Major Economic Indicators

Recent Development 

• As Spain 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 had 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 licence or surveillance document before entering the EU.
• 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. While the Chinese mainland remains a beneficiary, certain products, including toys, textiles and textile articles, footwear, furniture, jewellery, electrical equipment and watches and clocks, will be 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 the Spain slid by 24% to US$481 million during the first four months of 2009, while its imports from Spain fell by 22% to US$205 million.
• The once-buoyant Spanish economy has been fast tapering off since the second half of last year after the collapse of a decade-long boom fuelled by real estate construction and credit-financed domestic spending. In view of the global economic crisis and the subsequent slackening of domestic and external demand, Spain is forecast to see a GDP contraction of 3.6% in 2009.

Current Economic Situation

While the Spanish economy maintained a growth of 1.2% in 2008, it has been hard hit by the global economic recession and fast tapered off since the second half of last year. The collapse of a decade-long construction and consumption boom and the subsequent shrinking of consumer spending among highly indebted Spanish households have heavily dampened consumption and investment, not to mention the rapid deterioration in labour market and external demand.

For the rest of 2009, despite stimulus measures and sustained public spending, private consumption will continue to slacken as Spanish consumers are faced with higher interest rates amid the prevailing credit crunch. At the same time, the nation's sky-high unemployment rate, the highest in the EU, makes consumers more conservative when making purchases. On the investment front, the surging backlog of unsold homes as well as declining housing starts and property prices are holding down investment. Externally, Spanish exports will remain weak given the uninspiring external demand, although imports are expected to further moderate as a result of declining domestic consumption and prices. All in all, the Spanish economy is forecast to register a GDP contraction of 3.6% in 2009.

Trade Policy

Spain 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, will be 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 is expected to be subjected to a first reading by the European Parliament and Council before the end of spring 2009.

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 Spain ^

Hong Kong's total exports to Spain slid by 24% to US$481 million during the first four months of 2009, after a contraction of 6% to US$2,259 million in 2008. Major export items during January-April 2009 included telecommunications equipments & parts (13% share of the total), other articles of apparel, of textile fabrics (10%), toys, games & sporting goods (9%), watches and clocks (9%), and women's or girls' wear of textile fabrics, not knitted (7%).

On the other hand, Hong Kong's imports from the Spain fell by 22% to US$205 million during the first four months of 2009, after rising by 25% to US$818 million in 2008. Major import items during January-April 2009 included meat and edible meat offal (11% share of the total), leather (9%), polyacetals products (7%), telecommunications equipment & parts (7%) and fish products (6%). 

Spain's Involvement in the Hong Kong Economy

Spain only has limited investment in Hong Kong. As of 2008, there were 17 Spanish companies with regional offices in the territory. Nevertheless, it is estimated that there are about a hundred Spanish companies in Hong Kong. They include Inditex and El Corte Ingles (trading/sourcing), Mango and Zara (retailing), and BBVA, Banco Atlantico and Banco popular Espanol (banking and finance).

Reflecting Spanish widespread interests locally, there were about 150 Spanish nationals resided in Hong Kong as at the end of 2008.