22 June 2018
Spain: Market Profile
- As Spain is a member of the European Union (EU), its trade relations with Hong Kong/the Chinese mainland are affected by EU’s common external trade policy and measures. As a euro-zone member, it adopted the euro as its legal tender on 1 January 2002.
- The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment.
- A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters.
- Hong Kong’s total exports to Spain decreased by 1% to US$1.6 billion in the first eleven months of 2017, while its imports from Spain grew by 7% to US$917 million.
- As one of the most popular investment destinations, the inflows of foreign direct investment (FDI) to Spain amounted to US$18.7 billion in 2016, with China’s contributing US$125 million. As of the end of 2016, China’s total stock of FDI in Spain exceeded US$736 million, up from US$143 million in 2007. Hong Kong, holding an FDI stock of US$1.9 billion as of end-2016, was the second largest Asian investor in Spain, after only Japan.
- With the aim of promoting investment, employment, competitiveness and economic growth, the Spanish government and all other public authorities have been developing and consolidating an extensive and complete system of aid instruments and incentives especially targeted at boosting employment, regional investment and at research, development and technological innovation. To promote investment into the country’s key industries such as aerospace, automotive, biotechnology, pharmacy and life sciences, environment, ICT and chemicals, incentives including state incentives for training and employment and preferred financing from the Official Credit Institute (Instituto de Crédito Oficial or ICO) are widely available. More information on the investment environment and the relevant regulations can be found at INVEST IN SPAIN (ICEX).
- As an important step in accommodating greater synergies, Hong Kong and Spain signed a Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) on 1 April 2011, which came into force on 13 April 2012.
Current Economic Situation
Continuing fiscal consolidation, banking sector restructuring and structural reforms, particularly in the labour market, have borne fruit and driven the Spanish economy onto its fourth year of expansion in 2017, outpacing the euro-area average. Lower borrowing costs, still-soft oil prices, declining unemployment and improving export prospects alongside a competitive euro have, on the other hand, given consumers and businesses more confidence when making consumption and investment decisions, although base-broadening measures on corporate taxation, increases in excise duties on alcohol and tobacco and a wider base for social contributions may altogether imply a less expansionary fiscal policy orientation. Despite the ongoing deleveraging process and uncertainty over the independence drive in Catalonia, the Spanish economy is expected to see another 2.5% growth in 2018.
Spain is a member of the EU, and it follows EU's common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002. As it now stands, a total of 19 EU members, including Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, has adopted the euro as their legal tender.
No quotas are imposed on textiles and clothing exports, as well as non-textile products exports from Hong Kong and the Chinese mainland at present.
Scheme of Generalised Tariff Preferences
The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of the countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since 1 May 1998.
The EU has initiated anti-dumping (AD) proceedings against certain mainland-origin products. Currently, there are a number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters. As at end-December 2017, the EU did not apply any AD measures on imports from Hong Kong.
To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.
For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.
On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006. On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive.
The recast RoHS Directive was published on 1 July 2011 and entered into force on 2 January 2013. The new Directive continues to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. Nonetheless, the new Directive will widen, as from 22 July 2019, the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.
Another important law for Hong Kong companies to grapple with concerns waste EEE, i.e., the WEEE Directive. With the formal approval on 7 June 2012, the recast WEEE Directive entered into force on 13 August 2012, while Member States have until 14 February 2014 to transpose the new directive into national law. In brief, the recast WEEE Directive will see Member States subject to higher collection/recycling targets (i.e. 45% collection rate as of 2016 and 65% as of 2019) and a wider scope of measure covering essentially all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs.
On the heels of the recast RoHS and WEEE Directives, the EU’s new framework Directive for setting eco-design requirements for energy-related product (ErP) is now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product, or EuP, Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.
Moreover, REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.
Following the entry into force of the new Toy Safety Directive (Directive 2009/48/EC) on 20 July 2011, the Official Journal of the EU published on 11 August 2011 references to two important safety standards concerning electric toys (EN 62115:2005 and its amendment EN 62115:2005/A2:2011) and two previous standards on the mechanical and physical properties of toys and a standard on the flammability of toys.
Hong Kong's Trade with Spain 
Hong Kong’s total exports to Spain decreased by 1% to US$1.6 billion in the first eleven months of 2017, after decreasing by 7% to US$1.8 billion in 2016. Major export items in January-November 2017 included telecommunications equipment & parts (shared 40% of the total), computers (6%), watches and clocks (5%), electrical apparatus for electrical circuits (5%), articles of apparel, of textile fabrics (5%), toys, games & sporting goods (4%), jewellery (3%) and travel goods & handbags (3%).
On the other hand, Hong Kong’s imports from the Spain grew by 7% to US$917 million in the first eleven months of 2017, after increasing by 10% to US$939 million in 2016. Major import items in January-November 2017 included fresh, chilled or frozen meat & edible meat offal (shared 14% of the total), perfumery, cosmetics or toilet preparations (excluding soaps) (8%), watches and clocks (7%), medicaments (including veterinary medicaments) (6%), women’s or girls’ wear of textile fabrics, not knitted (5%), passenger motor cars (4%), telecommunications equipment & parts (4%), prepared or preserved meat and edible meat offal (3%), travel goods & handbags (3%), articles of apparel, of textile fabrics (3%) and footwear (3%).
Spain’s Involvement in the Hong Kong Economy
Spain only has limited investment in Hong Kong. As of June 2017, there were 10 Spanish companies with regional headquarters in the territory, while another 18 had regional offices. Nevertheless, it is estimated that there are about a hundred Spanish companies in Hong Kong. They include Inditex and El Corte Ingles (trading/sourcing), Loewe, Lladro, Mango, Orbea, Orca, Roca and Zara (retailing), BBVA, Banco Atlantico and Banco Popular Espanol (banking and finance), KOKONUZZ (design and brand development) and FC Barcelona (football club).
Reflecting Spanish widespread interests locally, there were about 240 Spanish nationals resided in Hong Kong as at the end of 2017.
 Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.