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The United States: Market Profile

Picture: The United States factsheet
Picture: The United States factsheet

1. Overview

Economic growth in the US has recovered significantly since 2009. Private consumption, the main engine of the US economy, has remained strong thanks to low unemployment and higher wages. Soft energy prices, tame inflation, strengthened household, corporate and bank balance sheets, and an improving housing market will support robust economic performance. Externally, exports will likely benefit from further stabilisation of the world economy. Nevertheless, global trade tensions, domestic monetary policy normalisation and emerging geo-political tensions could pose challenges in the years to come.

Source: Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

December 2017
US recognised Jerusalem as the capital of Israel and announced plans to move embassy there.

March 2018
President Trump accepted an offer to meet North Korean leader Kim Jong-un.

April 2018
China imposed 25% tariffs on a range of US goods in response to similar US measures.

Source: BBC country profile - Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: The United States real GDP and inflation
Graph: The United States real GDP and inflation
Graph: The United States GDP by sector (2016)
Graph: The United States GDP by sector (2016)
Graph: The United States unemployment rate
Graph: The United States unemployment rate
Graph: The United States current account balance
Graph: The United States current account balance

e = estimate, f = forecast
Source: International Monetary Fund, World Bank, Fitch Solutions
Date last reviewed: August 21, 2018

4. External Trade

4.1 Merchandise Trade

Graph: The United States merchandise trade
Graph: The United States merchandise trade

Source: WTO
Date last reviewed: August 21, 2018

Graph: The United States major export commodities (2017)
Graph: The United States major export commodities (2017)
Graph: The United States major export markets (2017)
Graph: The United States major export markets (2017)
Graph: The United States major import commodities (2017)
Graph: The United States major import commodities (2017)
Graph: The United States major import markets (2017)
Graph: The United States major import markets (2017)

Source: Trade Map, Fitch Solutions
Date last reviewed: August 29, 2018

4.2 Trade in Services

Graph: The United States trade in services
Graph: The United States trade in services

Source: WTO
Date last reviewed: August 21, 2018

5. Trade Policies

  • The United States is a member of a number of international organisations. It is a permanent member of the United Nations (UN) Security Council, a member of the North Atlantic Treaty Organisation (NATO), a member of the G-5, a member of the Organisation for Economic Co-operation and Development (OECD), and a member of the World Trade Organization (WTO).
  • Goods brought into the US are often subject to import duties, but import licenses are generally not required. There are no foreign exchange controls over payments for imports. As a founding member of the original Trans-Pacific Partnership (TPP) Agreement, the Office of the US Trade Representative on November 5, 2015 released the text of the TPP, which was formally signed by its 12 signatories in February 2016. However, US President Donald Trump signed an executive order formally withdrawing the country from the trade deal in January 2017. Despite the absence of the US from the agreement, the remaining 11 TPP nations officially agreed on key aspects of the trade pact on Nov 11, 2017 and signed the document in March 2018.
  • The US has been a WTO member since January 1, 1995. In his first State of the Union address on January 27, 2010, US President Obama unveiled the National Export Initiative (NEI) to boost exports and support new jobs. This was the first time the US had a government-wide export-promotion strategy with focussed attention from the president and his cabinet. In addition, the Obama administration launched the NEI/NEXT in May 2014. This is a customer service-driven strategy to help US companies reach more overseas markets by improving data, providing information on specific export opportunities, working more closely with financing organisations and service providers, and partnering with states and communities to empower local export efforts.
  • The Trump administration will press ahead with its trade agenda aimed at reducing the size of the US's trade in goods deficit with key trade partners such as the EU and China. Following the implementation of tariffs on solar panels, washing machines, steel and aluminium imports in the first few months of 2018, President Trump instructed the US Trade Representative (USTR) to raise USD50-60 billion worth of tariffs on March 22, 2018. The move followed a USTR investigation that determined that unfair policies around intellectual property in the markets of some trade partners caused harm to the US economy. The USTR cited a rarely used section of the 1974 Trade Act as justification. The Trump administration also concluded a renegotiation of its bilateral trade deal with South Korea (KORUS) on March 27. The revisions to the deal were modest.
  • The US rigorously enforces anti-dumping laws. When the Department of Commerce (DOC) determines that a class of foreign goods is being, or is likely to be, sold to purchasers in the US at less than its fair value, an antidumping duty investigation can be conducted. The US International Trade Commission (USITC) is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order. The US also enforces laws on countervailing. When the DOC determines that a class of foreign goods receives countervailable foreign government subsidies, a countervailing duty investigation may be conducted. As a standard practice, the USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order against the subject imports.
  • In the second quarter of 2017, the Office of the USTR issued its annual 'Special 301' report, evaluating the intellectual property rights (IPR) protection policies and enforcement measures in 100 trading partners. The report continues to place some countries such as Algeria, Argentina, China, Chile, India, Indonesia, Kuwait, Russia, Thailand, Ukraine and Venezuela on the Priority Watch List by highlighting longstanding IPR concerns, including coercive technology transfer requirements, structural impediments to effective IP enforcement, and widespread infringing activity such as trade secret theft, online piracy, counterfeiting and high levels of physical pirated and counterfeit exports to markets around the globe.
  • In April 2017, the DOC self-initiated an investigation under section 232 of the Trade Expansion Act of 1962 to determine whether imports of foreign-made steel are harming US national security. If the DOC’s determination is affirmative, and the president concurs, the president has the authority to adjust imports, including through the use of tariffs and quotas.
  • The USTR initiated on August 18, 2017 a Section 301 investigation pursuant to Section 302(b)(1)(A) of the Trade Act of 1974 into the Chinese mainland's acts, policies and practices related to technology transfer, intellectual property and innovation. The USTR has requested bilateral consultations with the Chinese mainland concerning the issues under investigation and will normally determine within 12 months from the date of initiation (estimated to be by August 17, 2018) whether any actionable acts, policies or practices exist, and if that determination is affirmative, what action, if any, the US should take.
  • The US has adopted various security initiatives since 9/11, including the introduction of the Container Security Initiative (CSI) in January 2002. The CSI purports to push the US cargo screening process outward to reduce the risk to US ports and cities. To date, CSI is operational at 50 ports, representing the point of origin of more than 80% of the cargo shipped to the US. Other than cargo screening, the Transportation Security Administration (TSA) met the August 2010 deadline for screening 100% of cargo transported on domestic and outbound flights of passenger aircraft originating within the US, while the statutory mandate of 100% screening of all inbound air cargo went into effect on December 3, 2012.
  • Another cargo security initiative, the Customs-Trade Partnership Against Terrorism (C-TPAT), has been in force since November 2001. Through this initiative, CBP asks US companies to ensure the integrity of their security practices. Participants of C-TPAT are entitled to fast-track clearance through US Customs. As such, major US importers have signed up to the programme, and request overseas suppliers to adopt measures in response to the C-TPAT requirement.
  • Imported goods are usually required to be marked with the country of origin in English. The marking has to be permanent, legible and conspicuous. Additional labelling is required on food, cosmetics, textiles and apparel, selected household products and flammable fabrics. Certain imported products must be approved by the proper US authority.
  • The Trump administration's trade policy agenda seeks to protect local firms, particularly those working around the technology, steel and aluminium industries. On April 5, 2018, the Trump administration announced that it would instruct US Trade Representative to explore tariffs on an additional USD100 billion in Chinese imports. The move came in response to China's decision to impose retaliatory tariffs of 25% on USD50 billion of US goods on April 4, 2018. This decision was, in turn, a response to the USTR's release of a list of 1,300 Chinese goods that would be subject to around 25% tariffs due to alleged harm caused to the US economy by unfair Chinese policies, including intellectual property (IP) theft. The Chinese government has also announced its intention to challenge the US measures at the WTO. On June 1, 2018, US President Trump brought in tariffs of 25% on EU steel imports and 10% on imported aluminium, citing national security as a key motivating factor. In retaliation over this decision, the EU is seeking to impose tariffs on US imports ranging from US-made Harley-Davidson motorcycles to clothing items such as jeans from July 1, 2018. While the measures were not in place at the time of writing, the European commission claimed to have the full support of all 28 member states to act swiftly in countering the new US trade measures. In early June 2018, the EU announced that it aims to introduce tariffs on about EUR2.8 billion worth of US steel as well as a wide range of industrial and agricultural products. The EU has also taken a complaint to the WTO. Should the case still be ongoing after three years, the EU plans to impose further tariffs of EUR3.6 billion on US products.
  • Regarding hi-tech exports, the US Bureau of Industry and Security (BIS) created a Validated End-User (VEU) programme in June 2007 to facilitate civilian trade by reducing administrative and logistical hurdles for certain exports to pre-screened mainland Chinese companies. About four months later the BIS announced an initial list of five mainland Chinese companies approved to receive exports, re-exports and transfers of certain controlled goods and technology under the programme. Since then, several lawmakers and government watchdogs who are concerned that sensitive items exported without federal review could find their way to the Chinese military have called on the BIS to halt the VEU programme. In late January 2009, the BIS announced the full implementation of the VEU programme for China.
  • Imports are usually subject to ad valorem and/or specific import duties. Regular rates are applied on imports from locations enjoying normal trade relations (NTR) or formerly most-favoured-nation status, including Hong Kong and the Chinese mainland. Products from some countries receive preferential import treatment via the US Generalised Scheme of Preferences (GSP).

Source: WTO - Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

The Trump administration's policy agenda aims to protect local industries and reduce the trade deficits by imposing blanket tariffs on a wide range of goods. If enacted, this agenda could incentivise domestic production over foreign imports - particularly in targeted sectors such as steel and aluminium. While this would result in higher consumer prices and hurt key sectors across multiple value chains, as well as potentially driving down productivity due to erecting trade barriers, it would create winners in other areas of the economy. Talks to renegotiate The North American Free Trade Agreement (NAFTA) started in August 2017, to fulfil a campaign pledge by Trump to bring manufacturing jobs back to the United States.

6.2 Multinational Trade Agreements

Active

  1. US-Australia Free Trade Agreement - As a result of the US - Australia Free Trade Agreement (FTA), tariffs that averaged 4.3% were eliminated on more than 99% of the tariff lines for US manufactured goods exports to Australia. Exports of these goods account for 93% of total US goods sales in Australia's market. The eventual elimination of all tariffs will create new export opportunities for America's manufacturers. The FTA also affords substantial benefits in a broad range of other sectors as well. Markets for services such as life insurance and express delivery will be opened; intellectual property will be better protected; American investments will be facilitated through predictable access and a stable business environment. For the first time in many sectors, American firms will be allowed to compete for Australia's government purchases on a non-discriminatory basis. All U.S. farm exports will go duty-free to Australia, benefitting many sectors such as processed foods, fruits and vegetables, corn, and soybeans. The FTA also makes advances in e-commerce and pharmaceutical market access.

  2. The US-Israel FTA - The US-Israel FTA eliminated duties on manufactured goods as of January 1, 1995. Non-tariff barriers to trade remain in the areas of intellectual property rights, standards and technical regulations, and there is a lack of transparency in government tendering process. Also, tariff and nontariff barriers continue to affect a certain portion of US agricultural exports. As a result, in 1996 the United States and Israel signed an Agreement on Trade in Agricultural Products (ATAP), establishing gradual and steady market access liberalisation for food and agricultural products effective through December 31, 2001. Negotiation and implementation of a successor ATAP was completed in 2004. It was effective through December 31, 2008 and was extended through December 31, 2010 and again through December 31, 2011. The FTA includes a non-binding statement of intent to eliminate barriers to trade in services such as tourism, communications, banking, insurance, management consulting, accounting, law, computer services, and advertising. It also includes an agreement to eliminate all restrictions on government procurement, and calls on Israel to relax its offsets requirements for government agencies other than the Israeli Ministry of Defence.

  3. The US-Korea FTA - The US-Korea FTA entered into force on March 15, 2012. From implementation, almost 80% of US industrial goods exports to South Korea gained duty-free status including aerospace equipment, agricultural equipment, auto parts, building products, chemicals, consumer goods, electrical equipment, environmental goods, travel goods, paper products, scientific equipment and shipping and transportation equipment.

    Other benefits of the FTA include:

    • Nearly two-thirds of US agricultural exports products are duty-free including wheat, corn, soybeans for crushing, whey for feed use, hides and skins, cotton, cherries, pistachios, almonds, orange juice, grape juice and wine.

    • Stronger protection and enforcement of intellectual property rights in Korea.

    • Increased access to Korea's USD580 billion services market for highly competitive American companies.

  4. The US-Morocco FTA - As a result of the US-Morocco FTA, 95% of US consumer and industrial goods exported to Morocco no longer need to pay a tariff. Tariffs on US goods export to Morocco will be phased out entirely by 2024. The FTA also expands the significant protections already afforded US investors under a Bilateral Investment Treaty (BIT) signed in 1985. All forms of investment are protected under the FTA, including enterprises, debt, concessions, contracts and intellectual property. US investors will enjoy in almost all circumstances the right to establish, acquire and operate investments in Morocco on an equal footing with Moroccan investors, and with investors of other countries.

  5. The US-Panama Trade Promotion Agreement (TPA) - The US-Panama TPA entered into force on October 31, 2012. On this day, over 87% of US industrial goods exports to Panama became duty-free including information technology equipment, agricultural and construction equipment, aircraft and parts, medical and scientific equipment, environmental products, pharmaceuticals, fertilisers, and agro-chemicals.

    Other benefits of the TPA include:

    • More than half of US exports of agricultural commodities to Panama became duty-free on day one, including high-quality beef, frozen turkeys, sorghum, soybeans, soybean meal, crude soybean and corn oil, almost all fruit and fruit products, wheat, peanuts, whey, cotton, and many processed products.

    • Stronger protection and enforcement of intellectual property rights in Panama.

    • Increased access to Panama's USD20.6 billion services market, including in priority areas such as financial, telecommunications, computer, distribution, express delivery, energy, environmental, and professional services.

    • Significant infrastructure opportunities in the USD5.25 billion Panama Canal expansion project, as well as through the almost USD10 billion in other significant infrastructure projects.

  6. The US-Peru TPA: Under this agreement, 80% of US consumer and industrial goods exports to Peru are no longer subject to tariffs. Tariffs on remaining products will be phased out by 2019.

    For agricultural products, tariffs have been eliminated on almost 90% of US exports - with remaining tariffs to be phased out by 2026.

    To be eligible for tariff-free treatment under the TPA, products must meet the relevant rules of origin. The TPA also provides favourable access for US service suppliers, as well as guarantees of protection to US investors and US copyrights, trademarks, and patents registered in Peru. In addition, Peru has opened up significant government procurement opportunities to US bidders.

  7. The US-Singapore FTA: This FTA has helped increase US exports, improve US competitiveness around the globe, secure a US presence in Southeast Asia, and provide a standard of free trade that encourages a high level of liberalisation. Doing business in Singapore has become even easier, faster, cheaper, and more transparent. The FTA has given US businesses and exporters even more access to one of the world's biggest markets, Southeast Asia, where many opportunities are to be found. Besides binding all Singapore tariffs for US goods at zero, the FTA has increased export opportunities for certain US manufacturing sectors, including those that produce medical instruments and equipment, microelectronics, photo equipment, certain textiles, pharmaceuticals, and chemicals. Singapore also has accorded substantial access to its services and investment market, with few exceptions. It also has increased government procurement opportunities and protection of intellectual property. Furthermore, the FTA provided for ground-breaking cooperation in promoting labour rights and the environment.

  8. The US-Chile FTA: The US-Chile FTA came into force in 2004 - with 80% of US consumer and industrial goods exports to Chile immediately becoming duty free. Tariffs on the remaining products have been phased out, with 100% of products duty free as of January 1, 2015. To be eligible for tariff-free treatment under the FTA, products must meet the relevant rules of origin.

    The FTA also provides favourable access for US service suppliers and guarantees of protection to US investors and US copyrights, trademarks and patents registered in Chile. In addition, Chile has opened up significant government procurements to US bidders. Chile's open economy and strong democratic institutions make it one of the most stable countries for doing business in the region.

Under Re-Negotiation

The NAFTA: The NAFTA was originally signed by Canada, the US and Mexico and took effect in January 1994. However, in 2017 the US has begun to re-negotiate the terms of NAFTA. Difficult trade negotiations with the US over NAFTA could result in significantly altered trade terms.

Sources: WTO Regional Trade Agreements database

7. Investment Policy

7.1 Foreign Direct Investment

Graph: The United States FDI stock
Graph: The United States FDI stock
Graph: The United States FDI flow
Graph: The United States FDI flow

Source: UNCTAD
Date last reviewed: August 21, 2018

7.2 Foreign Direct Investment Policy

Established by Executive Order of the US President in 2011, Select USA is a US government-wide effort to encourage, facilitate, and accelerate business investment in the US by both domestic and foreign firms. It provides enhanced coordination of existing resources and functions within the US Department of Commerce and across all federal departments and agencies with operations relevant to business investment. It works in partnership with state, regional, and local economic development organisations to promote and facilitate overall US business attraction, retention, and reshoring.

To stay competitive and maintain its status as a premier location for new business investment, the US has developed an extensive web of investment incentives, ranging from federal business incentives such as the energy-efficient appliance manufacturing tax credit, employment & training administration grants, renewable energy investment tax credits and the EB-5 Visa for Immigrant Investors to nearly 2,000 state business incentive programmes.

State governments often use the tax system to partner with the private sector on economic development initiatives. In particular, tax incentives are a key part of many states' economic development strategies. They are used to achieve goals beyond economic growth or job creation, such as spreading economic activity throughout the state (through geographic targeting) and focusing on perceived high-value industries. States also use tax incentives to compete with other states and foreign countries for business investments that promise jobs and increased economic activity.

Source: WTO - Trade Policy Review, The International Trade Administration (ITA), US Department of Commerce

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
The United States government operates around 293 free trade zones (FTZs) throughout the 50 states, known as Foreign Trade Zones. Foreign-FTZ are secure areas under US Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the United States' version of what are known internationally as free-trade zones.State and local governments provide numerous incentives to encourage business and, thus, employment in their jurisdictions. State tax incentives come in four basic types, focusing on jobs, business investment, specific industries, and specific locations. Variations in definition and target are considerable, however. States either create or allow communities to designate zones, particularly in distressed communities, in which to encourage economic activity.
Enterprise zonesThe most common zones are enterprise zones (also sometimes called empowerment zones). The federal, state, and local governments offer various incentives targeted at these zones to encourage economic activity in areas of high unemployment or declining property values.
Other zonesStates have also experimented with giving incentives, ranging from tax breaks to financing assistance, to companies that locate in targeted zones, regardless of industry. Such support has financed industrial parks that have been adapted for high tech company incubation.
Tax increment finance districtsMost states have gone a step further with geographic preferences by establishing tax increment finance (TIF) districts. In these districts, often administered at the local level, the area's tax revenue (or the increase in property tax revenues due to higher value) does not go into a general fund but rather remains with the district to pay off redevelopment costs or to pay for more investments. In most cases, local property taxes are diverted to the TIF district, but a few states, including New Mexico and Kentucky, have also allowed state sales taxes to be diverted.
General business creditsVarious business credits are available to provide special incentives for the achievement of certain economic objectives. In general, these credits are combined into one 'general business credit' for purposes of determining each credit's allowance limitation for the tax year. The general business credit that may be used for a tax year is limited to a tax-based amount. In general, the current year's credit that cannot be used in a given year because of the credit's allowance limitation may be carried back to the tax year preceding the current year and carried forward to each of the 20 years following the current year.
Employment creditsA 'work opportunity tax credit' is available through 2019 for employment of certain types of workers. 'Creditable' wages generally are the first US$6,000 of wages paid to each qualified employee for the year. The credit is 40% of creditable wages, for a maximum credit of USD2,400. Tying incentives to job creation or capital investment enables states to tailor incentive programs to tangible goals. These credit types are available in virtually every state. The credits reward companies that either add new jobs or can verify that they retained jobs they otherwise would have cut. Some states use jobs as the unit of measurement; others use payroll. For example, Delaware's job creation tax credit is USD500 for each qualified new job, and Mississippi's credit is equal to 2.5% of new payroll.
State-level creditsOther states have a standalone investment tax credit. These credits apply to a specific investment, usually expansion of facilities or purchase of new equipment. For example, Florida's Capital Investment Tax Credit allows an investment credit of 5% annually for 20 years of eligible capital costs. States also use tax incentives to promote specific industries. In some cases, the incentives are defensive, discouraging an existing local industry from leaving to collect incentives offered elsewhere. Incentives can also be proactive as states try to diversify their economies. The following industries are among the most common recipients of tax credits: agriculture, manufacturing, film production and technology.
Targeted incentivesAgriculture: Incentives for agricultural activities across the states aim to preserve and promote farming and ranching. Some incentives attempt to help small farmers, such as Kansas's credit for agritourism liability insurance and Nebraska's credit for landlords who rent to aspiring farmers. A few states use preferential excise tax rates or exemptions to develop wineries and breweries.

Technology: States often focus incentives on high technology, bioscience, and advanced manufacturing activities, hopeful that attracting these firms will enhance the state's reputation as a technology hub like Silicon Valley in California; Austin, Texas; or North Carolina's Research Triangle. These hubs attract high-paying jobs and highly educated employees and states see them as a way to diversify their economies. Twelve states and Washington, DC, provide high technology tax incentives; these range from a sales tax exemption for e-commerce in West Virginia to a comprehensive set of tax incentives for high technology companies in Washington DC. A subset of technology incentives targets the development of data centres. Nine states (Arizona, Minnesota, Mississippi, New York, North Carolina, Oklahoma, Tennessee, Texas, and Washington) encourage firms to create computer or Internet data centres, usually by offering reduced or no sales tax on computer servers and other equipment purchases or by exempting equipment from personal property taxes.
Manufacturing incentivesStates are particularly interested in attracting manufacturers that offer relatively high wages and benefits. In addition, large manufacturers such as automobile assembly plants often induce suppliers, particularly other manufacturers, to locate nearby. States most frequently offer job creation and investment credits to manufacturers, but many states also provide them with abatements of both real and personal property taxes. West Virginia and Louisiana have state corporate income tax credits to offset local personal property taxes for manufacturers.

Some tax exemptions aim to reduce tax distortions and are not generally considered incentives. For example, 35 states offer sales and use tax exemptions for manufacturing machinery to prevent double taxation on transactions that involve intermediate goods or other inputs to production. However, for three states that target the exemption to new or expanding facilities, it becomes an incentive: Arkansas, Kentucky, and North Dakota have sales tax exemptions for machinery for new or expanding facilities.
 Research creditThe research credit is available for companies that make qualified research expenditures (QREs) to develop new or improved products, manufacturing processes, or software in the United States. The research credit is computed by calculating current-year QRE over a base.

The base is calculated using either the regular research credit (RRC) method or the alternative simplified credit (ASC) method. Under the RRC method, the credit equals 20% of QREs for the tax year over a base amount established by the taxpayer in 1984 to 1988, or by another method for companies that began operations after that period.

The ASC equals 14% (for the 2009 tax year and thereafter) of QREs over 50% of the average annual QREs in the three immediately preceding tax years. If the taxpayer has no QREs in any of the three preceding tax years, the ASC may be 6% of the tax year's QREs. The taxpayer must make a timely ASC election on Form 6765 attached to an originally filed return filed by the due date for that return (including extensions), or, pursuant to final regulations published in February 2015, an amended return (subject to certain limitations).

Taxpayers using the RRC also may take a 20% credit for incremental payments made to qualified organisations for basic research. For tax years ending after August 8, 2005, taxpayers also may take the Energy Research Consortium Credit, which provides a 20% credit for expenditures on qualified energy research undertaken by an energy research consortium.
Film incentives
Over the past 15 years, 44 states have adopted targeted incentives for the film industry. Several states have structured the film credit as a refundable credit or rebate to film producers, unlike most tax incentives, which can only offset other taxes. These incentives vary from grants in DC and Georgia to fully refundable rebates in New Mexico. The credit is almost always refundable or transferable and exists even in states that have no income tax, such as Wyoming and Nevada.
Inbound investment incentives
In general, there are no specific incentives related to inbound investment at the federal level, other than certain portfolio debt and bank deposit exceptions. The portfolio debt exception enables non-residents and foreign corporations to invest in certain obligations (which must meet certain statutory requirements to qualify as 'portfolio debt') in the United States without being subject to US income (or withholding) tax on the interest income. Certain state and local benefits may also be available. Furthermore, interest income received on certain qualified private activity bonds is generally exempt from federal income tax. This enables a business enterprise to issue the bonds at a lower interest rate.

Source: US Internal Revenue Service, United States Department of Commerce, PwC Tax Summaries, Fitch Solutions

8. Taxation – 2018

  • Value added tax: variable ( depending on the state) 2.9% - 7.25%
  • Corporate income tax: 21%

Source: PwC Taxes at a Glance 2018

8.1 Important Updates to Taxation Information

  • On December 22, 2017, President Donald Trump, signed tax reform legislation (Public Law [P.L.] No. 115-97) that will lower business and individual tax rates, modernise United States  international tax rules, and provide the most significant overhaul of the US tax code in more than 30 years. P.L. 115-97 lowers permanently the US federal corporate income tax (CIT) rate from 35% to 21%. P.L. 115-97 also repeals the corporate alternative minimum tax (AMT). P.L. 115-97 provides the most significant overhaul of US international tax rules in more than 50 years by moving the United States from a 'worldwide' system to a 100% dividend exemption 'territorial' system. As part of this change, P.L. 115-97 includes two minimum taxes aimed at safeguarding the US tax base from erosion, along with other international tax provisions. P.L. 115-97 also includes a broad range of tax reform proposals affecting businesses, including a new 20% deduction for certain pass-through business income. In addition, P.L. 115-97 repeals or modifies many current-law tax provisions to offset part of the cost of the proposed tax reforms.     
  • Corporate income tax rates vary from state to state and generally range from 1% to 12% (although some states impose no income tax). The most common taxable base is federal taxable income, which is modified by state provisions and generally is apportioned to a state on the basis of an apportionment formula consisting of one or more of the following: tangible assets and rental expense, sales and other receipts, and payroll. Many states are moving away from a three-factor formula in favour of a one-factor receipts apportionment methodology. State and municipal taxes are deductible expenses for federal income tax purposes. No provisions exist for a sales tax or value-added tax (VAT) at the federal level; however, sales and use taxes constitute a major revenue source for the 45 states that impose such taxes and the District of Columbia. No provisions exist for a stamp tax at the federal level; however, state and local governments frequently impose stamp taxes at the time of officially recording a transaction involving real property (commonly referred to as transfer taxes). 

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax Rate (for resident corporations)21% (may vary depending on state-level taxes)
Corporate Capital Gains Tax RateMaximum rate is 21% - excluding the additional phase-out rates
Branch Tax Rate30%
Withholding Tax: Dividends, Interest, Royalties30%
Branch Interest Tax, on branch profits (reduced by reinvested profits and increased by withdrawals of previously reinvested earnings); the rate may be reduced by treaty30%
State and Local Sales Taxes, imposed by many states and some local governmentsThere are varying rates depending on the state - generally these rates range from 2.9% to 7.25%
Environmental Tax1% of the value of the goods entering the country

Source: PwC Tax Summaries 2018
Date last reviewed: August 29, 2018

9. Foreign Worker Requirements

9.1 Entry Requirements

In general, foreign nationals who wish to be admitted to the United States must first obtain authorisation, and in many instances, must obtain visas from a US consulate or embassy. Visas are endorsed in passports and indicate that evidence of a legally sufficient purpose for admission was presented to a US consular official.

US immigration laws clearly distinguish between foreign nationals seeking temporary admission (non-immigrants) and those intending to remain in the United States permanently (immigrants). At ports of entry, foreign nationals are inspected or questioned by CBP officials to determine their eligibility to enter the United States and the duration of their initial periods of stay. Nearly all nationals admitted to the United States for temporary periods receive instructions to access an electronic form called the I-94. The I-94 record indicates both the individual's status in the United States and the last date on which the individual may remain in the United States. The online portal also allows individuals to check their travel history from and to the United States, as captured by US authorities.

9.2 Visa Types

Different non-immigrant visas authorise a variety of activities in the United States, including visiting, studying and working. The categories are identified by combinations of letters and numbers that authorise the particular visas; for example, B-1 visitors for business or the work authorised L-1 intracompany transferee. Every non-immigrant category permits a maximum length of stay and a range of permissible activities. Applications for an extension beyond the initial entry period can be sought from the United States Citizenship and Immigration Service (USCIS). A business that requires the immediate services of a particular employee ordinarily brings the employee to the United States first in a non-immigrant category. If the employee wishes to remain in the United States on a permanent basis, the immigrant application process may begin while the employee is in the United States.

9.3 Visitor for Business

B-1 status is issued to people temporarily visiting the United States to engage in business on behalf of foreign employers. B-1 holders may not be employed by or receive salary from US employers, but, among other activities, they may negotiate contracts, sell company products, develop business leads and attend conferences and business meetings on behalf of their foreign employers. A temporary business visitor may accept reimbursement for incidental expenses such as travel expenses. A B-1 visitor must retain domicile in the foreign country to where he or she intends to return at the conclusion of his or her temporary US stay. In general, business visitors with B-1 visas may enter the United States for periods of up to six months. However, B-1 status can be granted for a shorter period, often not exceeding 30 days, unless the business visitor can justify a longer period of admission.

9.4 Visa Waiver Program

The Visa Waiver Program (VWP) allows nationals of some jurisdictions, including EU member states, to visit the United States for business, as generally described above, or recreation for up to 90 days without first obtaining B visas from US authorities.

9.5 Specialty Occupations - Trainees

H-3 status may be issued to foreign nationals to enter the United States for up to two years to receive training and to develop skills that will be used in their careers abroad. The training must be unavailable in the foreign national's home country, and the skills acquired must apply to work outside the United States. Spouses and unmarried children of H-3 visa holders are eligible for H-4 status, but are not permitted to work in the United States.

9.6 Intracompany Transferees

The L-1 visa allows foreign companies with affiliated operations in the United States to transfer needed personnel to their US facilities. L-1 visas may be issued to foreign nationals who are employed abroad in executive or managerial positions, or who hold positions involving specialised knowledge in the company's procedures, processes, services and/or products. These individuals must have been employed by the related foreign entity for at least one continuous year during the three years preceding admission to the United States. On arrival in the United States, the beneficiary must assume an executive, managerial or specialized knowledge position with the US affiliate, parent, subsidiary or branch office. Managers and executives may be issued and retain L-1A status for up to seven years; L-1B specialized-knowledge personnel may remain in the United States in that status for up to five years. For start-up operations, L-1 visas are granted initially for a one-year 'new office' period. For visa extensions, start-up companies must prove at the end of the year that they are “doing business” in the United States and have made progress toward becoming viable operating entities that need the services of managers, executives or personnel with specialised knowledge.

9.7 Extraordinary Ability - O-1

The O-1 visa category is for persons of extraordinary ability in the sciences, arts, education, business or athletics. Separate tests for demonstrating extraordinary ability exist for the following categories of individuals:

  • Foreign nationals in the motion picture and television industries
  • Other foreign nationals
9.8 Green Cards

Permanent resident or immigrant visas, which are commonly referred to as 'green cards', are issued to those intending to reside permanently in the United States. Immigrant visa holders may live and work in the United States with few restrictions. After a period of physical presence and continuous residence of either three or five years (depending on the basis on which the individual obtained the green card), immigrant visa holders may, but are not required to, apply for US citizenship. Nine preference categories of immigrant visas are available to foreign nationals. Four categories are based on family relationships, and five are based on US employment.

Source: US Department of Homeland Security, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
Aaa (stable)
25/04/2018
Standard & Poor'sAA+ (stable)
06/08/2011
Fitch Ratings
AAA (stable)05/04/2018

Source: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
7/189
8/190
6/190
Ease of Paying Taxes Index
27/189
28/190
32/190
Logistics Performance Index
10/160
N/A
14/160
Corruption Perception Index
3/176
2/180
N/A
IMD World Competitiveness4/61
3/63
1/63

Source: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World ranking
201620172018
Economic Risk Index Rank13/202
Short-Term Economic Risk Score
70.2
73.3
72.3
Long-Term Economic Risk Score73.4
76.3
76.7
Political Risk Index Rank24/202
Short-Term Political Risk Score
86.7
85.0
85.0
Long-Term Political Risk Score85.6
82.6
82.6
Operational Risk Index Rank7/201
Operational Risk Index Score75.3
77.5
78.2

Source: Fitch Solutions
Date last reviewed: August 29, 2018

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
The most notable positive economic factors that will support the US economy include still-easy monetary policy, and a forthcoming loosening of fiscal policy. Although the US is significantly dependent on foreign countries for imports, this is neither an unreasonable nor unsustainable situation, given the US's relative wealth and the comparative advantage of producing goods in foreign states. A stronger economic profile is precluded by a widening fiscal deficit, rising government debt and an ageing population.

OPERATIONAL RISK
Although the US's physical infrastructure is ageing, the country as a whole boasts strong logistics owing to extensive transportation and utilities networks, which will likely get a boost in funding under the Trump administration. Meanwhile, the competitiveness of a flexible labour market and highly-educated workers provide additional advantages to the business sector. The US legal system is one of the world's most business-friendly, government regulation is relatively easy to navigate, and corruption is minimal.

Source: Fitch Solutions
Date last reviewed: September 3, 2018

10.5 Fitch Solutions Political & Economic Risk Indices

Graph: The United States short term political risk index
Graph: The United States short term political risk index
Graph: The United States long term political risk index
Graph: The United States long term political risk index
Graph: The United States short term economic risk index
Graph: The United States short term economic risk index
Graph: The United States long term economic risk index
Graph: The United States long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 21, 2018

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
United States Score78.2
79.0
75.2
88.0
70.5
Developed States Average72.963.370.975.881.8
Developed States Position (out of 27)51111
24
Developed States Average72.963.370.975.881.8
Developed States Position (out of 27)5
111124
Global Average49.749.850.049.349.9
Global Position (out of 201)7115139

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: The United States vs global and regional averages
Graph: The United States vs global and regional averages
Country
Operational Risk IndexLabour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Secruity Risk Index
Switzerland79.976.577.673.991.8
Denmark79.6
75.4
75.8
83.3
84.0
Netherlands79.1
64.5
77.9
85.5
88.4
Sweden78.7
67.6
77.8
85.5
83.8
United States78.2
79.0
75.2
88.0
70.5
New Zealand78.0
73.0
75.7
73.8
89.4
Canada77.5
75.2
71.8
80.7
82.1
UK77.3
72.1
78.1
77.9
81.3
Norway77.3
62.7
72.6
81.5
92.3
Finland75.2
53.0
73.5
83.2
91.2
Japan74.9
68.8
64.9
81.4
84.7
Luxembourg74.4
52.1
77.7
78.9
88.9
Ireland74.1
65.0
77.8
71.2
82.5
Austria74.1
58.6
71.6
77.9
88.3
Australia73.5
68.0
71.4
70.3
84.3
Germany73.0
63.4
69.5
77.4
81.7
Spain
72.1
59.0
67.4
80.9
81.3
Belgium
72.1
55.3
76.5
81.4
75.3
France
71.5
60.2
70.3
79.9
75.5
Portugal70.6
50.8
66.5
80.2
85.0
Iceland70.4
59.9
66.2
69.1
86.6
Liechtenstein69.5
54.7
79.5
61.1
82.6
Israel66.7
72.4
63.0
69.1
62.4
Malta65.2
52.4
69.6
58.5
80.1
Isle of Man65.0
62.0
61.8
53.9
82.3
Italy63.1
53.9
57.6
72.3
68.7
Greece58.253.147.868.863.2
Developed Markets Averages72.9
63.3
70.9
75.8
81.8
Global Markets Averages49.7
49.8
50.0
49.3
49.9

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 21, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with United States

Graph: Major export commodities to The United States (2017)
Graph: Major export commodities to The United States (2017)
Graph: Major import commodities from The United States (2017)
Graph: Major import commodities from The United States (2017)
Graph: Merchandise exports to The United States
Graph: Merchandise exports to The United States
Graph: Merchandise imports from The United States
Graph: Merchandise imports from The United States

Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Source: Hong Kong Census and Statistics Department, Fitch Solutions


2017
Growth rate (%)
Number of US residents visiting Hong Kong
1,215,629
0.3
Number of US residing in Hong Kong13,4571.6

Visitor Source: Hong Kong Tourism Board
Resident Source: United Nations Department of Economic and Social Affairs - Population Division


2017
Growth rate (%)
Number of North American residents visiting Hong Kong
1,585,964
0.3
Number of Developed State citizens residing in Hong Kong65,6801.5

Visitor Source: Hong Kong Tourism Board
Resident Source: United Nations Department of Economic and Social Affairs - Population Division
Date last reviewed: August 21, 2018

11.2 Commercial Presence in Hong Kong


2017
Growth rate (%)
Number of French Companies in Hong Kong1,313
-3.0
- Regional headquarters283
-1.0
- Regional offices443-7.7
- Local offices5870.0

Source: Hong Kong Census and Statistics Department

11.3 Treaties and agreements between Hong Kong and United States

  • The United States has entered into double tax treaties with mainland China.
  • The US is one of the major sources of foreign direct investment in Hong Kong. According to the latest Hong Kong official statistics, the US was the 6th-largest source of foreign direct investment in Hong Kong.
Source: Fitch Solutions

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

The American Chamber of Commerce in Hong Kong
Address: 1904, Bank of America Tower, 12 Harcourt Road, Hong Kong
Email: amcham@amcham.org.hk
Tel: (852) 2530 6900
Website: http://www.amcham.org.hk/

Source: Directory of Hong Kong Trade and Industrial Organisations

American Consulate General in Hong Kong
Address: 26 Garden Road, Central, Hong Kong
General enquiries: information_resource_center_hk@yahoo.com
Media enquiries: HKPressTeam@state.gov
Permanent residents enquiries: bkkcis.inquiries@dhs.gov
Tel: (852) 2523 9011

Source: U.S. Consulate General Hong Kong & Macau

11.5 Visa Requirements for Hong Kong Residents

At the moment, Hong Kong SAR passport holders are required to apply for a visitor visa if they are going to the US for business or travel. They need to fill in an online form, pay a processing fee of USD160 and attend an in-person interview at the US consulate in Hong Kong.

Source: Visa on Demand

(Edeas Infograhpics)


1. Overview


Economic growth in the US has recovered significantly since 2009. Private consumption, the main engine of the US economy, has remained strong thanks to low unemployment and higher wages. Soft energy prices, tame inflation, strengthened household, corporate and bank balance sheets, and an improving housing market will support robust economic performance. Externally, exports will likely benefit from further stabilisation of the world economy. Nevertheless, global trade tensions, domestic monetary policy normalisation and emerging geo-political tensions could pose challenges in the years to come.


Source: Fitch Solutions


2. Major Economic/Political Events and Upcoming Elections


December 2017
US recognised Jerusalem as the capital of Israel and announces plans to move embassy there.


March 2018
President Trump accepts an offer to meet North Korean leader Kim Jong-un.


Apr-2018
China imposes 25% tariffs on a range of US goods in response to similar US measures.


Source: BBC country profile - Timeline, Fitch Solutions


3. Major Economic Indicators


(chart 01) (chart 02)


(chart 03) (chart 04)


4. External Trade


4.1 Merchandise Trade


(chart 05)


(chart 06) (chart 07)


(chart 08) (chart 09)


4.2 Trade in Services


(chart 10)


5. Trade Policies



  • The United States is a member of a number of international organisations. It is a permanent member of the United Nations (UN) Security Council, a member of the North Atlantic Treaty Organisation (NATO), a member of the G-5, a member of the Organisation for Economic Co-operation and Development (OECD), and a member of the World Trade Organization (WTO).



  • Goods brought into the US are often subject to import duties, but import licenses are generally not required. There are no foreign exchange controls over payments for imports. As a founding member of the original Trans-Pacific Partnership (TPP) Agreement, the Office of the US Trade Representative on November 5, 2015 released the text of the TPP, which was formally signed by its 12 signatories in February 2016. However, US President Donald Trump signed an executive order formally withdrawing the country from the trade deal in January 2017. Despite the absence of the US from the agreement, the remaining 11 TPP nations officially agreed on key aspects of the trade pact on Nov 11, 2017 and signed the document in March 2018.



  • The US has been a WTO member since January 1, 1995. In his first State of the Union address on January 27, 2010, US President Obama unveiled the National Export Initiative (NEI) to boost exports and support new jobs. This was the first time the US had a government-wide export-promotion strategy with focussed attention from the president and his cabinet. In addition, the Obama administration launched the NEI/NEXT in May 2014. This is a customer service-driven strategy to help US companies reach more overseas markets by improving data, providing information on specific export opportunities, working more closely with financing organisations and service providers, and partnering with states and communities to empower local export efforts.



  • The Trump administration will press ahead with its trade agenda aimed at reducing the size of the US’s trade in goods deficit with key trade partners such as the EU and China. Following the implementation of tariffs on solar panels, washing machines, steel and aluminium imports in the first few months of 2018, President Trump instructed the US Trade Representative (USTR) to raise US$50-60 billion worth of tariffs on March 22, 2018. The move followed a USTR investigation that determined that unfair policies around intellectual property in the markets of some trade partners caused harm to the US economy. The USTR cited a rarely used section of the 1974 Trade Act as justification. The Trump administration also concluded a renegotiation of its bilateral trade deal with South Korea (KORUS) on March 27. The revisions to the deal were modest.



  • The US rigorously enforces anti-dumping laws. When the Department of Commerce (DOC) determines that a class of foreign goods is being, or is likely to be, sold to purchasers in the US at less than its fair value, an antidumping duty investigation can be conducted. The US International Trade Commission (USITC) is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order. The US also enforces laws on countervailing. When the DOC determines that a class of foreign goods receives countervailable foreign government subsidies, a countervailing duty investigation may be conducted. As a standard practice, the USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order against the subject imports.



  • In the second quarter of 2017, the Office of the USTR issued its annual ‘Special 301’ report, evaluating the intellectual property rights (IPR) protection policies and enforcement measures in 100 trading partners. The report continues to place some countries such as Algeria, Argentina, China, Chile, India, Indonesia, Kuwait, Russia, Thailand, Ukraine and Venezuela on the Priority Watch List by highlighting longstanding IPR concerns, including coercive technology transfer requirements, structural impediments to effective IP enforcement, and widespread infringing activity such as trade secret theft, online piracy, counterfeiting and high levels of physical pirated and counterfeit exports to markets around the globe.



  • In April 2017, the DOC self-initiated an investigation under section 232 of the Trade Expansion Act of 1962 to determine whether imports of foreign-made steel are harming US national security. If the DOC’s determination is affirmative, and the president concurs, the president has the authority to adjust imports, including through the use of tariffs and quotas.



  • The USTR initiated on August 18, 2017 a Section 301 investigation pursuant to Section 302(b)(1)(A) of the Trade Act of 1974 into the Chinese mainland’s acts, policies and practices related to technology transfer, intellectual property and innovation. The USTR has requested bilateral consultations with the Chinese mainland concerning the issues under investigation and will normally determine within 12 months from the date of initiation (estimated to be by August 17, 2018) whether any actionable acts, policies or practices exist, and if that determination is affirmative, what action, if any, the US should take.



  • The US has adopted various security initiatives since 9/11, including the introduction of the Container Security Initiative (CSI) in January 2002. The CSI purports to push the US cargo screening process outward to reduce the risk to US ports and cities. To date, CSI is operational at 50 ports, representing the point of origin of more than 80% of the cargo shipped to the US. Other than cargo screening, the Transportation Security Administration (TSA) met the August 2010 deadline for screening 100% of cargo transported on domestic and outbound flights of passenger aircraft originating within the US, while the statutory mandate of 100% screening of all inbound air cargo went into effect on December 3, 2012.



  • Another cargo security initiative, the Customs-Trade Partnership Against Terrorism (C-TPAT), has been in force since November 2001. Through this initiative, CBP asks US companies to ensure the integrity of their security practices. Participants of C-TPAT are entitled to fast-track clearance through US Customs. As such, major US importers have signed up to the programme, and request overseas suppliers to adopt measures in response to the C-TPAT requirement.



  • Imported goods are usually required to be marked with the country of origin in English. The marking has to be permanent, legible and conspicuous. Additional labelling is required on food, cosmetics, textiles and apparel, selected household products and flammable fabrics. Certain imported products must be approved by the proper US authority.



  • The Trump administration's trade policy agenda seeks to protect local firms, particularly those working around the technology, steel and aluminium industries. On April 5, 2018, the Trump administration announced that it would instruct US Trade Representative to explore tariffs on an additional US$100 billion in Chinese imports. The move came in response to China's decision to impose retaliatory tariffs of 25% on US$50 billion of US goods on April 4, 2018. This decision was, in turn, a response to the USTR's release of a list of 1,300 Chinese goods that would be subject to around 25% tariffs due to alleged harm caused to the US economy by unfair Chinese policies, including intellectual property (IP) theft. The Chinese government has also announced its intention to challenge the US measures at the World Trade Organisation (WTO). On June 1, 2018, US President Trump brought in tariffs of 25% on EU steel imports and 10% on imported aluminium, citing national security as a key motivating factor. In retaliation over this decision, the EU is seeking to impose tariffs on US imports ranging from US-made Harley-Davidson motorcycles to clothing items such as jeans from July 1, 2018. While the measures were not in place at the time of writing, the European commission claimed to have the full support of all 28 member states to act swiftly in countering the new US trade measures. In early June 2018, the EU announced that it aims to introduce tariffs on about EUR2.8 billion worth of US steel as well as a wide range of industrial and agricultural products. The EU has also taken a complaint to the WTO. Should the case still be ongoing after three years, the EU plans to impose further tariffs of EUR3.6 billion on US products.



  • Regarding hi-tech exports, the US Bureau of Industry and Security (BIS) created a Validated End-User (VEU) programme in June 2007 to facilitate civilian trade by reducing administrative and logistical hurdles for certain exports to pre-screened mainland Chinese companies. About four months later the BIS announced an initial list of five mainland Chinese companies approved to receive exports, re-exports and transfers of certain controlled goods and technology under the programme. Since then, several lawmakers and government watchdogs who are concerned that sensitive items exported without federal review could find their way to the Chinese military have called on the BIS to halt the VEU programme. In late January 2009, the BIS announced the full implementation of the VEU programme for China.



  • Imports are usually subject to ad valorem and/or specific import duties. Regular rates are applied on imports from locations enjoying normal trade relations (NTR) or formerly most-favoured-nation status, including Hong Kong and the Chinese mainland. Products from some countries receive preferential import treatment via the US Generalised Scheme of Preferences (GSP).


Source: WTO - Trade Policy Review, Fitch Solutions


6. Trade Agreement


6.1 Trade Updates


The Trump administration's policy agenda aims to protect local industries and reduce the trade deficits by imposing blanket tariffs on a wide range of goods. If enacted, this agenda could incentivise domestic production over foreign imports - particularly in targeted sectors such as steel and aluminium. While this would result in higher consumer prices and hurt key sectors across multiple value chains, as well as potentially driving down productivity due to erecting trade barriers, it would create winners in other areas of the economy. Talks to renegotiate NAFTA started in August 2017, to fulfil a campaign pledge by Trump to bring manufacturing jobs back to the United States.


6.2 Multinational Trade Agreements


Under Re-Negotiation


The North American Free Trade Agreement (NAFTA): The NAFTA was originally signed by Canada, the US and Mexico and took effect in January 1994. However, in 2017 the US has begun to re-negotiate the terms of NAFTA. Difficult trade negotiations with the US over NAFTA could result in significantly altered trade terms.


Active



  1. US - Australia Free Trade Agreement - As a result of the US - Australia Free Trade Agreement (FTA), tariffs that averaged 4.3% were eliminated on more than 99% of the tariff lines for US manufactured goods exports to Australia. Exports of these goods account for 93% of total US goods sales in Australia's market. The eventual elimination of all tariffs will create new export opportunities for America's manufacturers. The FTA also affords substantial benefits in a broad range of other sectors as well. Markets for services such as life insurance and express delivery will be opened; intellectual property will be better protected; American investments will be facilitated through predictable access and a stable business environment. For the first time in many sectors, American firms will be allowed to compete for Australia's government purchases on a non-discriminatory basis. All U.S. farm exports will go duty-free to Australia, benefitting many sectors such as processed foods, fruits and vegetables, corn, and soybeans. The FTA also makes advances in e-commerce and pharmaceutical market access



  2. The US - Israel Free Trade Area Agreement (FTA) - The US - Israel FTA eliminated duties on manufactured goods as of January 1, 1995. Non-tariff barriers to trade remain in the areas of intellectual property rights, standards and technical regulations, and there is a lack of transparency in government tendering process. Also, tariff and nontariff barriers continue to affect a certain portion of US agricultural exports. As a result, in 1996 the United States and Israel signed an Agreement on Trade in Agricultural Products (ATAP), establishing gradual and steady market access liberalisation for food and agricultural products effective through December 31, 2001. Negotiation and implementation of a successor ATAP was completed in 2004. It was effective through December 31, 2008 and was extended through December 31, 2010 and again through December 31, 2011. The FTA includes a non-binding statement of intent to eliminate barriers to trade in services such as tourism, communications, banking, insurance, management consulting, accounting, law, computer services, and advertising. It also includes an agreement to eliminate all restrictions on government procurement, and calls on Israel to relax its offsets requirements for government agencies other than the Israeli Ministry of Defence.



  3. The United States - Korea Free Trade Agreement (FTA) - The United States - Korea FTA entered into force on March 15, 2012. From implementation, almost 80% of US industrial goods exports to South Korea gained duty-free status including aerospace equipment, agricultural equipment, auto parts, building products, chemicals, consumer goods, electrical equipment, environmental goods, travel goods, paper products, scientific equipment and shipping and transportation equipment.

    Other benefits of the FTA include:



    • Nearly two-thirds of US agricultural exports products are duty-free including wheat, corn, soybeans for crushing, whey for feed use, hides and skins, cotton, cherries, pistachios, almonds, orange juice, grape juice and wine.



    • Stronger protection and enforcement of intellectual property rights in Korea.



    • Increased access to Korea’s US$580 billion services market for highly competitive American companies.



  4. The US - Morocco Free Trade Agreement (FTA) - As a result of the US - Morocco FTA, 95% of US consumer and industrial goods exported to Morocco no longer need to pay a tariff. Tariffs on US goods export to Morocco will be phased out entirely by 2024. The FTA also expands the significant protections already afforded US investors under a Bilateral Investment Treaty (BIT) signed in 1985. All forms of investment are protected under the FTA, including enterprises, debt, concessions, contracts and intellectual property. US investors will enjoy in almost all circumstances the right to establish, acquire and operate investments in Morocco on an equal footing with Moroccan investors, and with investors of other countries.

  5. The US - Panama Trade Promotion Agreement (TPA) - The United States - Panama TPA entered into force on October 31, 2012. On this day, over 87% of US industrial goods exports to Panama became duty-free including information technology equipment, agricultural and construction equipment, aircraft and parts, medical and scientific equipment, environmental products, pharmaceuticals, fertilisers, and agro-chemicals.

    Other benefits of the TPA include:


    • More than half of US exports of agricultural commodities to Panama became duty-free on day one, including high-quality beef, frozen turkeys, sorghum, soybeans, soybean meal, crude soybean and corn oil, almost all fruit and fruit products, wheat, peanuts, whey, cotton, and many processed products.



    • Stronger protection and enforcement of intellectual property rights in Panama.

    • Increased access to Panama’s US$20.6 billion services market, including in priority areas such as financial, telecommunications, computer, distribution, express delivery, energy, environmental, and professional services.

    • Significant infrastructure opportunities in the US$5.25 billion Panama Canal expansion project, as well as through the almost US$10 billion in other significant infrastructure projects.



  6. The US-Peru Trade Promotion Agreement (TPA): Under this agreement, 80% of US consumer and industrial goods exports to Peru are no longer subject to tariffs. Tariffs on remaining products will be phased out by 2019.
    For agricultural products, tariffs have been eliminated on almost 90% of US exports – with remaining tariffs to be phased out by 2026.
    To be eligible for tariff-free treatment under the TPA, products must meet the relevant rules of origin. The TPA also provides favourable access for US service suppliers, as well as guarantees of protection to US investors and US copyrights, trademarks, and patents registered in Peru. In addition, Peru has opened up significant government procurement opportunities to US bidders.

  7. The US-Singapore Free Trade Agreement (FTA): This FTA has helped increase US exports, improve US competitiveness around the globe, secure a US presence in Southeast Asia, and provide a standard of free trade that encourages a high level of liberalisation. Doing business in Singapore has become even easier, faster, cheaper, and more transparent. The FTA has given US businesses and exporters even more access to one of the world’s biggest markets, Southeast Asia, where many opportunities are to be found. Besides binding all Singapore tariffs for US goods at zero, the FTA has increased export opportunities for certain US manufacturing sectors, including those that produce medical instruments and equipment, microelectronics, photo equipment, certain textiles, pharmaceuticals, and chemicals. Singapore also has accorded substantial access to its services and investment market, with few exceptions. It also has increased government procurement opportunities and protection of intellectual property. Furthermore, the FTA provided for ground-breaking cooperation in promoting labour rights and the environment.

  8. The US-Chile Free Trade Agreement (FTA): The US-Chile FTA came into force in 2004 - with 80% of US consumer and industrial goods exports to Chile immediately becoming duty free. Tariffs on the remaining products have been phased out, with 100% of products duty free as of January 1, 2015. To be eligible for tariff-free treatment under the FTA, products must meet the relevant rules of origin.
    The FTA also provides favourable access for US service suppliers and guarantees of protection to US investors and US copyrights, trademarks and patents registered in Chile. In addition, Chile has opened up significant government procurements to US bidders. Chile’s open economy and strong democratic institutions make it one of the most stable countries for doing business in the region.



Sources: WTO Regional Trade Agreements database




7. Investment Policy


7.1 Foreign Direct Investment


(chart 11) (chart 12)


7.2 Foreign Direct Investment Policy


Established by Executive Order of the US President in 2011, SelectUSA is a US government-wide effort to encourage, facilitate, and accelerate business investment in the US by both domestic and foreign firms. It provides enhanced coordination of existing resources and functions within the US Department of Commerce and across all federal departments and agencies with operations relevant to business investment. It works in partnership with state, regional, and local economic development organisations to promote and facilitate overall US business attraction, retention, and reshoring.


To stay competitive and maintain its status as a premier location for new business investment, the US has developed an extensive web of investment incentives, ranging from federal business incentives such as the energy-efficient appliance manufacturing tax credit, employment & training administration grants, renewable energy investment tax credits and the EB-5 Visa for Immigrant Investors to nearly 2,000 state business incentive programmes.


State governments often use the tax system to partner with the private sector on economic development initiatives. In particular, tax incentives are a key part of many states’ economic development strategies. They are used to achieve goals beyond economic growth or job creation, such as spreading economic activity throughout the state (through geographic targeting) and focusing on perceived high-value industries. States also use tax incentives to compete with other states and foreign countries for business investments that promise jobs and increased economic activity.

Source: WTO - Trade Policy Review, The International Trade Administration (ITA), US Department of Commerce


7.3 Free Trade Zones and Investment Incentives






























































Free Trade Zone/Incentive ProgrammeMain Incentives Available
 The United States government operates around 293 free trade zones (FTZs) throughout the 50 states, known as Foreign Trade Zones. Foreign-Trade Zones (FTZ) are secure areas under US Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the United States' version of what are known internationally as free-trade zones. State and local governments provide numerous incentives to encourage business and, thus, employment in their jurisdictions. State tax incentives come in four basic types, focusing on jobs, business investment, specific industries, and specific locations. Variations in definition and target are considerable, however. States either create or allow communities to designate zones, particularly in distressed communities, in which to encourage economic activity.
Enterprise ZonesThe most common zones are enterprise zones (also sometimes called empowerment zones). The federal, state, and local governments offer various incentives targeted at these zones to encourage economic activity in areas of high unemployment or declining property values.
Other ZonesStates have also experimented with giving incentives, ranging from tax breaks to financing assistance, to companies that locate in targeted zones, regardless of industry. Such support has financed industrial parks that have been adapted for high tech company incubation.
Tax Increment Finance DistrictsMost states have gone a step further with geographic preferences by establishing tax increment finance (TIF) districts. In these districts, often administered at the local level, the area’s tax revenue (or the increase in property tax revenues due to higher value) does not go into a general fund but rather remains with the district to pay off redevelopment costs or to pay for more investments. In most cases, local property taxes are diverted to the TIF district, but a few states, including New Mexico and Kentucky, have also allowed state sales taxes to be diverted.
General business creditsVarious business credits are available to provide special incentives for the achievement of certain economic objectives. In general, these credits are combined into one 'general business credit' for purposes of determining each credit's allowance limitation for the tax year. The general business credit that may be used for a tax year is limited to a tax-based amount. In general, the current year's credit that cannot be used in a given year because of the credit's allowance limitation may be carried back to the tax year preceding the current year and carried forward to each of the 20 years following the current year.
Employment creditsA 'work opportunity tax credit' is available through 2019 for employment of certain types of workers. 'Creditable' wages generally are the first US$6,000 of wages paid to each qualified employee for the year. The credit is 40% of creditable wages, for a maximum credit of US$2,400. Tying incentives to job creation or capital investment enables states to tailor incentive programs to tangible goals. These credit types are available in virtually every state. The credits reward companies that either add new jobs or can verify that they retained jobs they otherwise would have cut. Some states use jobs as the unit of measurement; others use payroll. For example, Delaware’s job creation tax credit is US$500 for each qualified new job, and Mississippi’s credit is equal to 2.5% of new payroll.
State-level creditsOther states have a standalone investment tax credit. These credits apply to a specific investment, usually expansion of facilities or purchase of new equipment. For example, Florida’s Capital Investment Tax Credit allows an investment credit of 5% annually for 20 years of eligible capital costs. States also use tax incentives to promote specific industries. In some cases, the incentives are defensive, discouraging an existing local industry from leaving to collect incentives offered elsewhere. Incentives can also be proactive as states try to diversify their economies. The following industries are among the most common recipients of tax credits: agriculture, manufacturing, film production and technology.
Targeted incentivesAgriculture: Incentives for agricultural activities across the states aim to preserve and promote farming and ranching. Some incentives attempt to help small farmers, such as Kansas’s credit for agritourism liability insurance and Nebraska’s credit for landlords who rent to aspiring farmers. A few states use preferential excise tax rates or exemptions to develop wineries and breweries.

Technology: States often focus incentives on high technology, bioscience, and advanced manufacturing activities, hopeful that attracting these firms will enhance the state’s reputation as a technology hub like Silicon Valley in California; Austin, Texas; or North Carolina’s Research Triangle. These hubs attract high-paying jobs and highly educated employees and states see them as a way to diversify their economies. Twelve states and Washington, DC, provide high technology tax incentives; these range from a sales tax exemption for e-commerce in West Virginia to a comprehensive set of tax incentives for high technology companies in Washington DC. A subset of technology incentives targets the development of data centres. Nine states (Arizona, Minnesota, Mississippi, New York, North Carolina, Oklahoma, Tennessee, Texas, and Washington) encourage firms to create computer or Internet data centres, usually by offering reduced or no sales tax on computer servers and other equipment purchases or by exempting equipment from personal property taxes.
Manufacturing IncentivesStates are particularly interested in attracting manufacturers that offer relatively high wages and benefits. In addition, large manufacturers such as automobile assembly plants often induce suppliers, particularly other manufacturers, to locate nearby. States most frequently offer job creation and investment credits to manufacturers, but many states also provide them with abatements of both real and personal property taxes. West Virginia and Louisiana have state corporate income tax credits to offset local personal property taxes for manufacturers.

Some tax exemptions aim to reduce tax distortions and are not generally considered incentives. For example, 35 states offer sales and use tax exemptions for manufacturing machinery to prevent double taxation on transactions that involve intermediate goods or other inputs to production. However, for three states that target the exemption to new or expanding facilities, it becomes an incentive: Arkansas, Kentucky, and North Dakota have sales tax exemptions for machinery for new or expanding facilities.
 Research creditThe research credit is available for companies that make qualified research expenditures (QREs) to develop new or improved products, manufacturing processes, or software in the United States. The research credit is computed by calculating current-year QRE over a base.

The base is calculated using either the regular research credit (RRC) method or the alternative simplified credit (ASC) method. Under the RRC method, the credit equals 20% of QREs for the tax year over a base amount established by the taxpayer in 1984 to 1988, or by another method for companies that began operations after that period.

The ASC equals 14% (for the 2009 tax year and thereafter) of QREs over 50% of the average annual QREs in the three immediately preceding tax years. If the taxpayer has no QREs in any of the three preceding tax years, the ASC may be 6% of the tax year’s QREs. The taxpayer must make a timely ASC election on Form 6765 attached to an originally filed return filed by the due date for that return (including extensions), or, pursuant to final regulations published in February 2015, an amended return (subject to certain limitations).

Taxpayers using the RRC also may take a 20% credit for incremental payments made to qualified organisations for basic research. For tax years ending after August 8, 2005, taxpayers also may take the Energy Research Consortium Credit, which provides a 20% credit for expenditures on qualified energy research undertaken by an energy research consortium.
Film Incentives
Over the past 15 years, 44 states have adopted targeted incentives for the film industry. Several states have structured the film credit as a refundable credit or rebate to film producers, unlike most tax incentives, which can only offset other taxes. These incentives vary from grants in DC and Georgia to fully refundable rebates in New Mexico. The credit is almost always refundable or transferable and exists even in states that have no income tax, such as Wyoming and Nevada.
Inbound investment incentives
In general, there are no specific incentives related to inbound investment at the federal level, other than certain portfolio debt and bank deposit exceptions. The portfolio debt exception enables non-residents and foreign corporations to invest in certain obligations (which must meet certain statutory requirements to qualify as 'portfolio debt') in the United States without being subject to US income (or withholding) tax on the interest income. Certain state and local benefits may also be available. Furthermore, interest income received on certain qualified private activity bonds is generally exempt from federal income tax. This enables a business enterprise to issue the bonds at a lower interest rate.






Source: US Internal Revenue Service, United States Department of Commerce, PwC Tax Summaries, Fitch Solutions


8. Taxation – 2018



  • Value added tax: variable ( depending on the state) 2.9% - 7.25%

  • Corporate income tax: 21%


Source: PwC Taxes at a Glance 2018


8.1 Important Updates to Taxation Information



  • On December 22, 2017, President Donald Trump, signed tax reform legislation (Public Law [P.L.] No. 115-97) that will lower business and individual tax rates, modernise United States  international tax rules, and provide the most significant overhaul of the US tax code in more than 30 years. P.L. 115-97 lowers permanently the US federal corporate income tax (CIT) rate from 35% to 21%. P.L. 115-97 also repeals the corporate alternative minimum tax (AMT). P.L. 115-97 provides the most significant overhaul of US international tax rules in more than 50 years by moving the United States from a ‘worldwide’ system to a 100% dividend exemption ‘territorial’ system. As part of this change, P.L. 115-97 includes two minimum taxes aimed at safeguarding the US tax base from erosion, along with other international tax provisions. P.L. 115-97 also includes a broad range of tax reform proposals affecting businesses, including a new 20% deduction for certain pass-through business income. In addition, P.L. 115-97 repeals or modifies many current-law tax provisions to offset part of the cost of the proposed tax reforms.     



  • Corporate income tax rates vary from state to state and generally range from 1% to 12% (although some states impose no income tax). The most common taxable base is federal taxable income, which is modified by state provisions and generally is apportioned to a state on the basis of an apportionment formula consisting of one or more of the following: tangible assets and rental expense, sales and other receipts, and payroll. Many states are moving away from a three-factor formula in favour of a one-factor receipts apportionment methodology. State and municipal taxes are deductible expenses for federal income tax purposes. No provisions exist for a sales tax or value-added tax (VAT) at the federal level; however, sales and use taxes constitute a major revenue source for the 45 states that impose such taxes and the District of Columbia. No provisions exist for a stamp tax at the federal level; however, state and local governments frequently impose stamp taxes at the time of officially recording a transaction involving real property (commonly referred to as transfer taxes). 


8.2 Business Taxes










































Type of TaxTax Rate and Base
Corporate Income Tax Rate (for resident corporations)21% (may vary depending on state-level taxes)
Corporate Capital Gains Tax RateMaximum rate is 21% - excluding the additional phase-out rates
Branch Tax Rate30%
Withholding Tax: Dividends, Interest, Royalties30%
Branch Interest Tax, on branch profits (reduced by reinvested profits and increased by
withdrawals of previously reinvested earnings); the rate may be reduced by treaty
30%
State And Local Sales Taxes, imposed by many
states and some local governments
There are varying rates depending on the state- generally these rates range from 2.9% to 7.25%
Environmental Tax1% of the value of the goods entering the country.






Source: PwC Tax Summaries 2018
Date last reviewed: August 29, 2018


9. Foreign Worker Requirements


9.1 Entry Requirements


In general, foreign nationals who wish to be admitted to the United States must first obtain authorisation, and in many instances, must obtain visas from a US consulate or embassy. Visas are endorsed in passports and indicate that evidence of a legally sufficient purpose for admission was presented to a US consular official.
US immigration laws clearly distinguish between foreign nationals seeking temporary admission (non-immigrants) and those intending to remain in the United States permanently (immigrants). At ports of entry, foreign nationals are inspected or questioned by Customs and Border Protection (CBP) officials to determine their eligibility to enter the United States and the duration of their initial periods of stay. Nearly all nationals admitted to the United States for temporary periods receive instructions to access an electronic form called the I-94. The I-94 record indicates both the individual’s status in the United States and the last date on which the individual may remain in the United States. The online portal also allows individuals to check their travel history from and to the United States, as captured by US authorities.


9.2 Visa Types


Different non-immigrant visas authorise a variety of activities in the United States, including visiting, studying and working. The categories are identified by combinations of letters and numbers that authorise the particular visas; for example, B-1 visitors for business or the work authorised L-1 intracompany transferee. Every non-immigrant category permits a maximum length of stay and a range of permissible activities. Applications for an extension beyond the initial entry period can be sought from the United States Citizenship and Immigration Service (USCIS). A business that requires the immediate services of a particular employee ordinarily brings the employee to the United States first in a non-immigrant category. If the employee wishes to remain in the United States on a permanent basis, the immigrant application process may begin while the employee is in the United States.


9.3 Visitor for Business


B-1 status is issued to people temporarily visiting the United States to engage in business on behalf of foreign employers. B-1 holders may not be employed by or receive salary from US employers, but, among other activities, they may negotiate contracts, sell company products, develop business leads and attend conferences and business meetings on behalf of their foreign employers. A temporary business visitor may accept reimbursement for incidental expenses such as travel expenses. A B-1 visitor must retain domicile in the foreign country to where he or she intends to return at the conclusion of his or her temporary US stay. In general, business visitors with B-1 visas may enter the United States for periods of up to six months. However, B-1 status can be granted for a shorter period, often not exceeding 30 days, unless the business visitor can justify a longer period of admission.


9.4 Visa Waiver Program


The Visa Waiver Program (VWP) allows nationals of some jurisdictions, including EU member states, to visit the United States for business, as generally described above, or recreation for up to 90 days without first obtaining B visas from US authorities.


9.5 Specialty Occupations - Trainees


H-3 status may be issued to foreign nationals to enter the United States for up to two years to receive training and to develop skills that will be used in their careers abroad. The training must be unavailable in the foreign national’s home country, and the skills acquired must apply to work outside the United States. Spouses and unmarried children of H-3 visa holders are eligible for H-4 status, but are not permitted to work in the United States.


9.6 Intracompany Transferees


The L-1 visa allows foreign companies with affiliated operations in the United States to transfer needed personnel to their US facilities. L-1 visas may be issued to foreign nationals who are employed abroad in executive or managerial positions, or who hold positions involving specialised knowledge in the company’s procedures, processes, services and/or products. These individuals must have been employed by the related foreign entity for at least one continuous year during the three years preceding admission to the United States. On arrival in the United States, the beneficiary must assume an executive, managerial or specialized knowledge position with the US affiliate, parent, subsidiary or branch office. Managers and executives may be issued and retain L-1A status for up to seven years; L-1B specialized-knowledge personnel may remain in the United States in that status for up to five years. For start-up operations, L-1 visas are granted initially for a one-year ‘new office’ period. For visa extensions, start-up companies must prove at the end of the year that they are “doing business” in the United States and have made progress toward becoming viable operating entities that need the services of managers, executives or personnel with specialised knowledge.


9.7 Extraordinary Ability - O-1


The O-1 visa category is for persons of extraordinary ability in the sciences, arts, education, business or athletics. Separate tests for demonstrating extraordinary ability exist for the following categories of individuals:



  • Foreign nationals in the motion picture and television industries

  • Other foreign nationals


9.8 Green Cards

Permanent resident or immigrant visas, which are commonly referred to as 'green cards’, are issued to those intending to reside permanently in the United States. Immigrant visa holders may live and work in the United States with few restrictions. After a period of physical presence and continuous residence of either three or five years (depending on the basis on which the individual obtained the green card), immigrant visa holders may, but are not required to, apply for US citizenship. Nine preference categories of immigrant visas are available to foreign nationals. Four categories are based on family relationships, and five are based on US employment.


Source: US Department of Homeland Security, Fitch Solutions


10. Risks


10.1 Sovereign Credit Ratings
































Rating (Outlook)Rating Date
Moody's
Aa2 (Positive)
04/05/2018
S&P GlobalAA (Stable)
08/11/2013
Fitch Ratings
AA (Stable)20/07/2018







Source: Moody's, Standard & Poor's, Fitch Ratings


10.2 Competitiveness and Efficiency Indicators


















































World Ranking
201620172018
Ease of Doing Business Index
28/189
29/190
31/190
Ease of Paying Taxes Index
87/189
88/190
54/190
Logistics Performance Index
16/160
N/A
16/160
Corruption Perception Index
69/176
70/180
N/A
IMD World Competitiveness32/61
31/63
28/63






Source: World Bank, IMD, Transparency International


10.3 Fitch Solutions Risk Indices






























































World ranking
201620172018
Economic Risk Index Rank18/202
Short-Term Economic Risk Score
68.871.971.5
Long-Term Economic Risk Score72.774.674.8
Political Risk Index Rank29/202
Short-Term Political Risk Score
7680.279.4
Long-Term Political Risk Score82.380.680.6
Operational Risk Index Rank23/201
Operational Risk Index Score67.870.571.5






Source: Fitch Solutions
Date last reviewed: August 29, 2018


10.4 Fitch Solutions Risk Summary


ECONOMIC RISK
The most notable positive economic factors that will support the US economy include still-easy monetary policy, and a forthcoming loosening of fiscal policy. Although the US is significantly dependent on foreign countries for imports, this is neither an unreasonable nor unsustainable situation, given the US's relative wealth and the comparative advantage of producing goods in foreign states. A stronger economic profile is precluded by a widening fiscal deficit, rising government debt and an ageing population.

OPERATIONAL RISK
Although the US's physical infrastructure is ageing, the country as a whole boasts strong logistics owing to extensive transportation and utilities networks, which will likely get a boost in funding under the Trump administration. Meanwhile, the competitiveness of a flexible labour market and highly-educated workers provide additional advantages to the business sector. The US legal system is one of the world's most business-friendly, government regulation is relatively easy to navigate, and corruption is minimal.

Source: Fitch Solutions
Date last reviewed: September 3, 2018


10.5 Fitch Solutions Political & Economic Risk Indices


(chart N1) (chart N2)


(chart N3) (chart N4)


10.6 Fitch Solutions Operational Risk Index











































































Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
France Score71.560.270.379.975.5
Developed States Average72.963.370.975.881.8
Developed States Position (out of 27)1916171222
Developed States Average72.963.370.975.881.8
Developed States Position (out of 27)1916171222
Global Average49.749.850.049.349.9
Global Position (out of 201)2336271231






Note: 100 = Lowest risk; 0 = highest risk.
Source: Fitch Solutions Operational Risk Index


(chart N5)


























































































































































































































































Country
Operational Risk IndexLabour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Secruity Risk Index
Switzerland79.976.577.673.991.8
Denmark79.6
75.4
75.8
83.3
84.0
Netherlands79.1
64.5
77.9
85.5
88.4
Sweden78.7
67.6
77.8
85.5
83.8
US78.2
79.0
75.2
88.0
70.5
New Zealand78.0
73.0
75.7
73.8
89.4
Canada77.5
75.2
71.8
80.7
82.1
UK77.3
72.1
78.1
77.9
81.3
Norway77.3
62.7
72.6
81.5
92.3
Finland75.2
53.0
73.5
83.2
91.2
Japan74.9
68.8
64.9
81.4
84.7

Luxembourg


74.4
52.1
77.7
78.9
88.9
Ireland74.1
65.0
77.8
71.2
82.5
Austria74.1
58.6
71.6
77.9
88.3
Australia73.5
68.0
71.4
70.3
84.3
Germany73.0
63.4
69.5
77.4
81.7
Spain
72.1
59.0
67.4
80.9
81.3
Belgium
72.1
55.3
76.5
81.4
75.3
France
71.5
60.2
70.3
79.9
75.5
Portugal70.6
50.8
66.5
80.2
85.0
Iceland70.4
59.9
66.2
69.1
86.6
Liechtenstein69.5
54.7
79.5
61.1
82.6
Israel66.7
72.4
63.0
69.1
62.4
Malta65.2
52.4
69.6
58.5
80.1
Isle of Man65.0
62.0
61.8
53.9
82.3
Italy63.1
53.9
57.6
72.3
68.7
Greece58.253.147.868.863.2
Developed Markets Averages72.9
63.3
70.9
75.8
81.8
Global Markets Averages49.7
49.8
50.0
49.3
49.9






Note: 100 = Lowest risk; 0 = highest risk.
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 21, 2018


11. Hong Kong Connection


11.1 Hong Kong’s Trade with France



(chart 13) (chart 14)


(chart 15) (chart 16)


























2017
Growth rate (%)
Number of French residents visiting Hong Kong204,130
-4.5
Number of French residing in Hong Kong2,2280.02






Source: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs - Population Division


























2017
Growth rate (%)
Number of European residents visiting Hong Kong1,929,824
-0.2
Number of Developed State citizens residing in Hong Kong65,6801.5






Source: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs - Population Division, Fitch Solutions
Date last reviewed: August 21, 2018


11.2 Commercial Presence in Hong Kong




































2017
Growth rate(%)
Number of French Companies in Hong Kong343
2.7
- Regional headquarters81
11.0
- Regional offices 101-7.3
- Local offices 1615.9






Source: Hong Kong Census And Statistics Department


11.3 Treaties and agreements between Hong Kong and France



  • Alongside the Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) effective since December 1, 2011, Hong Kong also signed an Investment Promotion and Protection Agreement (IPPA) with France in May 1997.



  • France also has a Double Taxation Agreement with mainland China, as well as a Bilateral Investment Treaty with mainland China that entered into force on August 20, 2010.Note: China (mainland) and Russia signed an Agreement for the Avoidance of Double Taxation (DTA) on 13 October 2016 and Investment Promotion and Protection Agreements which came into effect on February 12, 2000.


11.4 Chamber of Commerce (or Related Organisations) in Hong Kong


The French Chamber of Commerce and Industry in Hong Kong


Address: 21/F, On Hing Building, 1 On Hing Terrace, Central, Hong Kong
Email: frencham@fccihk.com
Tel: (852) 2294 7721
Fax: (852) 2525 1428


Source: French Chamber of Commerce - Hong Kong


Consulate General of France In Hong Kong And Macau


Address: 25/F & 26/F, Tower II, Admiralty Centre, 18 Harcourt Road, Hong Kong
Email: informations@consulfrance-hongkong.org
Tel: (852) 3752 9900
Fax: (852) 3752 9901


Source: Consulate General of France in Hong Kong and Macau


11.5 Visa Requirements for Hong Kong Residents


HKSAR passport holders do not need a visa to the Schengen area for a stay up to 90 days in any 180-day period.


Source: Visa on Demand


Content provided by Picture: Fitch Solutions – BMI Research
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