Ten countries from Eastern Europe and the Mediterranean will formally join the European Union (EU) on May 1st, forming an expanded EU market that will have spin-offs for Hong Kong, said a report released by Hong Kong Trade Development Council (TDC) on Thursday (Apr 29th).

The report said the enlarged club offers many opportunities, not least of which the chance to penetrate a larger EU market, whose new members will be observing EU rules and standards with which Hong Kong is familiar.

Exporting to Eastern Europe has been cumbersome and costly for Hong Kong companies because the 10 countries have regulations and standards of their own, different from those adopted by the EU, so that goods accepted by the EU may not be accepted by them.

After May 1, Hong Kong will be able to ship its products to all these markets under a common set of rules and regulations.

The new members, including Cyprus, the Czech Republic, Estonia, Hungary Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia, will boost the present EU membership to 25, establishing a trade bloc that will have a population of 455 million people and a combined GDP of over 9 trillion US dollars, according to the report.

A study carried out by TDC also found that demand in the 10 Eastern European countries for Hong Kong-type industrial and consumer goods had been soaring significantly in the run-up to their accession to the EU.

The report said industrial activities in those countries have increased, due to strong flows of foreign direct investment (FDI) into the manufacturing sector.

Rising incomes and brighter job prospects have stimulated consumer spending, which, in turn, has triggered a rise in imports, the report said.

TDC's assistant chief economist Daniel Poon cited Poland and Hungary as examples of Eastern European countries whose imports have risen dramatically.

Poland's imports grew from 49 billion US dollars in 2000 to 68 billion US dollars in 2003, while Hungary's rose from 32 billion US dollars to 48 billion US dollars during the same period.

The goods comprised mainly industrial materials used in manufacturing and consumer products, a substantial portion of which are Hong Kong-type products.

Starting from May 1, the new EU members will have to bring their import tariffs into line with those of the Union. This means Hong Kong companies will enjoy lower import tax on a wide range of consumer goods such as jewelry, consumer electronics, watches, clocks, toys, games and sports goods.

The tariff cuts also apply to industrial products such as plastic, tools, electric motors, machine and machine parts, electronic products and vehicles.

The report suggested that Hong Kong companies consider using strategically located countries such as Poland, Hungary and the Czech Republic as centers from which to channel their goods into Eastern Europe. They could cooperate with well-established regional distributors and specialized agents there for distribution.

Editor: Wing