LCQ6: Trade relations between Hong Kong and United States
Following is a question by the Dr Hon Cheng Chung-tai and a reply by the Acting Secretary for Commerce and Economic Development, Dr Bernard Chan, in the Legislative Council today (March 28):
At the end of last month, the Government of the United States (US) announced that it would impose the largest ever sanctions against North Korea in order to cut off the financial sources for the nuclear programme of North Korea. It was reported that five Hong Kong shipping companies alleged to have aided North Korea in evading international embargoes were put on the sanction list. On the other hand, the US Department of Commence released its investigation reports last month, claiming that the steel and aluminium materials exported by Hong Kong had brought serious damages to the US industries and threatened the US’s national security. The reports therefore recommended the imposition of tariffs of 23.6 per cent on those products. Regarding the trade relations between Hong Kong and the US, will the Government inform this Council:
(1) whether it has assessed the industries which will be affected by the sanctions, and their economic losses in the coming year; if so, of the details;
(2) of the measures, apart from expressing its dissatisfaction and position to officials of the US Consulate General and raising objections directly to the US Department of Commerce through the Economic and Trade Office in Washington, the Government will take to alleviate the impact on local enterprises to be brought about by the US’s initiatives to raise the tariffs on steel and aluminium materials; and
(3) given that free trade is of utmost importance to the maintenance of Hong Kong’s economic prosperity, whether the Government has liaised with the relevant officials of Hong Kong’s other major trading partners lest they might follow the practice of the US?
Hong Kong is an externally-oriented economy and pursues a free trade policy. As a founding member of the World Trade Organization (WTO), we have always been a staunch supporter of the multilateral trading system and are against any restrictive trade measures which are inconsistent with WTO agreements.
In respect of the additional tariffs unilaterally imposed by the United States (US) on imported steel and aluminium, the US Department of Commerce released on February 16, 2018 the “Section 232 investigation” reports relating to the threatening and impairment of US national security by imports of steel and aluminium. The reports recommended the US President consider unilaterally imposing quotas or additional tariffs on imported steel and aluminium (Note 1) covered in the investigation. One of the recommendations is to subject aluminium products imported from five countries/economies (including Hong Kong) to import tariffs at 23.6 per cent.
We consider that such measures are unilateral, discriminatory, and based on unfounded allegations. Since the release of the investigation reports, the Hong Kong Special Administration Region (HKSAR) Government has been actively following up the matter through various channels. We discussed our response with representatives of the five major local chambers of commerce (Note 2), and also got in touch with the American Chamber of Commerce in Hong Kong. We filed our formal representation to the US Administration to register our objection on February 27. On the same day, the five major chambers also issued a joint statement to support HKSAR Government's follow-up actions. The Permanent Representative of the HKSAR of China to the WTO registered our grave concern on the subject tariff measures at the WTO General Council Meeting held on March 7 and urged WTO Members to honour their WTO commitments.
Subsequently, the US President decided on March 8 to impose global tariffs of 25 per cent and 10 per cent respectively on steel and aluminium imports covered in the Section 232 investigation reports.
In this connection, the Secretary for Commerce and Economic Development met with the Consul General of the US to Hong Kong and Macau on March 15 to convey to the US Administration our request for excluding Hong Kong from the US plan to raise tariff on imports of steel and aluminium. We also request the US Administration to engage us in full dialogue prior to taking any unilateral action. Our Economic and Trade Office in Washington DC has taken corresponding follow-up actions in reiterating Hong Kong’s standpoints and concerns to the relevant local authorities.
At the WTO Informal Ministerial Gathering held on March 20 in New Delhi, India, the Director-General of Trade and Industry reiterated that WTO Members should act within the WTO framework, and pointed out that unilateral moves could undermine WTO's rules and commitments that seek to uphold the fundamental principles of non-discrimination, transparency and predictability, and bring about systemic risks to the multilateral system. Protectionist measures will also impede global economic growth. At the WTO Council for Trade in Goods meeting held on March 23, representative of the Economic and Trade Office in Geneva reiterated our concerns and stated clearly our position on the subject tariff measures. We will continue to follow up on the matter on the WTO platform and with the US Administration. We also reserve our rights to pursue all necessary actions under the WTO.
The HKSAR Government has been keeping in touch with the trade, and will provide advice and assistance to manufacturers who intend to make representation to the US Department of Commerce to exclude their products from the tariffs unilaterally imposed by the US.
According to the information of the Census and Statistics Department, Hong Kong has no domestic exports of the covered steel products to the US. The values of Hong Kong's re-exports of the covered steel products to the US in 2016 and 2017 were US$1.35 million and US$1.76 million respectively (both constituting 0.2 per cent of Hong Kong's total exports of the covered steel products in the respective years). As for aluminium products, Hong Kong's total exports (including domestic exports and re-exports) to the US in 2016 and 2017 were US$42.92 million and US$38.72 million respectively (constituting 9.0 per cent and 8.7 per cent of Hong Kong's total exports of the covered aluminium products in the respective years).
The HKSAR Government has all along been closely monitoring changes of import regulations and policies of our major trading partners, promptly providing trade information to our local traders and manufacturers, and where necessary, responding to trade restrictive measures in order to safeguard Hong Kong’s trade interest. Our overseas Economic and Trade Offices will continue to closely monitor changes in trade regulations of our trading partners and stay in close touch with the relevant local officials concerned on matters affecting our trade and economic interests.
Regarding sanctions against the Democratic People’s Republic of Korea (DPRK), the US imposed a new round of unilateral sanctions last month, adding 27 entities, 28 vessels and one individual to the unilateral sanctions list maintained by it. Five Hong Kong-registered companies have been included. The US prohibits all persons and entities subject to its jurisdiction from engaging in transactions with persons and entities on the sanction list.
In 2017, DPRK ranked 180th among Hong Kong's trading partners in the world. Given that the trade volume between Hong Kong and DPRK is very small and that the unilateral sanctions list of the US only involves a very small number of Hong Kong-registered companies, the unilateral sanctions imposed by the US against DPRK would not have material impact on Hong Kong's industry and economy.
Note 1: The coverage of the products in the investigations are set out below:
Note 2: The Federation of Hong Kong Industries; The Chinese Manufacturers' Association of Hong Kong; The Chinese General Chamber of Commerce; The Hong Kong General Chamber of Commerce; and The Hong Kong Chinese Importers' and Exporters' Association.
Ends/Wednesday, March 28, 2018