On December 7, witnessed by the Chinese President Xi Jinping and Maldivian President Abdallah Amin Abdul Gayoom, Fu Ziying, the International Trade Negotiation Representative and Deputy Minister of the Ministry of Commerce of the People’s Republic of China, and Mohammed Saeed, the Minister of the Ministry of Economic Development of Maldives, on behalf of their respective governments, formally signed the China-Maldives Free Trade Agreement (the “Agreement”) in Beijing. To make the public and enterprises comprehensively and accurately understand the Agreement, Zhang Shaogang, the Director of the Department of International Trade and Economic Affairs, gave a detailed introduction and interpretation of background and contents of the Agreement.

Q: What’s the meaning of the conclusion of the Agreement?

A: The Agreement is the 16th free trade agreement signed by China upon negotiation, and is the latest outcome of the idea of “to promote the building of free trade areas and the establishment of an open global economy” raised at the 19th National Congress of the Communist Party of China (CPC). It shows China's attitude and intention of actively promoting the establishment of a new full opening pattern and firmly supporting free trade and economic globalization.

Meanwhile, the Agreement is also an important initiative taken by both parties to implement the consensus of their leaders and enrich the future-oriented comprehensive and friendly partnership between the two countries. The two countries’ reaching the comprehensive and high-level free trade agreement on the basis of mutual benefit and win-win result sets an example for mutual beneficial cooperation between two countries of which the sizes differ from each other greatly, is a milestone in the histories of the two countries’ economic and trade development, and will strongly promote a greater development of bilateral economic and trade relations and continuously bring benefits to enterprises and people of the two countries.

Q: Please introduce the background and process of the negotiation on the Agreement.

A: In December 2014, President Xi Jinping paid a historical visit to Maldives during which the two countries declared the building of the future-oriented comprehensive and friendly partnership. To implement the economic and trade outcome from the leader’s visit, both parties reached a preliminary consensus on the discussion and conclusion of a free trade agreement at the first meeting of China-Maldives Joint Committee of Economics and Trade held in December 2014. Both parties initiated a feasibility study on the Agreement in February 2015 and completed the study in June. The study result was positive generally, recommending both parties to initiate the free trade negotiation as soon as possible. In December 2015, both parties formally initiated the negotiation on the Agreement. After five rounds of negotiation and one ministerial-level discussion, the negotiation ended formally in September 2017. Afterwards, both parties completed the verification of the legal text of the Agreement together in the first ten-day period of November 2017, and reached consensus on the final text of the Agreement at the end of November and were ready to sign the Agreement. On December 7, 2017, both parties signed the Agreement in Beijing.

Q: What are the main contents of the Agreement?

A: The Agreement has 15 chapters except the foreword: General Rules, Definitions, Trade in Goods, Rules of Origin and Related Operational Procedures, Customs Procedures and Trade Facilitation, Technical Barriers to Trade and Sanitary and Phytosanitary Measures, Trade Remedies, Trade in Service, Investment, Economic and Technical Cooperation, Transparency, Management and Organization Terms, Dispute Settlement, Exceptions and Final Provisions. Besides, the Agreement has 9 annexes including Tariff Reduction, Schedule of Trade in Service Commitment and Specific Rules of Origin.

Q: Are there any outcomes in respect of tariff reduction of trade in goods in the Agreement?

A: In the area of trade in goods, the Agreement realizes a high-level tariff reduction, and percentages of the number and value of trade of zero-tariff products committed by both parties exceed 95%. Because China is the first country that signs the bilateral free trade agreement with Maldives, Chinese enterprises will receive the market access treatment more concessional than that for other countries after the implementation of the Agreement.

From Maldives, the products that finally realize zero tariff will account for 95.6% of the total number of tax items, covering 95.1% of imports from China, with the tax reduction period not exceeding 8 years to the maximum. For 70.3% products of the number of tax items, tariffs will be eliminated immediately after the entry into force of the Agreement, while for 20.3% and 5% products, tariffs will be removed gradually within 5 years and 8 years respectively. With respect to specific products, Maldives will eliminate tariffs for 97.3% industrial products of the number of tax items, while it will remove tariffs for such agricultural and aquatic products over which China has export advantages as flowers, vegetables and processed fish products.

From China, the products that finally realize zero tariff will account for 95.4% of the total number of tax items, covering 96.4% of imports from Maldives, with the tax reduction period not exceeding 5 years to the maximum. For 91.1% products of the number of tax items, tariffs will be eliminated immediately after the entry into force of the Agreement, while for 4.3% products, tariffs will be removed gradually within 5 years. With respect to specific products, China will eliminate tariffs for 95.8% industrial products of the number of tax items and 93.6% agricultural and aquatic products of the number of tax items, including the majority of the fish and aquatic products to which Maldives pays special attention.

Q: Are there any provisions on identification of the origin of goods in the Agreement?

A: With respect to the rules of origin, the origin criterion is formulated by flexible combination of the overall rule of 40% regional value content and the brief specific rule of origin on products in the Agreement. Relatively strict criteria is set for part of agricultural products to which China pays special attention only, while most products will be identified to have qualifications of origin as long as they satisfy the overall rule. For goods hard to satisfy the regional value content criterion that both parties expect to promote export, tariff classification change and selection criteria or processing procedures and other standards are also flexibly set based on the physical truth of the industry, which not only facilitates the applicability of enterprises but also meets special needs of both parties in part of products.

Besides, with respect to cumulation rules, small-and-micro processing or treatment, interchangeable materials, neutral elements, package and container, direct transportation of low-value goods without submission of any certificate of origin, and requirements for import declaration, there are detailed provisions in the Agreement based on practice and development of origin management by the customs in recent years, which simplifies the procedural requirement to a great extent and reduces the customs clearance costs of micro enterprises. Furthermore, both parties reached consensus on such contents as the establishment of the digital data exchange system for the place of origin, discussion over feasibility of independent statement on the place of origin, and building of contact points and the negotiation mechanism, which provides the full authorization and mechanism guarantee for competent departments in the places of origin of both parties to introduce new facilitation measures in subsequent implementation and timely solve various problems during the implementation so as to ensure the efficient implementation of the market access for goods and rules of origin in the Agreement.

Q: Are there any arrangements on custom procedures and trade facilitation in the Agreement?

A: With respect to customs procedures and trade facilitation, the Agreement provides that the customs departments of both parties will further strengthen cooperation, simplify customs clearance procedures, ensure the openness and transparency of the related laws and regulations of both parties, release goods in reasonable time by use of information technology and risk management tools, and give concessional customs clearance treatments to such perishable goods as aquatic products. Both parties agree to adopt the pre-judgment, reexamination and lawsuit system, encourage and drive the single window construction by setting single window terms, and try to provide efficient and speedily customs clearance services for enterprises of both parties so as to reduce the customs clearance costs of the enterprises. Besides, both parties also establish the negotiation and customs committee mechanisms to ensure the smooth and efficient implementation of the related provisions, provide the strong guarantee for the security, convenience and clearance of the supply chain of the bilateral trade, standardize the trade order and facilitate legal trade.
Q: Are there any provisions on technical barriers to trade and sanitary and phytosanitary measures in the Agreement?

A: With respect to technical barriers to trade and sanitary and phytosanitary measures, the Agreement restates the related rights and obligations of both parties in the WTO and incorporates the Agreement on Technical Barriers to Trade and the Agreement on Implementing Sanitary and Phytosanitary Measures, so as to ensure that both parties may implement the related principles of the WTO well. Meanwhile, the Agreement expresses higher requirements for the transparency of the related laws and regulations of the two countries and standardizes the transparency of port law enforcement by terms on border measures. It sets forth the negotiation mechanism and timely solves technical problems from the bilateral trade, and defines cooperation in the related fields, which provides a platform for the competent departments of the two countries to deepen cooperation. These provisions will further facilitate the bilateral trade and reduce impacts of non-tariff measures on trade.

Q: Are there any provisions on trade remedies in the Agreement?

A: The trade remedies chapter in the Agreement provides for bilateral and global safeguard measures, anti-dumping and anti-subsidy areas, etc. in detail. Both parties reserve the rights and obligations under the WTO Agreement in respect of anti-dumping, anti-subsidy and global safeguard measures. When meeting the legal conditions, Chinese industries can still apply for using the above trade remedies to safeguard their own benefits. Besides, for domestic industries, bilateral safeguard measures also provide a safety valve. In the design of the bilateral safeguard measure mechanism concerning the trade remedy terms in the Agreement, the related provisions in the Global Safeguard Measure Agreement are referenced, while the flexibility of implementation condition, period, times and compensation is maintained.

Q: Are there any important outcomes in respect of the trade in service in the Agreement?

A: In the field of trade in service, the Agreement provides for market access and national treatment by reference to the GATS of the WTO and passage rules in the free trade agreement, and lists market opening commitments of the relevant service departments in the Schedule of Specific Commitments. Specifically, the number of Maldivian service departments that make opening commitments increases from 5 committed under the framework of the WTO to 86, and Maldives makes commercially significant commitments in such fields to which China pays attention as commercial service, express delivery service, telecommunication, building, distribution, environment, finance, medical treatment (including traditional Chinese medicine) and transportation. China makes commitments higher than those made by China under the framework of the WTO to Maldives in respect of such service departments as commercial service, building, tourism and road transportation departments.

Besides, both parties also agree to incorporate financial service and mobility of natural persons. With respect to the finance service, Maldives promises to give the same preferential treatment given to other free trade partners to China unconditionally in the future. With respect to the mobility of natural persons, Maldives promises to give Chinese commercial visitors, service salespersons and contract service providers the multiple entry visa that lasts for 270 days to the maximum and internal floating personnel of Chinese companies the work permit that states one year of stay to the maximum.

Q: What benefits and convenience does the Agreement bring to Chinese visitors who want to travel to Maldives?

A: In recent years, Chinese visitors traveling to Maldives have maintained more than 300,000 people. According to the statistics of Maldives, China has been the largest overseas source of visitors for seven years in a row. For your concern on traveling to Maldives, the Agreement will bring Chinese visitors benefits and convenience in the following aspects:

Firstly, according to the Agreement, Maldivian travel agencies and travel operators can set up joint venture companies in Shanghai Experimental Free Trade Zone, Tianjin Experimental Free Trade Zone and Beijing as well as branches across China to run Chinese citizens’ outbound travel business. This is the highest commitment China gives to existing free trade partners. Chinese consumers who plan to travel to Maldives will have more options, including enjoying Maldivian travel services directly through the above Maldivian travel agencies set up in China.
Secondly, with respect to hotel and catering services, the Agreement provides that Chinese service investors will be able to set up hotels, restaurants, bars, coffee shops and other commercial institutions that provide accommodation and catering services in Maldives so as to provide the above services to the locals and visitors from all over the world, and that they will enjoy the same treatment as the local service providers. This means that Chinese visitors who will travel to Maldives in the future may enjoy services rendered by Chinese brand hotels and catering enterprises.

Thirdly, the competent travel departments of both parties agree to strengthen communication and cooperation, work together to drive the publicity and promotion of travel destinations, raise the transparency of travel policies, laws and regulations of the two countries and intensify cooperation in visitor protection so as to bring more convenient and better services to Chinese visitors.

Additionally, with respect to the air service, we provide the Maldivian relevant aviation departments and enterprises the detailed and comprehensive guidance on and suggestions about operations in China to promote Maldivian airlines to better cooperate with Chinese aviation management departments in supervision and provide better services to Chinese visitors who travel to Maldives by taking Maldivian flights.

Q: Which key service departments in China will also benefit from the Agreement?

A: In the Agreement, 81 Maldivian service departments that make market opening commitments to us are added. In principle, all of these additional service departments will benefit from the Agreement. Here, I give an example: with respect to the medical treatment service, Chinese investors or medical service providers can set up joint venture hospitals or clinics (including traditional Chinese medicine) in Maldives. It means that Chinese visitors may enjoy services rendered by traditional Chinese medicine hospitals or clinics when they travel in Maldives in the future.

Besides, in such fields as research & development service, express delivery service, ship and construction machinery and equipment lease service, management consultancy service, value-added telecommunication and adult education service, Maldives make commitments of market opening and national treatment, which creates a good policy and law environment for investments and business promotion by Chinese enterprises in the above fields in Maldives.

Q: Are there any important outcomes in respect of investment in the Agreement?

A: In the investment chapter in the Agreement, both parties extensively provide for the investor protection, fair competition and dispute settlement, and reach an appropriate balance between protecting investors’ lawful rights and interests and safeguarding the management right of the host government. The investment chapter provides that the either party gives high-level investment protection to the other party, and incorporates terms on expropriation compensations, minimum treatment standards, transfer, etc. as well as national treatment and most-favored-nation treatment for the phase after the access is given to each other. The chapter sets forth such exceptions as financial prudential measures, fundamental security and confidential information so as to protect the policy space for foreign fund management by the government, and incorporates the comprehensive mechanism for settlement of disputes between investors and the State to provide the full right guarantee and remedy approach for investors of both parties. As a whole, the investment chapter in the Agreement reflects new contractual practice of China in international investment.

Q: What consensus has been reached on economic and technical cooperation in the Agreement?

A: In the Agreement, both parties reach consensus on the goal, scope and mechanism of economic and technical cooperation between the two countries, and promise to further strengthen cooperation in trade investment promotion, tourism, agriculture and fishery, industry, traditional medicine, finance, tax and technology. Both parties are supported and encouraged to cooperate with each other in capability construction in sanitary and phytosanitary measures, technical barriers to trade, customs and trade facilitation, trade remedies, etc.

Q: When will the Agreement enter into force?

A: According to the effective terms in the Agreement, the Agreement will come into force in 30 days after both parties are informed in writing respectively of completion of domestic procedures or on the date agreed by both parties. In the next step, both parties will finish domestic legal approval procedures respectively to promote the early implementation of the Agreement. Before it comes into force formally, we will publish this document on “China FTA Network” (http://fta.mofcom.gov.cn) for everyone to refer and inquire.