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TRADE POLICY REVIEWS: SECOND PRESS RELEASE AND CHAIRPERSON'S  CONCLUSIONS
Hong Kong, China: December 1998

“ Despite the current economic difficulties, notably the contraction of GDP and rising unemployment, Hong Kong had maintained its traditional openness to both trade and investment and had not taken any measures directly affecting imports or foreign direct investment...”

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PRESS RELEASE
PRESS/TPRB/97
8 December 1998

TRADE POLICY REVIEW BODY: REVIEW OF HONG KONG, CHINA
TPRB'S EVALUATION
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The Trade Policy Review Body of the World Trade Organization (WTO) concluded its third review of the trade policies of Hong Kong, China on 7 and 8 December 1998. The text of the Chairperson's concluding remarks is attached as a summary of the salient points which emerged during the discussion. The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.

The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including its domestic laws and regulations, the institutional framework, bilateral, regional and other preferential agreements, the wider economic needs and the external environment. A record of the discussion and the Chairperson's summing up together with the reports will be published in due course as the complete trade policy review of Hong Kong, China and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989, 1994 & 1998), Austria (1992), Bangladesh (1992), Benin (1997), Bolivia (1993), Botswana (1998), Brazil (1992 & 1996), Burkina Faso (1998), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile (1991 & 1997), Colombia (1990 & 1996), Costa Rica (1995), C˘te d'Ivoire (1995), Cyprus (1997), the Czech Republic (1996), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the European Communities (1991, 1993, 1995 & 1997), Fiji (1997), Finland (1992), Ghana (1992), Hong Kong (1990, 1994 & 1998), Hungary (1991 & 1998), Iceland (1994), India (1993 & 1998), Indonesia (1991, 1994 & 1998), Israel (1994), Jamaica (1998), Japan (1990, 1992, 1995 & 1998), Kenya (1993), Korea, Rep. of (1992 & 1996), Lesotho (1998), Macau (1994), Malaysia (1993 & 1997), Mali (1998), Mauritius (1995), Mexico (1993 & 1997), Morocco (1989 & 1996), New Zealand (1990 & 1996), Namibia (1998), Nigeria (1991 & 1998), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), the Solomon Islands (1998), South Africa (1993 & 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Trinidad and Tobago (1998), Tunisia (1994), Turkey (1994 & 1998), the United States (1989, 1992, 1994 & 1996), Uganda (1995), Uruguay (1992 & 1998), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

TRADE POLICY REVIEW BODY:   REVIEW OF HONG KONG, CHINA
CONCLUDING REMARKS BY THE CHAIRPERSON
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The third Trade Policy Review of Hong Kong, China was conducted by the TPR Body on 7 and 8 December 1998. These remarks, prepared on my own responsibility, are intended to summarize the main points of the discussion; they are not intended as a full report. Further details of the discussion will be fully reflected in the minutes.

The discussion developed under three main themes: (i) economic environment; (ii) trade policies and measures; and (iii) sectoral issues.

Economic environment

Members congratulated Hong Kong, China on both the smooth transfer of sovereignty and on its reaction to the Asian crisis. Notwithstanding these two major developments, the present economic regime could be characterized as "business as usual". Indeed, the Hong Kong, China economy remained among the most open of WTO Members, a feature which had contributed to Hong Kong, China having one of the highest standards of living in the world. Despite the current economic difficulties, notably the contraction of GDP and rising unemployment, Hong Kong had maintained its traditional openness to both trade and investment and had not taken any measures directly affecting imports or foreign direct investment, thereby demonstrating its continuing commitment to the primacy of the WTO, to which Hong Kong, China had contributed significant leadership.

Members raised a number of questions particularly with respect to the special role and status of the Hong Kong Special Administrative Region (HKSAR) in China; the impact of the Asian financial crisis on Hong Kong, China's macroeconomic performance, its exchange rate system and fiscal policy; recent stock market intervention; and the change in the economic and trade structure of Hong Kong, China.

In reply, the representative of Hong Kong, China thanked Members for their support for Hong Kong, China's policies and for their confirmation that Hong Kong, China continued to conduct "business as usual". She added that under the Basic Law the HKSAR had a firm, guaranteed, framework to pursue free and open economic policies on all fronts.

On Hong Kong, China's macroeconomic performance, she stated her conviction that the economy's fundamentals were sound and that Hong Kong, China was well placed to react once local sentiment and external circumstances, on which Hong Kong, China was heavily dependent, improved. The linked exchange rate system had served the economy well and its abandonment was not an appropriate response to the existing difficulties; the link remained essential both to Hong Kong, China's role as a major international financial centre and to its efforts to promote international trade, particularly given the external orientation of the economy. In addition, with zero government debt and high fiscal reserves, the Government maintained a prudent fiscal stance, which would contribute to a rapid recovery.

On Members' questions about the Government's recent incursion in the stock market, the representative assured the meeting that this did not represent a departure from Hong Kong, China's long established policy of free trade and an open economy; intervention had been exceptional, probably unique, intended to maintain the stability and integrity of Hong Kong, China's financial system. The Government did not believe that this intervention conferred any advantage on those companies whose shares were purchased and the shareholding would be sold in an orderly manner. On the decline of manufacturing, the representative noted that this was more apparent than real and was, in any event, not something to try to reverse, but rather should act as a spur to ensure that the needed skills would be available to meet the challenges posed by a changing environment.

Trade policies and measures

Members commended Hong Kong, China on its continued trade-liberalization effort and on the transparency of its trade and investment regime, which remained one of the most attractive in the world. In particular, Members welcomed Hong Kong, China's accession to the WTO Agreement on Government Procurement and its early completion of the necessary legislation implementing the TRIPS Agreement. Members also expressed their appreciation of Hong Kong, China's industrial development policy, which involved "minimum intervention and maximum support".

Members raised a number of questions, particularly with respect to: the prospects of further binding Hong Kong, China's tariff lines, less than half of which were currently bound; anti-dumping; a bid challenge system in government procurement practices; the maintenance of the non-interventionist industrial policy; the continuing problem of forged trade marks and copyright piracy, notwithstanding strengthened legislation on intellectual property; and the adequacy of Hong Kong, China's competition policy.

In reply, the representative stated that Hong Kong, China saw no need to accelerate its schedule to bind tariffs, particularly as it had already taken significant action in this regard, for example, under the ITA. Hong Kong, China had no enabling legislation on anti-dumping, countervailing duties and safeguards because it did not believe in protecting its domestic industries through such measures. Hong Kong, China's accession to the Agreement on Government Procurement had not changed the Government's procurement policy, which was open and non-discriminatory. Hong Kong, China's support programmes were aimed at providing the necessary infrastructure to move into areas that require innovation and skills, but not to pick special sectors. Hong Kong, China had effectively implemented the provisions of the TRIPS Agreement and stronger enforcement actions had been taken. Hong Kong, China was committed to promoting competition and economic efficiency through a comprehensive, transparent and overarching competition policy; the introduction of a general competition law was not necessary given Hong Kong, China's small, externally-oriented, highly competitive economy.

Sectoral issues

Members congratulated Hong Kong, China on it's market-driven regime for production and trade in goods and services. In addition, they complimented Hong Kong, China on its sound regulatory framework, which provided the right mix of guidance and flexibility. Members also commended Hong Kong, China on its acceptance of the Fourth and the Fifth Protocols of the GATS, concerning telecommunications and financial services, respectively, in which Hong Kong, China's commitments had contributed significantly to the successful outcome of the negotiations.

Members raised a number of questions particularly with respect to seemingly high mark-ups associated with the rice control scheme; and restrictions in some service sectors, notably foreign banking operations, telecommunications and transportation.

In reply, the representative stated that Hong Kong, China had taken steps to liberalize the rice trade and was actively considering ways to further enhance competition. Most of Hong Kong, China's markets for services were free and open. Hong Kong, China remained committed to greater liberalization of the banking system, where regulation was applied only when essential. The "one-building" rule had not caused any market access difficulties for foreign banks; there were no restrictions on foreign direct investment into the sector. On telecommunications, the Government was in the process of opening the sector well beyond its commitments under the Fourth Protocol of the GATS. The Basic Law clearly specified that Hong Kong, China would maintain its previous system of shipping management and regulation. Hong Kong, China enjoyed no special privileges in the ports of mainland China.

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In conclusion, it is my feeling that this Body strongly commended Hong Kong, China for maintaining its predictable trade and investment regime following reunification with China and despite the Asian crisis. Notwithstanding these two major developments, the free-market principles underlying Hong Kong's trade and investment policies together with its respect for the rule of law had not changed. Members also expressed their confidence that with these policies Hong Kong, China's economy would soon resume strong and sustained economic growth. In short, it is my sense that Members felt that Hong Kong, China remained one of the most open economies in the world, and that they looked forward to Hong Kong, China's consolidation of this status by, for example, increasing its bindings and GATS commitments. Members also looked forward to seeing Hong Kong, China continuing to contribute, by its example and leadership at the WTO, to the further strengthening of the multilateral trading system.