The article 'Hong Kong too greedy in trade talks' and the editorial 'Economic integration is a two-way street', both in the South China Morning Post of March 11, reveal a lack of understanding of regional trade agreements and the World Trade Organisation (WTO) framework under which Cepa (the Closer Economic Partnership Arrangement between Hong Kong and the mainland) is now being negotiated.
Cepa will be a regional trade agreement between two WTO members. The Hong Kong General Chamber of Commerce has emphasised repeatedly that Cepa must abide by WTO rules and principles.
One of the fundamental principles is mutual benefit. So Cepa cannot be, as your report implies, a one-way street. It must by nature benefit both sides. However, the benefits need not be symmetrical and match item by item.
True, if indeed early liberalisation is allowed, Hong Kong will benefit from early liberalisation of some service industries, but at the same time it will take on the 'risk' of early exposure to the myriad problems that plague China's WTO implementation - the complex regulatory practices in the mainland's service industries, for instance.
Already, many such problems are being identified in the ongoing Transitional Review Mechanism of the WTO. By allowing China to pilot-test market openings and gain regulatory experience, Cepa will benefit China by contributing to its capacity-building in WTO implementation. It should also be remembered that there is a new round of trade negotiations going on in the WTO. China being a new member, there will be increasing pressure for the country to make further concessions. Again, Cepa provides the mechanism for China to 'test flight' these issues without acceding to them in the multilateral context until it is ready.
Similarly, experience gained from Cepa will help China negotiate similar trade arrangements with other WTO countries. China is already committed to negotiating a much more complex free trade agreement with Asean countries.
These benefits may appear 'macro' in nature, but Cepa will bring considerable concrete benefits as well - an increase in foreign direct investment from the potentially large sector of small and medium-size enterprises in the service industry, for instance.
