Hong Kong 2003
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External Commercial Relations

Regional Trade Agreements

Notwithstanding the Government's commitment to the primacy of the multilateral trading system under the WTO, it is accepted that free trade agreements (FTAs) may contribute to multilateral trade liberalisation if they are fully WTO-consistent. The Government is, therefore, prepared to consider negotiating FTAs with trading partners so long as these would be in Hong Kong's interests and contribute to multilateral trade liberalisation.

Mainland and Hong Kong Closer Economic Partnership Arrangement

The HKSAR Government and the Central People's Government (CPG) signed the main text of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) on June 29, 2003, and concluded the six Annexes on September 29, 2003. Under CEPA, the Mainland has agreed to eliminate import tariff for 374 Hong Kong products under its 2004 tariff codes and to give preferential market access to Hong Kong service suppliers in 18 services sectors2. Both sides have also agreed to enhance cooperation in trade and investment facilitation. CEPA came into full operation on January 1, 2004. It adopts a building block approach and provides a mechanism for further liberalisation measures. A Joint Steering Committee, jointly led by Financial Secretary of the HKSAR Government and the Vice Minister of Commerce of the CPG, is responsible for overall coordination of CEPA.

The establishment of the CEPA under the framework of the WTO will further promote trade and investment flows, as well as exchanges of talent, capital and technology, between Hong Kong and the Mainland, which would be mutually beneficial and conducive to sustained economic growth. Since the announcement of CEPA, the Government has launched a strong awareness and publicity campaign to promote the business opportunities brought about by CEPA to local, foreign and Mainland investors.

Hong Kong and New Zealand Closer Economic Partnership Agreement

Negotiations with New Zealand on a free trade agreement continued. The negotiations encompassed a wide-ranging scope with emphasis on trade and investment liberalisation and facilitation. The two sides have achieved good progress on many issues and are committed to concluding the negotiations as soon as possible to achieve a high-quality agreement that is beneficial to both economies.

Hong Kong's Participation in the WTO

The HKSAR is a founding member of the WTO. Its separate membership reflects Hong Kong's autonomy in the conduct of its external commercial relations, which is guaranteed under the Basic Law.

The WTO provides a fair, predictable and rules-based multilateral trading system for trade in goods, services and trade-related intellectual property rights. It promotes the liberalisation of international trade and serves as a forum for multilateral trade negotiations and dispute settlement among its members. Active participation in the WTO's multilateral trading system is the cornerstone of the HKSAR's external trade policy.

As a small and totally open economy, the HKSAR's participation in the WTO is guided by two objectives: firstly, to sustain the momentum of trade liberalisation, especially in areas of interest to the HKSAR, such as tariffs and services; secondly, to strengthen and update the multilateral rule-based trading system so that it remains an effective framework to promote trade expansion and liberalisation, as well as to protect Hong Kong against any arbitrary and discriminatory actions taken by its trading partners.

The HKSAR participates actively in the new Round of multilateral trade negotiations launched at the WTO's Fourth Ministerial Conference in Doha, Qatar, in November 2001. Its priority in this round of trade negotiations is to seek greater market access for its services sectors and industrial goods.

In September 2003, the HKSAR took part in the Fifth Ministerial Conference held in Cancun, Mexico, which aimed to take stock of the progresss of negotiations and give further instructions to take them forward. The conference ended without consensus on the direction of the negotiations due to members' divergent positions on some of the key issues. However, by the end of 2003, WTO members had already demonstrated a strong sense of re-engagement for continuous negotiations. The new Round of negotiations is scheduled for completion by January 1, 2005. Hong Kong's business community will benefit from the positive outcome of further multilateral trade negotiations.

As a further demonstration of its commitment to the WTO, the HKSAR has offered to host the Sixth WTO Ministerial Conference. The offer was unanimously accepted by the WTO members in October 2003 although the date has yet to be decided. Besides enhancing Hong Kong's involvement in all key negotiations, hosting of the conference will help raise its international profile, induce considerable economic benefits in the form of tourist receipts, and attract future overseas tourists, international conferences and other business opportunities.

Regional Economic Cooperation

As an integral part of the Asia-Pacific economy and an important services, financial and trading centre, Hong Kong continued to play an active role in enhancing regional economic cooperation. Its economic links with the region remained strong. In 2003, some 83 per cent of Hong Kong's total external trade was conducted with the other 20 member economies of APEC. Hong Kong participates as a full and separate member in APEC and PECC under the name Hong Kong, China.

APEC is a regional forum set up in 1989 for high-level government-to-government dialogue and cooperation on trade and economic issues. Hong Kong joined the forum in 1991. In October, the Chief Executive represented the HKSAR at the 11th APEC Economic Leaders Meeting held in Bangkok, Thailand. The meeting was preceded by the 15th APEC Ministerial Meeting, at which the Secretary for Commerce, Industry and Technology represented the HKSAR.

APEC pursues its goal of free and open trade and investment by 2010 for industrialised economies and 2020 for developing economies through work in three areas — trade and investment liberalisation, trade and investment facilitation, and economic and technical cooperation. Hong Kong participates actively in all three. It has been a Vice-Chair of APEC's Committee on Trade and Investment (CTI) since 1996.

Thailand, as the APEC Chair for 2003, has set the overall theme as 'A World of Differences: Partnership for the Future', with five sub-themes: knowledge-based economy for all; promoting human security; financial architecture for a world of differences; new growth enterprises: SMEs and micro business; and act on development pledge. Hong Kong had its 2002 Individual Action Plan reviewed by other APEC members in August and was commended for its continued openness and commitment to free and open trade and investment.

PECC, founded in 1980, is a non-governmental regional forum comprising government officials, business leaders and academics who work in their personal capacity on practical policy issues to enhance trade, investment and economic development in the Pacific region. Hong Kong joined this forum in May 1991. The Hong Kong Committee for Pacific Economic Cooperation, established in March 1990 to advise on and coordinate Hong Kong's participation in and input to the PECC process, continues to play an active role in PECC's various fora, task forces and project groups.

Observer Role in the OECD

The HKSAR is an observer on the Trade Committee and the Committee on Financial Markets of the Paris-based OECD, which are important fora for discussions on policy matters in respect of trade and financial services. Ideas introduced in these committees are often followed up in other international organisations such as the WTO and eventually translated into binding multilateral agreements or codes.

Liaison with the Mainland

China formally acceded to the WTO on December 11, 2001. It is generally expected that China's broad market-opening commitments for accession to the WTO, as well as the enhanced accessibility to overseas markets as provided for under the WTO agreements, will boost the Mainland's overall economic growth. The Mainland is Hong Kong's largest trading partner and there is a strong economic link between the two places. The Mainland's accelerated economic growth is expected to usher in enormous business opportunities for Hong Kong. The anticipated surge in trade flow and the improvement of the investment environment in the Mainland brought about by China's accession to the WTO should help boost Hong Kong's external trade and intermediary services. In addition, CEPA will open up many business opportunities in the Mainland for Hong Kong businessmen, and enhance the attractiveness of Hong Kong to overseas investors.

The Government is committed to facilitating businessmen's efforts in tapping the Mainland market, particularly the opportunities brought about by China's accession to the WTO and CEPA. It maintains close contact with the Mainland authorities at different levels through various government bureaux and departments, the Beijing Office of the HKSAR Government, the Hong Kong Economic and Trade Office in Guangdong as well as quasi-government bodies like the Hong Kong Trade Development Council (TDC). Regular high-level communication is also achieved through mechanisms such as the Hong Kong/Guangdong Cooperation Joint Conference, the Hong Kong/Shanghai Economic and Trade Cooperation Conference and the CEPA Joint Steering Committee.

Trade in Textiles

Hong Kong's textiles exports to the European Union, Canada and the United States are subject to certain quantitative restrictions. In accordance with the WTO Agreement on Textiles and Clothing (ATC), these quantitative restrictions are being phased out over 10 years, in four stages from January of 1995, 1998, 2002 and 2005, respectively. All quantitative restrictions will have been eliminated from January 1, 2005. Hong Kong has been closely monitoring the implementation of the ATC and the operation of the Textiles Monitoring Body, the ATC's supervisory body. Through cooperation with the International Textiles and Clothing Bureau (of which Hong Kong, China was the Chairman from January 1999 until September 2002), Hong Kong and a group of developing country exporters of textiles have been working together to ensure that the liberalisation process under the ATC is on course and to explore possibilities for further liberalisation.

Hong Kong continues to cooperate with its trading partners in combating illegal transhipment of textiles. Among other things, to promote understanding of Hong Kong's anti-transhipment efforts, Hong Kong Customs officers conduct joint factory observation visits in conjunction with US Customs representatives. Such visits are not acts of law enforcement. In 2003, one round of a joint factory observation visit was conducted.

To combat false declarations of origin and values of goods and illegal transhipment of textiles, the Customs and Excise Department in 2003 carried out 96 063 factory and consignment inspections and 1 284 investigations. The department also conducted 976 'blitz' check operations on textile consignments at various import and export control points. It successfully prosecuted 820 offenders, resulting in the imposition of fines amounting to $18.87 million. It operates a monetary reward scheme to elicit information on textiles origin fraud.

Trade in Strategic Commodities

To ensure that Hong Kong has continued access to advanced products and technologies to sustain its economic development and that Hong Kong will not be used as a conduit for illicit diversion of strategic commodities, the Government maintains a comprehensive import and export control system to monitor the flows of strategic commodities through Hong Kong. The licensing control system for strategic commodities is administered by the Trade and Industry Department with the support of vigorous enforcement action by the Customs and Excise Department. Hong Kong maintains close cooperation with its trading partners to keep itself abreast of the developments in the international arena on strategic trade control matters, and to make sure that its control arrangement is complementary to those of its trading partners.

The Chemical Weapons (Convention) Ordinance, which was passed by the Legislative Council in July, enables the Government to fully implement the Chemical Weapons Convention in Hong Kong. It underlines Hong Kong's commitment to internationally agreed arrangements on the ban of chemical weapons and on the monitoring of activities involving sensitive chemicals. It also helps enhance Hong Kong's international reputation in the area of strategic trade control, and helps ensure its continued access to a full range of chemicals needed for local industrial, medical, research and trading purposes.

In 2003, the Customs and Excise Department investigated 251 cases of unlicensed import and export of strategic commodities and prosecuted 51 offenders, resulting in fines amounting to $2.28 million. Goods valued at $2.78 million were seized and confiscated.

Bilateral Investment Promotion and Protection Agreements

Hong Kong has bilateral investment promotion and protection agreements with 14 economies: Australia, Austria, Belgium/Luxembourg, Denmark, France, Germany, Italy, Japan, Republic of Korea, the Netherlands, New Zealand, Sweden, Switzerland and the United Kingdom. A primary objective of these agreements is to assure overseas investors of the stable investment environment in Hong Kong.

Customs Cooperation

Hong Kong Customs plays an active role in the work of the World Customs Organisation (WCO), which aims to enhance the effectiveness and efficiency of customs administrations and facilitate trade by achieving harmony and uniformity of customs procedures among its members and the Sub-committee on Customs Procedures (SCCP) of APEC, which is tasked to simplify and harmonise customs procedures to facilitate cross-border trade in the Asia-Pacific region. As at December, the WCO has a world-wide membership of 162 Customs administrations, and APEC has 21 member economies.

In the WCO forum, the department works closely with the WCO Vice-Chairman representing the Asia-Pacific region on regional matters, and is a co-coordinator of regional activities on enforcement programmes in the areas of security, commercial fraud, smuggling and intelligence, customs-business partnership and integrity.

In the APEC SCCP forum, the department works closely with member economies on trade facilitation work, and is a co-coordinator of SCCP Collective Action Plans on Public Availability of Information, Customs Integrity and Customs-Business Partnership.

To promote counter-terrorism work, the department participates actively in the WCO Task Force on Security and Facilitation of the International Trade Supply Chain and the APEC Counter-Terrorism Task Force.

The department maintains a close liaison with the WCO Regional Intelligence Liaison Office (RILO) in Tokyo. Since Tokyo started hosting the RILO in 1999, the department has seconded two officers to support intelligence analysis and coordination among members in the Asia-Pacific region.

The RILO office will be relocated to Beijing with effect from 2004. The department will continue to provide full support to the project by seconding an officer to the Beijing Office in order to enhance the regional intelligence network by exchanging timely intelligence and offering investigative assistance to regional members.

Recognising the importance of international cooperation with other customs administrations and law enforcement agencies in combating transnational customs crimes, the department maintains a good working relationship and close liaison with the customs attachés and the representatives of other law enforcement agencies stationed in 12 consular missions in Hong Kong. Through regular bilateral meetings, the department has enhanced mutual cooperation with the Mainland and other customs administrations in building up a strong network for combating transnational customs crimes.

Container Security Initiative

In the aftermath of the September 11, 2001 incident, the US Bureau of Customs and Border Protection proposed the Container Security Initiative (CSI) to address the perceived risks of terrorist attacks associated with ocean-going containers destined for the United States. Under the CSI, the customs authority of a participating foreign port will work with the US Customs officers stationed abroad to identify containers that carry a high risk of being exploited for terrorist attacks. The customs authority of the participating port will scan or inspect the identified containers before the containers depart the port for the United States. Following careful consideration and discussion with the local exporting and shipping communities, Hong Kong agreed to join the CSI, and the Hong Kong and US Customs signed a 'Declaration of Principles' on this in September 2002. Hong Kong's participation in the CSI would help ensure the smooth flow of US-bound cargo that originated from Hong Kong, and enhance the security of the global maritime trading system. Both are vital to Hong Kong as a major trading entity and as the world's busiest container port. A CSI pilot scheme was launched in Hong Kong on May 12, 2003.


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