Merchandise Trade

• Portugal joined the World Trade Organization in January 1995, having been a member of the General Agreement on Tariffs and Trade since 1962. Portugal is also a member state of the European Union (EU) and incorporates EU regulatory norms. As a eurozone member, it has adopted the euro as its legal tender.
   
• As Portugal is an EU member, a common tariff applies to the import of goods across the external borders of the EU. The EU has an overall simple tariff of 5.1%. Once goods are cleared by customs authorities upon entry into any EU member state, these imported goods can move freely among member states without any additional customs procedures. The EU updated its trade policy (and, by extension, its import tariffs, customs, duties and procedures) in 2017 and 2018. The customs duties' rates applied in Portugal vary according to the origin of the goods. There are several origin agreements where the importation of goods from certain countries are exempt from customs duties or are subject to reduced rates.
   
• The EU is party to some 50 free trade agreements and access to other markets is mediated through those agreements. The EU's scheme on a generalised system of preferences entered into effect on January 1, 2014. Under the scheme, tariff preferences have been 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 Mainland China remains a beneficiary, many of its exports – such as toys, electrical equipment, footwear, textiles, wooden articles, watches and clocks – have already been graduated from preferential treatment. Hong Kong has been fully excluded from the EU's generalised scheme of preferences since May 1, 1998.
   
• In 2018 the EU modernised its trade defence instruments in response to EU states wanting to shield EU producers from damage caused by unfair competition and to ensure a level playing field for businesses. Anti-dumping and anti-subsidy regulations have been amended to better respond to unfair trade practices and to furnish Europe's trade defence instruments with more transparency, quicker procedures and more effective enforcement. In exceptional cases, such as in the presence of distortions in the cost of raw materials, the EU will be able to impose higher duties through the limited suspension of the lesser duty rule.
   
• The EU has imposed various anti-dumping measures on a wide range of products, predominantly in the areas of textiles, machine parts, steel, iron and machinery, and certain goods coming from Mainland China and a few other Asian nations in order to protect domestic industries. Currently, a number of products originating from Mainland China are subject to the 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 and regional exporters. In November 2016, the European Commission (EC) imposed a provisional anti-dumping duty on imports of some primary and semi-processed metals from Mainland China. The rate of duty is between 43.5% and 81.1% of the net free-at-union-frontier price before duty, depending on the company. As of April 2020, the EU is not applying any anti-dumping measures on imports from Hong Kong.
   
• In 2016, the EC introduced an import licensing regime for steel products exceeding 2.5 tonnes. The regulation will be active until May 15, 2020.

Sources: WTO – Trade Policy Review, European Commission, Fitch Solutions

Major Multinational Trade Agreements

Active

1. The EU Common Market: The transfer of capital, goods, services and labour between member nations enjoy free movement. The common market extends to the 27 member nations of the EU, namely: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. As Portugal's main trade partners are in the EU, the absence of customs charges with member countries greatly enhances its trade volumes.

2. European Economic Area (EEA)-European Free Trade Association: This economic integration agreement entered into force on January 1, 1994. The EEA unites EU member states and European Free Trade Association states (Iceland, Liechtenstein, Norway and Switzerland) to form an internal market governed by the same basic rules. These rules aim to enable goods, services, capital and persons to move freely in the EEA in an open and competitive environment, a concept referred to as the four freedoms. While it enhances trade flows between these countries and Portugal, only Switzerland is a fairly major trading partner.
    
3. EU-Turkey Customs Union: The EU and Turkey are linked by a customs union agreement that entered into force on January 1, 1996. Turkey has been a candidate country to join the EU since 1999 and is a member of the Euro-Mediterranean Partnership. The customs union with the EU provides Turkey with tariff-free access to the European market, benefitting both exporters and importers. Turkey is the EU's fourth largest export market and its fifth largest provider of imports. The EU is by far Turkey's number one import and export partner. Turkey's exports to the EU are mostly machinery and transport equipment, followed by manufactured goods. At present, the customs union agreement covers all industrial goods but does not address agriculture (except processed agricultural products), services or public procurement. Bilateral trade concessions apply to agricultural, coal and steel products. In December 2016, the European Commission (EC) proposed the modernisation of the customs union and to further extend bilateral trade relations to areas such as services, public procurement and sustainable development.
    
4. EU-Japan Economic Partnership Agreement (EPA): In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1.0 billion annually. According to the EC, the EU-Japan EPA will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and came into force on February 1, 2019, after the EU Parliament ratified the agreement in December 2018. The total trade volume of goods and services between the EU and Japan is an estimated EUR86.0 billion. The key parts of the agreement will cut duties on a wide range of agricultural products while seeking to open up services markets – particularly financial services, e-commerce, telecommunications and transport. Japan is the EU's second biggest trading partner in Asia after Mainland China. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments, and electrical machinery.

5. EU-Southern African Development Community (SADC) EPA (Botswana, Lesotho, Mozambique, Namibia, South Africa and eSwatini): An agreement between EU and SADC delegations was reached in 2016 and is fully operational for SADC members following the ratification of the agreement by Mozambique. The remaining six members of SADC included in the deal (the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe) are seeking economic partnership agreements with the EU as part of other trading blocs – such as with East or Central African communities.

Provisionally Active

The Comprehensive Economic and Trade Agreement (CETA): The CETA is an agreement between the EU and Canada. CETA was signed in October 2016 and ratified by the Canadian House of Commons and EU Parliament in February 2017. However, the agreement has not been ratified by every European state and has only provisionally entered into force. CETA is expected to strengthen trade ties between the two regions, having come into effect in 2016. Some 98% of trade between Canada and the EU will be duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

Ratification Pending

1. EU-Central America Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize and the Dominican Republic): An agreement between the parties was reached in 2012 and is awaiting ratification (30 of the 34 parties have ratified the agreement as of April 2020). The agreement has been provisionally applied since 2013.

2. EU-Mercosur: The EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay) signed a trade deal on June 28, 2019, after 20 years of negotiations. The trade agreement for goods and services will cover nearly 25% of global GDP and almost 800 million people. The deal is expected to cut duties on EU exports to Mercosur by EUR4.0 billion annually and eliminate tariffs on 93% of Mercosur's exports to the EU and 91% of EU exports to Mercosur states. The deal will also include access to public procurement contracts. Mercosur states will greatly benefit from increased access to the EU for agricultural goods, which has resulted in opposition to the deal by European farmers. European firms, especially those in the manufacturing and industrial sector, will have an advantage over other competitors after the removal of high tariffs.
    
3. EU-Singapore FTA (EUSFTA): On February 13, 2019, the European Parliament passed the agreement, which would see the creation of the EUSFTA. However, before the agreement is implemented, all the states involved will need to ratify the agreement through their individual legislatures; in this case, the FTA may become provisionally active along the lines of states that have already ratified the agreement.
    
4. EU-Vietnam Free Trade Agreement (FTA): In July 2018, the EU and Vietnam agreed on final texts for the EU-Vietnam FTA and the EU-Vietnam Investment Protection Agreement. The EU describes the agreement as the most ambitious it has ever concluded with a developing country, expecting it to increase EU exports to Vietnam by around 29% and Vietnam's exports to the EU by around 18%. In February 2020, members of the European Parliament approved the FTA, but the Investment Promotion Agreement is still awaiting approval. The agreement still needs to be formally concluded.

Under Negotiation

1. EU-Australia: The EU, Australia's second largest trade partner, has launched negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48.0 billion in 2017, and bilateral trade in services added another EUR27.0 billion. The negotiations aim to remove trade barriers, streamline standards and put European companies exporting to, or doing business in, Australia on equal footing with those from countries that have signed up to the Trans-Pacific Partnership or other trade agreements with Australia. The Council of the EU authorised opening negotiations for a trade agreement between the EU and Australia on May 22, 2018.
    
2. EU-United States Transatlantic Trade and Investment Partnership (TTIP): This agreement was expected to increase trade in goods and services, but talks were suspended at the end of 2016. In January 2019, the EC published its draft negotiating directives, which include a trade agreement focused on the removal of tariffs on industrial goods, excluding agriculture. On April 15, 2019, EU member states gave the EC their approval to start formal negotiations. The negotiating directives for the TTIP are no longer relevant.

Sources: WTO Regional Trade Agreements Database, Fitch Solutions

Foreign Direct Investment

• Value Added Tax: 6-23%
• Corporate Income Tax: 21%

Source: Tax and Customs Authority

Work Permit

EU member citizens do not require a work permit, but their employer must inform the job office about their employment. Citizens of the European Economic Area (with EU member states, Iceland, Norway and Lichtenstein) and Switzerland do not require a visa to enter, reside and work in the country.

No work permit is needed by foreigners from outside the EU if they have a permanent residence or family reunion permit, have been granted asylum, study in the country or have blue or green cards.

Obtaining Foreign Worker Permits

Individuals from non-EU countries require residence and work permits. The procedure to be granted a work permit includes a review of the local job market to ensure that there is no Portuguese or EU job seeker available to fulfil the position. Employers must first apply for a permit to hire foreign workers. The vacant position must be reported to the local district Labour Office and cannot be changed at a later stage to fit the profile of a potential employee. The candidate must then apply for a work permit. The government issues the permit for a maximum of two years, which can be repeatedly prolonged, but always for a maximum of two years, and may be renewed as many times as needed. The permit process takes an average of one month.

Blue Card

Intended for the stay of a highly qualified employee. A foreigner holding a blue card may reside in the country and work in the job for which the blue card was issued, or change that job under the conditions defined. High qualification means a duly completed university education or higher professional education that has lasted for at least three years. The blue card is issued with the term of validity three months longer than the term for which the employment contract has been concluded, but for the maximum period of two years. The blue card can be extended. One of the conditions for issuing the blue card is a wage criterion – the employment contract must contain gross monthly or yearly wage at least at the rate of 1.5 multiple of the gross average annual wage.

Sources: Government websites, European Commission, Fitch Solutions

Sovereign Credit Ratings

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

Competitiveness and Efficiency Indicators

Sources: World Bank, IMD, Transparency International

Fitch Solutions Risk Indices

Source: Fitch Solutions
Date last reviewed: April 16, 2020

Hong Kong’s Trade with Portugal

Export Commodity	Commodity Detail	Value (US$ million)
Commodity 1	Telecommunications and sound recording and reproducing apparatus and equipment	122.3
Commodity 2	Electrical machinery, apparatus and appliances, and electrical parts thereof	113.4
Commodity 3	Miscellaneous manufactured articles	17.8
Commodity 4	Office machines and automatic data processing machines	15.3
Commodity 5	Professional, scientific and controlling instruments and apparatus	13.8

Import Commodity	Commodity Detail	Value (US$ million)
Commodity 1	Photographic apparatus, equipment and supplies, and optical goods; watches and clocks	44.9
Commodity 2	Electrical machinery, apparatus and appliances, and electrical parts thereof	19.2
Commodity 3	Articles of apparel and clothing accessories	9.4
Commodity 4	Miscellaneous manufactured articles	8.9
Commodity 5	Textile yarn, fabrics, made-up articles and related products	7.0