in the chapter on the digital economy; Both sides have included cooperation in the field of measurement standards in the cooperation clauses of the technical trade barriers chapter, which is the first time in the free trade agreement between China and Latin American countries.

Secondly, the rules of the agreement text fully reflect high level, modernity, and inclusiveness. Firstly, China and Nepal have achieved high-level openness in goods trade, and have also made high-level commitments to cross-border service trade and investment. The second aspect is that the agreement text includes traditional chapters related to trade in goods and services, such as customs procedures and trade facilitation, rules of origin, sanitary and phytosanitary measures, cross-border trade in services, financial services, etc. It also includes "post border" issues such as digital economy, environment and trade, and competition policy, reflecting the modernity of the rules in the agreement text and the direction of efforts to be compatible and connected with high standard international economic and trade rules. Thirdly, the agreement also includes chapters on cooperation and small and medium-sized enterprises, encouraging both sides to carry out economic and technological cooperation in agriculture, textile industry, logistics, tourism and other fields. Through project cooperation, industry docking, policy exchanges, etc., it helps the two countries better achieve complementary advantages and make full use of the preferential policies of the agreement. The above arrangements fully reflect the inclusiveness of the rules of the agreement text.

5、 Arrangement between both parties in terms of tariff reduction in goods trade

In terms of tariff reduction in goods trade, both sides have reached a mutually beneficial and win-win result on a high-level basis. The final zero tariff products of both China and Nepal account for over 95% of the total tax items. Among them, the immediate zero tariff products of both parties account for about 60% of the total tax items. In terms of specific products, China's implementation of zero tariff products will fully cover Nepal's main export products. After the agreement takes effect, when Nepal's beef, shrimp, coffee, cocoa, jam, peanuts, frozen snails, ethanol and other products enter the Chinese market, tariffs will gradually be reduced to zero. In addition, China will grant Nepal an annual tariff quota of 50000 tons of sugar. At the same time, Nepal will also implement zero tariffs on China's main export products. After the agreement takes effect, tariffs will gradually be reduced and eliminated when most of China's products, such as automobiles, motorcycles, batteries, photovoltaic modules, clothing and textiles, shoes and boots, aquatic products, vegetables, etc., enter the Nigerian market. With the implementation of the agreement, both the people and businesses of the two countries will benefit.

6、 Arrangements between both parties in cross-border service trade and investment market access

It is worth noting that the China Nepal Free Trade Agreement is the first free trade agreement signed by China to open up cross-border trade in services and investment through a negative list. Both parties promise to provide each other with market access conditions for service trade and investment, which are not lower than the highest level each party can provide to its free trade partners. At the same time, the Nepalese side has made a high-level commitment to openness in the manufacturing industry, construction engineering, power transportation, ocean transportation and other areas that China focuses on, providing greater certainty and broader space for Chinese enterprises to better explore the Nepalese market. On the basis of China's commitment to joining the WTO, it has further opened up a wide range of areas to Nepal, including commercial services, environmental protection, banking and insurance, wholesale and retail, and ocean transportation.

Both parties have also made high-level arrangements for business personnel exchanges, promising to provide convenient conditions for the entry and residence of business visitors, internal personnel of the company, contract service providers, etc., and allowing the parents of business personnel to stay with them for the first time, addressing the concerns of business personnel going abroad in a targeted manner. In terms of financial services, both parties have made clear provisions on most favored nation treatment, market access for financial institutions, and regulatory transparency.

The above open arrangements will provide more transparent, open, and predictable market access conditions for service trade and investment for enterprises from both countries, and will effectively promote trade and investment cooperation in various fields between China and Nepal.

7、 Information on the Digital Economy Chapter for the First Inclusion in China's Free Trade Agreement

The Digital Economy Chapter is an important component of the China Nepal Free Trade Agreement, which mainly includes domestic electronic transaction frameworks, electronic signatures, online consumer protection, online personal information protection, paperless trade, small and medium-sized enterprises, and digital economy cooperation.

In terms of the electronic transaction framework, both parties further clarify the legal validity and effectiveness of electronic transactions, and further support and promote the development of the digital economy by minimizing regulatory burden. In terms of electronic signatures, both parties encourage the application of digital certificates in the business sector and will further promote mutual recognition between digital certificates and electronic signatures. In terms of online consumers and personal information protection, both parties clearly state that they will provide online consumers with no lower protection measures than other forms of consumers, and clarify the protection of personal information. In terms of paperless trade, both sides encourage paperless customs clearance, the use of electronic documents, and the use of electronic payments to promote trade facilitation. They also encourage and strengthen information and communication technology cooperation in areas such as electronic ports, single windows, logistics, and supply chains. In terms of small and medium-sized enterprises, both sides encourage cooperation to create a favorable policy environment and enhance the digital capabilities of small and medium-sized enterprises, supporting their greater participation in the digital economy. In terms of digital economy cooperation, both sides will encourage cooperation in research and training activities, including sharing best practices in the development of e-commerce, and conducting cooperation in a series of fields such as digital inclusivity and electronic identity management.

Both sides will take this as an opportunity to jointly create a favorable development environment for the digital economy, enhance the level of bilateral trade facilitation, promote the development of markets for enterprises, especially small and medium-sized enterprises, through e-commerce, and further promote the development of bilateral trade.

8、 The effective date of the China Nepal Free Trade Agreement

After the agreement is signed, both parties will fulfill their respective domestic legal approval procedures to promote the early entry into force and implementation of the agreement. We will publish the text on the China Free Trade Zone Service Network for the public to access and reference.