WTO Trade Policy Review of Hong Kong, China

WTO-TPRStatement of the U.S. Representative

December 3, 2011

As Delivered

Thank you,Mr. Chairman. We welcome Permanent Representative, Mr. Martin Glass, and your delegation to the WTO’s sixth Trade Policy Review of Hong Kong, China. We appreciate the efforts of both the government of Hong Kong Special Administrative Region of the People’s Republic of China and the Secretariat in producing the reports circulated prior to this meeting. These reports provided comprehensive details on the developments in Hong Kong’s economic and trade policy since its previous review in 2006. We thank Hong Kong for its responses to our written questions, which we will examine carefully. Finally, we would like to thank the discussant, Ambassador Eduardo Muñoz Gómez, for his important insights, for facilitating these deliberations, and for helping to ensure that Hong Kong’s Trade Policy Review is comprehensive and productive.

The past four years since Hong Kong’s last Trade Policy Review have seen tremendous challenges to economies around the world, and Hong Kong’s has been no exception. The United States recognizes and commends Hong Kong for its unwavering commitment to open trade and investment during these challenging times. We value the Government’s assertion that the institutions and policies that served Hong Kong well in the past, such as the rule of law, an open trade policy, “and a level playing field for business, remain the bedrock” of Hong Kong’s prosperity. Hong Kong’s strong commitment to these policies has made its recovery possible and will serve Hong Kong well in the years to come. We further applaud the government for not adopting any protectionist measures in response to the global financial crisis.

In the two years following its last Trade Policy Review, Hong Kong achieved impressive real GDP growth of 7% in 2006 and 6.4% in 2007 before slowing to 2.2% in 2008. As the Secretariat’s report notes, Hong Kong is one of the most market-oriented and open economies in the world and, as such, is strongly influenced by global and regional economic conditions. Fortunately, as the world economy, and especially that of China, began to improve, Hong Kong’s economy rebounded strongly beginning in the second quarter of 2009 and has continued to perform well.

China’s economic growth has had and will continue to have a strong impact on Hong Kong’s own economic growth and development. Hong Kong’s economy has long been dominated by services industries: financial services, trading and logistics, tourism, and professional services currently account for roughly 55% of its GDP and almost half of its employment. As the Secretariat points out, Hong Kong’s challenge will be to maintain these services industries in the face of growing competition from China. Hong Kong will need to focus on its comparative advantages and adapt accordingly to meet this challenge. Similarly, growing economic ties between China and Chinese Taipei pose challenges for Hong Kong’s longtime role as an intermediary provider of financial services, trade, and logistics. The Secretariat’s report shows that Hong Kong has acted to meet the challenges posed by improved cross-strait relations by expanding Hong Kong International Airport’s cargo handling capacity and making available land nearby for the development of a logistics cluster.

The Closer Economic Partnership Arrangement with China (CEPA), originally signed in 2003, recognizes these trends and demonstrates Hong Kong’s efforts to capitalize on its relationship with China. As noted by the Secretariat, the depth and coverage of liberalizing measures have been extended for both goods and services in the years since Hong Kong’s last Trade Policy Review. The United States takes note of this work and underscores the importance of transparency and consistency with WTO obligations with regard to bilateral and regional trade agreements for all WTO members.

The United States has a strong trade and investment relationship with Hong Kong. It is currently our twenty-fourth largest goods trading partner, with $24.6 billion in total two-way goods trade during 2009. U.S. goods and services trade with Hong Kong totaled $42 billion in 2008, the latest year for which goods and services trade data is available. The stock of U.S. foreign direct investment (FDI) in Hong Kong was $50.5 billion in 2009, primarily concentrated in the finance/insurance, non bank holding companies, and wholesale trade sectors. The stock of Hong Kong FDI in the United States was $3.8 billion in 2009, mostly in the manufacturing and wholesale trade sectors.

Despite Hong Kong’s overall transparency and openness to trade, the United States is concerned with Hong Kong’s overly restrictive sanitary and phytosanitary (SPS) measures as they apply to U.S. exports, particularly those of beef and beef products. The World Organization for Animal Health (OIE) BSE guidelines provide for the importation of meat and meat products, including bone-in products, offal, and variety meats, regardless of cattle age, from countries or zones posing a controlled BSE risk if the appropriate tissues defined as specified risk materials (SRMs) are removed. Even though the OIE classifies the United States as a controlled risk country for BSE, Hong Kong currently only accepts deboned beef from cattle less than 30 months of age from the United States. We hope that this Trade Policy Review will encourage Hong Kong to focus on the importance of consistently implementing science-based sanitary and phytosanitary measures as a critical component of its longstanding commitment to trade and openness.

The United States also notes that Hong Kong has been a signatory to the WTO Agreement on Government Procurement (GPA) since 1997 and that it had been a signatory under the GATT Code on Government Procurement. Yet, we continue to be disappointed that Hong Kong has not submitted a market access offer in the current negotiations on the revision of the GPA. We will be interested to hear from Hong Kong about its plans in this regard.

We are further disappointed that a significant number of Hong Kong’s tariffs remain unbound. According to the Secretariat, while all applied MFN tariffs are zero, only slightly more than one third of Hong Kong’s non-agricultural tariffs are subject to WTO bindings. Inasmuch as this imparts a certain degree of unpredictability to Hong Kong’s tariff regime, we are interested to know the government’s plans to bind its tariffs.

In closing, I would like to reiterate our appreciation for Hong Kong’s active participation in the Doha Round negotiations. I would also like to emphasize that we continue to value our close work with the Hong Kong government and our WTO partners to strengthen and build on the WTO’s rules-based and cooperative foundation. But more work is needed to reach a balanced and ambitious conclusion to the Doha Round. To achieve a Doha outcome that results in the global economic growth necessary to spur development, all key players will need to make meaningful market-opening contributions. As a dynamic economy that sees the benefits that open trade has brought, Hong Kong stands to gain from new market access opportunities generated by the Doha Round, particularly in emerging economies. We look forward to continuing our work with Hong Kong and other Members to ensure these gains are realized.

We thank the delegation of Hong Kong for its willingness to consider these points and welcome the opportunity to engage with your and other delegations in a discussion of Hong Kong’s trade policy regime. The United States values our strong bilateral trade partnership and we offer good wishes to the government of Hong Kong for a successful and productive Trade Policy Review.

Thank you.