Speak up for free trade, Hong Kong
SCMP May 30, 2005
In December, Hong Kong has a unique opportunity to underline its unique
identity, its role not just as interface between China and the world
but as an international city which, in commercial terms, is open to
all and favours none.
Will the next administration recognise the opportunity and speak up
for what is in Hong Kong's interests? Or will it content itself with
playing efficient host and intermediary but avoid taking positions
if its interests differ from those of Beijing?
I refer to the Ministerial Meeting of the World Trade Organisation,
the make-or-break meeting for the Doha Round of trade negotiations.
The outcome may well determine whether the liberalisation of global
trade in goods and services continues. Or whether the system, which
has brought such immense benefits, particularly to East Asia, over
the past 50 years is headed for decay, as multilateralism gives way
to a mix of protectionism and bilateral deals.
The Tung administration expended a huge amount of time and political
capital in furthering 'one country', urging closer co-operation with
the mainland and making exaggerated claims for the Closer Economic
Cepa may be harmless, in that it does little more than bring forward
for Hong Kong liberalisation to which China is already committed under
WTO rules. But it is also an example of the bilateral deals which have
been proliferating. Dozens have either been concluded or are under
negotiation: the US with Australia and Singapore; South Korea with
Chile; China with the Association of Southeast Asian Nations, and maybe
also with South Korea; Asean with India, and so on. These have been
done nominally in the name of advancing free trade at a time when multilateral
progress at the WTO has been bogged down.
In practice, these deals usually avoid awkward issues like agriculture,
and are only useful if they bring harmonisation to new areas such as
investment rules, which have not been touched by the WTO. More often
than not, they have been political gestures. The US has viewed them
as rewards for good international behaviour and China as a chance to
seize the diplomatic initiative in Asia.
But they are not just harmless bits of political window dressing.
Every new bilateral deal comes with its own preferences, tariff levels
and rules of origin. The resulting 'spaghetti bowl' threatens to become
a nightmare for complex manufacturing systems which rely on automated
production to take best advantage of specialisation and the international
division of labour. Hong Kong is a base for the logistics of these
manufacturing and distribution systems, which are especially important
in the garment, shoe and electronics industries.
It links Taiwan and the mainland, China with Bangladesh, South Korea
with Thailand, Japan with Malaysia, and all with buyers from the US
and Germany, Brazil and Spain. They need simple rules as much as they
need low tariffs. Politicians who talk grandly of expanding through
bilateral deals understand few of the business realities.
Hong Kong has a two-fold interest in December. First, to do its best
to see that the talks are a success. That, in itself, would restore
impetus to multilateralism. Second, it must make its voice heard as
an apolitical region which recognises the dangers of bilateralism.
The issue for Hong Kong is not just to run a smooth meeting - it is
to speak up as a WTO member in its own right. This might seem obvious.
But the Tung administration did not seem to understand the importance
Donald Tsang Yam-kuen has a great chance to be a leader: to stand
up for Hong Kong's separate economic status, its commitment to non-discrimination,
to rigorous multilateralism, and to the merits of competition at home
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