Major Economic Indicators

Recent Developments 

• As Italy is a member of the European Union (EU), its trade relations with Hong Kong/the Chinese mainland are affected by EU's common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002.
• Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China has been established to monitor EU imports of Chinese textiles and apparel, which was scheduled to operate for one year, covering 8 out of the 10 previously restricted categories. On 11 December 2008, the European Commission announced that the regime of double checking surveillance system was to expire on 31 December 2008. Accordingly, starting 1 January 2009, textile and clothing products originating in China no longer require any import license or surveillance document before entering the EU.
• The EU's new scheme on generalised system of preferences ("GSP") entered into effect 1 January 2009, and will remain in force until 31 December 2011. While the Chinese mainland remains a beneficiary, certain products including toys, textiles and textile articles, footwear, furniture, jewellery, electrical equipment and watches and clocks, are excluded from preferential treatment.
• A number of Chinese mainland-origin products are subject to EU's anti-dumping duties, including bicycle parts and certain leather footwear, which are of interest to Hong Kong exporters
• Hong Kong's total exports to Italy decreased by 13% to US$1,454 million during January-May 2009, while its imports from Italy decreased by 25% to US$1,393 million.
• Despite a more solid financial system and relatively healthy household and corporate balance sheets, the global credit squeeze, together with waning external demand, has led the Italian economy sink into a deep recession. With GDP shrinking by 5.9% in the first quarter, the Italian economy is forecast to see a 4.4% decline in the whole of 2009.

Current Economic Situation

While the impact of the global credit crisis on the Italian financial system has been limited, the Italian economy has lost significant momentum since the last quarter of 2008. Thanks to the slump in external demand, Italy registered a GDP decline of 5.9% in the first quarter of 2009, the worst quarterly performance since 1980. Credit conditions have remained subdued despite relatively healthy household and corporate balance sheets, which together with rising joblessness have weighed on private consumption and business investment. On the other hand, slow productivity growth and deteriorating competitiveness have taken a toll on Italy's exports in the midst of falling external demand.

Looking ahead, boosted by the long-awaited interest rate and tax cuts, as well as stimulus measures such as incentives for the purchase of cars and home appliances, the Italian economy is expected to regain some momentum in the second half of 2009. Following further stabilisation of the world economy, Italy is forecast to see its GDP fall this year by 4.4%, way lower than it was in the first quarter.

Trade Policy

Italy is a member of the EU, and it follows EU's common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002.

Textiles and Clothing

Hong Kong's textiles and clothing exports to the EU were previously subject to the World Trade Organisation (WTO) Agreement on Textiles and Clothing (ATC), under which quantitative restrictions on textiles and clothing were eliminated completely on 1 January 2005.

Likewise, the previous quotas imposed by the EU on textiles and clothing products originating from the Chinese mainland were removed on 1 January 2005. However, as a result of the EU-China agreement reached in June 2005, the EU imposed safeguard quotas on 10 categories of Chinese textile products for the period of 2005-2007. Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China was established to monitor EU imports of Chinese textiles and apparel for one year, covering 8 out of the 10 previously restricted categories.

On 11 December 2008, the European Commission announced that the regime of double checking surveillance system was to expire on 31 December 2008. Accordingly, starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.

Non-textile Manufacturing Products

Previously, the EU also imposed Union-wide quotas on three categories of non-textile products originating from the Chinese mainland, including certain footwear, porcelain and ceramic tableware/kitchenware. But these quotas were liberalised on 1 January 2005.

Scheme of Generalised Tariff Preferences

The EU's new scheme on generalised system of preferences ("GSP") entered into effect on 1 January 2009, and will remain in force until 31 December 2011. The scheme classifies products into two categories, namely sensitive products that enjoy the benefits of reduced tariff rates by 3.5 percentage points, and non-sensitive products that enjoy total tariff suspension. Under the new GSP scheme, the Chinese mainland remains a beneficiary. But certain products, including toys, textiles and textile articles, footwear, furniture, jewellery, electrical equipment and watches and clocks, are excluded from preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU's GSP scheme since 1 May 1998.

Anti-dumping Measures

The EU has initiated anti-dumping proceedings against certain mainland-origin products. Currently, there are a number of mainland-origin items subject to EU's anti-dumping measures, including bicycle parts and certain leather footwear (definitive duty at 16.5%), which are among the affected products of interest to Hong Kong.

Other Measures

To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.

For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which will come into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.

On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006.

On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast WEEE Directive and the other for a recast RoHS Directive. As per the EC, the purpose of a recast WEEE Directive is to tackle a number of technical, legal and administrative difficulties since its entry into force, while as for the recast RoHS Directive, the EC aims to improve implementation by the Member States (e.g., by ensuring a more harmonised implementation), improve enforcement and increase understanding of the provisions. 

On the heels of the WEEE Directive and RoHS Directive, the EU's new Directive on the eco-design of Energy-using Products (EuP) is now in place. This EuP Directive does not directly introduce binding requirements for specific products, but does define conditions and criteria for setting via subsequent measures. On 16 July 2008, the EC presented a proposal to extend the EuP Directive to set compulsory minimum ecodesign requirements for not only energy-using products but all energy-related products. The EuP Directive as it stands now already applies to a wide range of equipment, from office appliances, televisions and hairdryers to boilers, water heaters and industrial fans. The proposed extension, while continuing to apply to energy-using products, will cover products that - while not themselves consuming energy - nonetheless impact on the consumption of energy. The proposal was approved by the European Parliament on 24 April 2009; thenceforth, the Commission could set minimum efficiency standards for products which impact on the energy consumption, such as windows, insulation materials, showers and water taps.

Moreover, REACH, the EU Regulation on Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.

The European Chemicals Agency (ECHA) drew up a Candidate List of 15 substances of very high concern (SVHCs) on 28 October 2008, and prioritised seven for their particularly dangerous effects. On 1 June 2009, the ECHA made its first recommendation of seven substances that should no longer be placed on the market or allowed to be used within the EU, except if specifically authorised. The seven substances will likely affect Hong Kong producers, as several of them are used in consumer goods, including various textile applications.

Highlighted by the 2007 summer of recalls, the European Parliament voted through on 18 December 2008 a new Toy Safety Directive, which was later adopted on 11 May 2009. The new Toy Safety Directive provides a clearer definition of what is considered to be a ‘toy', bolsters safety regulations, clarifies warnings and age-limit descriptions, bans substances which are carcinogenic, mutagenic or toxic for reproduction (CMRs) and restricts the use of heavy metals and fragrances. The Directive, which requires member states to implement its provisions before January 2011, will impose new and more stringent safety requirements to cope with recently identified hazards, strengthen manufacturers' and importers' responsibilities, and enhance market surveillance activities by member states' enforcement activities.

Hong Kong's Trade with the Italy ^

Hong Kong's total exports to Italy fell by 13% to US$1,454 million in the first five months of 2009, after growing by 3% to US$4,351 million in 2008. Major export items during January-May 2009 included telecommunications equipment and parts (shared 11% of the total), travel goods & handbags (11%), other articles of apparel, of textile fabrics (9%), optical goods (8%), and toys, games & sporting goods (7%).

At the same time, Hong Kong's imports from the Italy declined by 25% to US$1,393 million in the first five months of 2009, after rising by 6% to US$4,379 million in 2008. Leading import items during January-May 2009 included leather (shared 11% of the total), jewellery (11%), textile yarn (6%), travel goods & handbags (5%), and footwear (5%).

Italy's Involvement in the Hong Kong Economy

Apart from bilateral trade, Italy also has an involvement in the Hong Kong economy. Currently, there are some 300 Italian firms in Hong Kong, engaging in banking, insurance, telecommunications, logistics, trading and other services sectors. Examples include Alitalia, Fratelli Consulich (HK) Ltd. and Interglobo Queirolo (Far East) Ltd. (logistics), Banca di Roma and Banca Intesa (banking & finance), Telecom Italia (telecommunications), and Ferragamo Hong Kong Limited, Frette Pacific and Benetton (trading / distribution).  As at 1 June 2008, there were 32 Italian companies with regional headquarters in Hong Kong, while another 52 had regional offices in the territory.

Reflecting Italian widespread interests locally, there were about 660 Italian nationals resided in Hong Kong as at the end of 2008.