HONG KONG 2004 - Commerce and Industry

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: first, to sustain the momentum of trade liberalisation, especially in areas of interest to the HKSAR, such as tariffs and services; and second, 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 current round of multilateral trade negotiations launched at the WTO's Fourth Ministerial Conference in Doha, Qatar, in November 2001. Its priority in this round is to seek greater market access for its services sectors and industrial goods. Though the Fifth Ministerial Conference held in Cancun, Mexico, in September 2003 ended without consensus on the direction of the negotiations due to members' divergent positions on some key issues, the negotiations entered a new phase at the meeting of the WTO General Council in August 2004 when members adopted a framework for major negotiating areas including agriculture and industrial goods, and agreed to launch negotiations on trade facilitation. The closing date of the negotiations was also extended to an open deadline. Hong Kong's business community will benefit from further liberalisation under the multilateral trade negotiations.

As a further demonstration of its commitment to the WTO, the HKSAR will host the Sixth WTO Ministerial Conference on December 13-18, 2005. A Coordination Office has been set up under the Trade and Industry Department to oversee the logistical preparations. Besides enhancing Hong Kong's involvement in all key negotiations, hosting 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.

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 2004, some 83 per cent of Hong Kong's 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 of Hong Kong, China.

APEC is a regional forum for high-level government-to-government dialogue and cooperation on trade and economic issues. In November, the Chief Executive represented the HKSAR at the 12th APEC Economic Leaders Meeting held in Santiago, Chile. The meeting was preceded by the 16th 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.

Chile, as the APEC Chair for 2004, set the overall theme as 'One Community, Our Future', with seven sub-themes: a commitment to development through trade; sharing benefits through better practices; skills for the coming challenges; opportunities for entrepreneurial growth; growth and stability: key for APEC integration; commitment to sustainable growth; and experiencing our diversity.

PECC 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. The Hong Kong Committee for Pacific Economic Cooperation, which advises on and coordinates 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.

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.

The HKSAR Government remains, as always, committed to the primacy of the multilateral trading system under the WTO. That notwithstanding, the Government is open-minded about exploring free trade agreements (FTAs) with trading partners so long as they are in Hong Kong's interests, consistent with WTO provisions and contribute to multilateral trade liberalisation.

With implementation of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)² on January 1, 2004, the Mainland applied zero import tariff for goods of Hong Kong origin covered in 374 Mainland 2004 tariff codes. The Mainland has also given preferential market access to Hong Kong service suppliers in 18 services sectors³. In addition, the relevant professional and regulatory bodies of Hong Kong and the Mainland have concluded various agreements or arrangements on examinations or mutual recognition of professional qualifications⁴ to promote the exchange of talent between the two places. On trade and investment facilitation, working groups have been set up to discuss measures in seven areas of cooperation under CEPA. The Joint Steering Committee, led by the Financial Secretary of the HKSAR Government and the Vice Minister of Commerce of the Central People's Government (CPG), is responsible for overall coordination of CEPA.

CEPA adopts a building block approach and provides a mechanism for further liberalisation measures. To further broaden the coverage of CEPA, the CPG and the HKSAR Government have held a series of high level and senior official meetings since May 2004. The two sides signed the record of consultations on August 27, 2004 and the Supplement to CEPA (known as CEPA II) on October 27, 2004. Under CEPA II, the Mainland agreed to apply zero tariff to new products under 713 Mainland 2004 tariff codes, including goods currently being produced in Hong Kong (529 tariff codes) and planned to be produced (184 tariff codes). Products under existing productions will enjoy zero tariff from January 1, 2005, whereas those planned to be manufactured will enjoy zero tariff upon confirmation by both sides that they have come into production. The Mainland also agreed to broaden liberalisation in 11 service sectors⁵ already covered under CEPA and introduce liberalisation measures in eight new areas⁶.

The establishment and implementation of 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.

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 by 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 and 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 and the CEPA Joint Steering Committee.

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.

Over the years, exports of certain Hong Kong textile and clothing products to the European Union, Canada and the United States have been subject to quantitative restrictions. In accordance with the WTO Agreement on Textiles and Clothing (ATC), all such quantitative restrictions among members of the WTO (including Hong Kong) will be eliminated by January 1, 2005. Hong Kong's textiles exports will have quota-free access to world markets, including the traditionally restrained markets in Europe and North America. With the elimination of textiles quotas, Hong Kong's textile import and export arrangements will be suitably streamlined to facilitate trade while maintaining necessary controls to safeguard the interest of Hong Kong's textile trade. Hong Kong has been closely monitoring the implementation of the ATC and the operation of the Textiles Monitoring Body, the WTO's supervisory body of the ATC. Through cooperation with the International Textiles and Clothing Bureau (of which Hong Kong is a member), Hong Kong and a group of textile exporting developing countries 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 to combat illegal transhipment of textiles. Among other things and 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 2004, two rounds of joint factory observation visits were conducted.

To combat false declarations of origin and values of goods and illegal transhipment of textiles, the Customs and Excise Department in 2004 carried out 84 411 factory and consignment inspections and 1 507 investigations. The department also conducted 977 'blitz' check operations on textile consignments at various import and export control points. It successfully prosecuted 1 059 companies and individual offenders, resulting in the imposition of fines amounting to $26.94 million. It operates a monetary reward scheme to elicit information on textiles origin fraud.

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 abreast of 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 commenced operation in June, 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 2004, the Customs and Excise Department investigated 234 cases of unlicensed import and export of strategic commodities and prosecuted 57 offenders, resulting in fines amounting to $1.51 million. Goods valued at $1.92 million were confiscated.

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 had a worldwide membership of 164 Customs administrations; and APEC had 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 security, commercial fraud, smuggling and intelligence, customs-business partnership and integrity.

The department also maintains close liaison with the WCO Regional Intelligence Liaison Office (RILO), which was relocated from Tokyo to Beijing on January 1. The department continues to provide full support to the RILO by seconding an officer to the Beijing Office to enhance the regional intelligence network by exchanging timely intelligence and offering investigative assistance to members in the Asia-Pacific Region.

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.

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 representatives of other law enforcement agencies stationed in their 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.

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. 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' in September 2002. CSI became operational in Hong Kong on May 12, 2003. Hong Kong Customs cooperates with US Customs officers stationed in Hong Kong to identify containers that carry a high risk of being exploited for terrorist attacks for inspection by Hong Kong Customs. Hong Kong's participation in the CSI helps enhance the security of the global maritime trading system and facilitates the smooth flow of US-bound cargoes originating from Hong Kong.