Hong Kong 2006 - Commerce and Industry

The HKSAR is a founding member of the World Trade Organisation (WTO). Its separate membership reflects Hong Kong's high degree of 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 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 open economy, 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 the multilateral rules-based trading system so that it remains an effective framework to promote trade expansion and liberalisation, as well as to protect the HKSAR 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. To demonstrate its commitment as a constructive and responsible WTO member, HKSAR hosted the WTO Sixth Ministerial Conference in December 2005. The successful conclusion of the conference provided a launching pad for the multilateral trade negotiations to enter the final phase in 2006 by outlining concrete timelines and the intensified plurilateral sectoral mode of negotiations. However, negotiations gained no further progress as different positions of major players persisted. In July 2006, WTO members agreed to suspend the negotiations. During the suspension, HKSAR played an active role in pushing for the resumption of the talks. After quiet diplomacy for more than four months, negotiations on technical work were resumed in November 2006.

As an important services, financial and trading centre as well as an integral part of the Asia-Pacific economy, Hong Kong continued to play an active role in enhancing regional economic cooperation. In 2006, some 84 per cent of Hong Kong's external trade was conducted with the other 20 member economies of Asia-Pacific Economic Cooperation (APEC). Hong Kong participates as a full and separate member in APEC and Pacific Economic Cooperation Council (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 Hong Kong at the 14th APEC Economic Leaders' Meeting held in Hanoi. The meeting was preceded by the 18th APEC Ministerial Meeting, where Hong Kong was represented by the Secretary for Commerce, Industry and Technology.

APEC pursues its goal of free and open trade and investment by 2010 for industrialised economies and 2020 for developing economies through work in trade and investment liberalisation, trade and investment facilitation, and economic and technical cooperation. Hong Kong participates actively in all three areas. It has been a Vice-Chair of APEC's Committee on Trade and Investment (CTI) since 1996, and Vice-Chair of APEC's Economic Committee since 2001.

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 the HKSAR's participation in and input to the PECC process, continues to play an active role in PECC's various activities.

Hong Kong is an observer on the Trade Committee and the Committee on Financial Markets of the Paris-based Organisation for Economic Cooperation and Development (OECD), which are important forums 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 Government is committed to the primacy of the multilateral trading system under the WTO. That notwithstanding, in response to new trends in world trade, the Government will seek to enter into more economic and trade arrangements with trading partners so long as they are in Hong Kong's interests, consistent with WTO provisions, contributive to multilateral trade liberalisation, and can deliver better access to overseas markets under more favourable conditions for Hong Kong goods and services.

The Central People's Government (CPG) and the HKSAR Government signed the Supplement III to the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) on June 27, 2006.

On trade in goods, the Mainland has applied zero tariff to all imported goods of Hong Kong origin since January 1, 2006, upon application by local manufacturers and upon the CEPA rules of origin (ROOs) being agreed and met. With the two sides reaching agreement on the CEPA ROOs for more products in 2006, a cumulative total of over 1 400 products can enjoy zero tariff under CEPA from January 2007. For trade in services, on the basis of the preferential market access offered to Hong Kong service suppliers in 27 services areas², Supplement III to CEPA introduced a total of 15 new liberalisation measures spreading across 10 of the areas³. These new liberalisation measures took effect from January 1, 2007 allowing Hong Kong service suppliers to enjoy preferential access to the Mainland market beyond China's WTO commitments. The progressive liberalisation of trade and investment measures under CEPA continues to provide impetus to the development of the Hong Kong economy and the economic integration between the two places.

The Mainland's rapid economic and trade growth has helped boost Hong Kong's external trade and intermediary services. In addition, the various preferential treatments under CEPA also enhance the attractiveness of Hong Kong to overseas investors.

The Government is committed to helping the business community tap into the Mainland market, with emphasis on the opportunities brought about 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 Offices in the Mainland 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 15 economies: Australia, Austria, Belgium/Luxembourg, Denmark, France, Germany, Italy, Japan, Republic of Korea, the Netherlands, New Zealand, Sweden, Switzerland, Thailand and the United Kingdom. A primary objective of these agreements is to assure overseas investors of the stable investment environment in Hong Kong.

The global elimination of textiles quotas since January 1, 2005 has helped Hong Kong's import and export trade in textiles by creating an environment that encourages it to continue to leverage its expertise and immense potential to develop into a world-class logistics and sourcing hub for textiles. At the same time, Hong Kong continues to maintain highly effective origin control measures to prevent abuse and to safeguard the interest of Hong Kong's textiles trade.

At the international level, Hong Kong, along with other WTO members and the International Textiles and Clothing Bureau (of which Hong Kong is a member), continues to monitor closely the global textiles trade to ensure that it is fully and truly liberalised, and that it comes under the same multilateral trading discipline of the WTO as other sectors.

Hong Kong also cooperates with its trading partners to combat illegal transhipment of textiles. In 2006, Hong Kong Customs officers conducted another round of joint factory observation visit in conjunction with US Customs representatives to promote understanding of Hong Kong's anti-transhipment efforts. Such visits are not acts of law enforcement.

The Customs and Excise Department carried out 74 845 factory and consignment inspections and 922 investigations during the year to combat false declarations about the origin and value of goods and illegal transhipment of textiles. The department also conducted 1 022 'blitz' check operations on textile consignments at various import and export control points. It successfully prosecuted 560 companies and individual offenders, resulting in the imposition of fines amounting to $12 million. It operates a monetary reward scheme to elicit information on textiles origin fraud.

The Trade and Industry Department maintains a comprehensive import and export control licensing system to monitor the flows of strategic commodities through Hong Kong. The system ensures that while Hong Kong has access to advanced products and technologies to sustain its economic development, it is not used as a conduit for the illicit diversion of strategic commodities. The department also administers a permit system to monitor activities involving sensitive chemicals as required by the Chemical Weapons Convention. 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.

In 2006, the Customs and Excise Department investigated 225 cases of unlicensed import and export of strategic commodities and prosecuted 52 offenders, resulting in fines amounting to $1.8 million. Goods valued at $6.9 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.

The department also maintains close liaison with the WCO Regional Intelligence Liaison Office (RILO) in Beijing and has seconded an officer to the RILO Beijing Office to enhance the regional intelligence network in the Asia-Pacific Region.

In December 2006, Hong Kong conducted the WCO Diagnostic Mission, a strategic assessment of Hong Kong's capability in reforming and modernising its customs service to provide advice on the implementation of the WCO SAFE Framework of Standards to Secure and Facilitate Global Trade.

The department has concluded a number of bilateral Customs Cooperative Arrangement (CCA) with other customs administrations and maintains a good working relationship and close liaison with the customs attachés and representatives of other law enforcement agencies in Hong Kong. Regular bilateral meetings are held with Mainland and other customs administrations to build up a strong network for exchanging intelligence of transnational customs crimes.