LCQ10: Promotion of free trade and economic development of Hong Kong
Following is a question by the Hon Chan Chun-ying and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (February 15):
In recent years, various nations have entered into new bilateral or multilateral free trade agreements with their trading partners one after another for promoting economic co-operation and development. However, the new President of the United States (US) signed a presidential memorandum immediately upon assumption of office last month, confirming the withdrawal of the US from the Trans-Pacific Partnership, an agreement which the US had reached with 11 nations after years of negotiations. There are comments that this will be conducive to the establishment of a Free Trade Area of the Asia-Pacific (FTAAP) and the negotiations on the Regional Comprehensive Economic Partnership, which China has been actively promoting in recent years. In this connection, will the Government inform this Council:
(1) whether it has assessed the impact on Hong Kong's overall economy brought about by the latest development in global trade liberalisation; if it has assessed, of the outcome and the Government's counter measures; and
(2) whether it has studied the possible impact of the successful establishment of FTAAP on Hong Kong's overall economy; if it has studied, of the details; if not, the reasons for that?
My reply to the question raised by Hon Chan Chun-ying is as follows:
(1) World trade has remained sluggish since the global financial crisis in 2008. According to the estimates by the International Monetary Fund, the volume of global trade in goods and services grew at an average rate of 2.8 per cent annually during 2009 to 2016, showing a sharp deceleration as compared to the average rate of 6.1 per cent between 2001 and 2008. Moreover, the deteriorated economic performance of advanced markets, with an average annual economic growth of merely 1.2 per cent from the financial crisis in 2008 to last year, also awakened trade protectionist sentiments and fueled the flame of de-globalisation, casting further uncertainties over the global economic and trade outlook. In particular, the stance of the new United States administration towards free trade has attracted the most attention, though details of such policy have yet to be revealed. If the trend of protectionism further intensifies to the extent which hampers global trade performance, Hong Kong, being a small and open economy, will inevitably be affected. We will continue to closely monitor the policy developments of various economies on the front of trade protectionism.
Insofar as Hong Kong is concerned, the Government upholds the belief that free trade is conducive to global economic development. Free trade does not only facilitate commodity and capital flow, and hence reduces transaction costs and lowers operating expenses; it also increases choices for consumers and gives full play to market competition. As a small and open economy, Hong Kong has all along participated actively in the World Trade Organization (WTO) to staunchly support and promote trade liberalisation, as well as to strengthen the rule-based multilateral trading system. With the globalisation of the world economy, it has become a major trend for trading partners to enter into Free Trade Agreements (FTAs) and regional economic co-operation arrangements. While committing to the multilateral trading system as the foundation, the Government also actively participates in the establishment of high-standard FTAs in line with WTO rules, with a view to enshrining the complementarity of FTAs and the multilateral trading system which can provide impetus to global trade liberalisation, thus presenting new opportunities for Hong Kong's economic development. So far, Hong Kong has concluded FTAs with the Mainland China, New Zealand, the Member States of the European Free Trade Association (i.e. Iceland, Liechtenstein, Norway and Switzerland) and Chile, and is currently conducting FTA negotiations with the Association of Southeast Asian Nations (ASEAN), Maldives, Georgia and Macau.
(2) The eventual realisation of a Free Trade Area of the Asia-Pacific (FTAAP) is one of the key initiatives of the Asia-Pacific Economic Cooperation (APEC). As a member economy of APEC, Hong Kong, together with other member economies, completed in 2016 a collective strategy study on issues related to the realisation of the FTAAP to assess the potential economic and social costs and benefits of the FTAAP, and analyse the challenges associated with the various potential pathways towards the establishment of the FTAAP. The result of the study showed that advancing towards the FTAAP would accelerate regional economic integration as well as enhance trade and investment growth through removal of trade barriers, thus driving long-term economic development. The recommendations of the study which set out the way forward towards the eventual realisation of the FTAAP have been endorsed by APEC Leaders in the form of the Lima Declaration on the FTAAP (Lima Declaration) in November 2016 in Lima, Peru.
A dedicated working group has been set up by APEC to take forward the issues related to the FTAAP. According to the Lima Declaration, the next steps of APEC are to address areas of divergence and convergence in regional and bilateral FTAs, and also to embark on work programmes to assist member economies in building consensus, deepening member economies' understanding in such agreements and enhancing their capacity to participate in high-quality and comprehensive FTAs.
As a free and open economy, Hong Kong welcomes the Lima Declaration. We will work closely with APEC member economies and participate actively in the relevant work plans of APEC so as to facilitate the early realisation of the FTAAP.
Moreover, we have been closely monitoring the development of regional FTAs, including the Regional Comprehensive Economic Partnership (RCEP) which is one of the potential pathways to realise the FTAAP. The RCEP is currently the largest FTA negotiation in the Pan-Asia region. The combined Gross Domestic Product (GDP) of the 16 RCEP participating economies (Note) represents nearly one-third of the world's GDP. All these economies are also important trading partners of Hong Kong. Hong Kong will continue to exchange views with its trading partners on the development of regional FTAs on different occasions and platforms.
Note: Including 10 member states of ASEAN, Mainland China, Japan, Korea, Australia, New Zealand and India.
Ends/Wednesday, February 15, 2017