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  • Dec 23, 2014
  • Updated: 6:39am

Parallel trading

The influx of parallel traders who buy their stock tax-free in Hong Kong to resell it in mainland China at a profit is causing growing unrest. Residents of Sheung Shui, a town close to China's border, say the increase in parallel importers has pushed up retail prices and causes a general nuisance. Importers argue that their trade benefits the Hong Kong economy.

CommentInsight & Opinion

Hong Kong, city of trade, must not crack down on infant formula traders

Andrew Work says by trying to stop parallel traders making an honest living, Hong Kong is trampling on the work ethic that makes it great

PUBLISHED : Thursday, 07 February, 2013, 12:00am
UPDATED : Thursday, 07 February, 2013, 8:40am

Hong Kong became a great city after millions of mainland refugees came here to trade. Entrepreneurship brought goods to billions of people. First, goods made here and, later, goods made in mainland China; Hong Kong's tradition as a centre of exchange made the world a better place.

The tradition continues, as can be seen in the volume of trade through our airports, ports and cross-border trucking industry. We count the benefits in dollar trade volumes and jobs created. Less often tallied are benefits to the global population who get the goods they want at prices they can afford, thanks to our link in the trade chain.

With no natural resources of our own, everything Hong Kong has comes from elsewhere: food and water from the mainland; wheat from Canada; soya beans from Brazil and baby milk powder from the Netherlands and New Zealand, among other sources.

The owner-producers of these products send them to Hong Kong on the basis of our willingness to pay for them. And some people buy the goods to resell them - at a profit.

In the case of infant formula, people have forgotten every part of this virtuous chain. They waylay honourable traders making an honest living.

Our government is creating a bureaucracy and ramping up spending to criminalise the simple act of trading that made this city great. Bernard Lee Kwan-kit, vice-chairman of the Association of Customs and Excise Service Officers, said extra manpower, space and facilities such as X-ray machines would be needed to enforce proposed restrictions on buying infant formula. What next? Full body searches?

The presence of parallel traders in Hong Kong has drawn complaints of overcrowding, including at MTR stations and on trains. But there are solutions. Innovative thinking suggests the MTR could impose a small charge for extra luggage, set up dedicated repacking zones (with their own surcharge) and dedicated lanes in stations and sections of trains for those carrying luggage for whatever reason. Those using the service would appreciate being able to move themselves and their goods from point to point, free of hassle, and other customers could travel easy, with the encumbered passengers channelled elsewhere.

The shortage of infant formula seems to be a problem of preference. Producers are encouraging pharmacies to take less popular brands that are languishing on store shelves. It seems parents are infuriated at being unable to get their preferred brands as readily as they like. Ridiculous hysteria has even led to a petition to the US government to intervene.

The people harassing these honest traders didn't make the milk powder, didn't bring it here and have no natural right to it. Given Hong Kong's heritage as a city built by poor immigrants from China working hard as traders, the antipathy for these people is a betrayal of who we are.

Our government should not be complicit with these self-appointed victims and agitators, but should instead enforce the laws of the land and promote the economic principles that illuminated the working spirit of Hongkongers past, and will hopefully not be extinguished in the future.

Andrew Work is director and co-founder of The Lion Rock Institute


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This article is now closed to comments

Hello, Everyone? Duh, why is there this inconvenient trade? Because the mainland government is so pathetically incapable of dealing with smuggling. It is incredible that Hong Kong has to go through all this pain, inconvenience, expense because of mainland's utter failure to control blatant smuggling right under their noses. How is it possible they can be so stupid? Or is this just another case of the Communist Party system, soil palms and to heck with the law?
First I'd like to know if Mr. Work lives in the New Territories? From this article, I'm guessing the answer would be, "No." Secondly, I'd like to know if he has children and has tried to purchase diapers or milk formula for his child? Again, from the article, I would guess the answer for both is also, "No."
It's easy to stand on a pedestal and comment on the history of Hong Kong that Mr. Work doesn't completely understand. It's also easy to comment on economic principals that are far more complex than this article gives credit to.
Until Mr. Work really does his homework, he will never realize how many times the government has stepped in for the benefit of the citizens of Hong Kong. Until he worries about ensuring food for his child(ren) or needs to commute daily among gangs of trolley laden traders, he will never understand the issue completely.
However, in defense of the SCMP and regarding Jackblack's comments, this is a free newspaper and has the responsibility to continue allowing the people of Hong Kong to voice their opinions.
Why don't make HK the Milk Powder Trading Centre of the World, not just the xenophobic city of asia?
These are smugglers. Working in Hong Kong without work permit and smuggling goods into China for pure profit motive. Who knows how much bribe they pay Chinese customs? They get in the way of everyone in HK, they spend no money here and pay no tax. The money they pay for milk powder goes to Europe, USA or Australia.
The mainland refugees who came to Hong Kong built factories and business in HK. They hired HK workers, paid HK tax, invested their profits in HK, gave generously to HK charities and contributed their time and energy to HK public life.
Don't they pay the exit tax when they take the MTR to Lowu?
When there are market failures that unreasonably distorts the operation of free market, it is the rightful role of government to regulate. This is particularly so where the good is a basic necessity for many Hong Kong families. The infant formula sold in HK is often also available in the PRC but because of PRC consumers mistrust of goods sold in the PRC there is a unjustified perception that HK versions are better. This is a market failure which has unreasonably distorted the market and affected HKers accessibilty to a basic need.
Free market principles are based on certain assumptions and qualifications. A slavish and absolutist application to free market philosophies does no one any good.
Parallel trader pls go get a real job. One that has an employment contract :)
I agree.
We will soon see that trade is more free on the mainland than here if things keep going this way in Hong Kong.
Given the recent incidents of poor quality infant formula distributed throughout China, it is not unrealistic to expect some form of regulation, or at least inspection. However, the implication on the free market could be diabolic if the process is not implemented in an all-trade encompassing and innovative form.
What about the residents of Sheng Shui, who've seen their local pharmacies invaded, prices driven up, themselves treated like second-class customers in their neighborhood shops? Perhaps the author should visit the area and explain free-market principles to these Hong Kongers.
The bigger issue: why can't the mainland ensure an adequate supply of untainted milk-powder for its own residents? Why are mainland mothers driven to a grey-market to buy a household commodity?
Articles like this reflect the continuing decline of the SCMP's editorial quality. So many good journalists have left this newspaper. Instead, we have op-ed pieces from dubious amateurs.



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