The US is forgetting the differences between Hong Kong and China. Let’s remind them

Jack Lange and Tara Joseph warn that Hong Kong could easily have faced heavier sanctions from a US that no longer clearly sees its distinctions from the mainland. So it is vital for the government and business community to emphasise what makes it unique

PUBLISHED : Wednesday, 18 July, 2018, 4:01am
UPDATED : Wednesday, 18 July, 2018, 4:00am

The escalating trade hostilities between the United States and mainland China pose a variety of risks to Hong Kong. But the sharpened focus on US-China relations also creates an opportunity for Hong Kong’s government and business community to draw attention to the city's unique values and strengths.

At this juncture – when the US’ appreciation of the distinctions between mainland China and Hong Kong is more important than ever, but shows signs of dimming in the fog of conflict – we cannot let that opportunity pass.

US policy is not being driven solely by the wilfulness of Donald Trump. A consensus has developed in the US that the US-China economic relationship has become severely unbalanced, and the reset button needed to be pushed. This largely results from cumulative impatience with the lack of progress on market access issues, and what is viewed as an intolerable disequilibrium in flows of advanced technology.

Trade surpluses and deficits dominate headlines but are just part of the story. Grievances about the lack of reciprocity in treatment of foreign investment, and both economic and national security concerns relating to technology transfers, absorb comparable amounts of attention in Washington, and are in many ways more complex and intractable.

There are widespread objections to Trump’s use of tariffs to address these issues. But the issues themselves are deep, structural and will not be resolved soon – even if Trump declares victory and moves on.

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Prolonged US-China trade tensions will affect Hong Kong. Declining trade volume and deal flow between the US and China already affect many businesses and professional service providers. Supply chains are being disrupted. Exchange rate fluctuations and yuan depreciation hurt many Hong Kong businesses, and the uncertainties and dislocations are already weighing down the stock market.

So far, Hong Kong has not been directly drawn into the web of US government measures targeting China. But one option presented by the US Commerce Department on tariffs on imports of aluminium earlier this year was to impose high tariffs on mainland China, Russia, Venezuela, Vietnam … and Hong Kong. That set off alarm bells in government and business circles.

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Trump ultimately decided to impose lower worldwide tariffs on aluminium imports. Hong Kong did not get an exemption, despite being the trading partner with which the US has its largest trade surplus, but exports of aluminium from Hong Kong to the US are not economically significant.

Hong Kong may have dodged a bigger bullet. According to reports, the China hawks in the Trump administration advocated expansive new restrictions – especially on investment in industries promoted through the Made in China 2025 initiative – within the framework of existing emergency economic powers legislation.

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There were indications that, in the internal debate over that proposal, what would constitute “Chinese” investment for purposes of the restrictions – and how Hong Kong should be treated – was explicitly addressed. One may imagine that, in this conversation, there was a vigorous school of thought advancing the proposition that Hong Kong’s autonomy has been so hollowed out by an assertive mainland that it is no longer constructive to discern where the mainland ends and Hong Kong begins.

In the end, Trump decided to rely on a revised Committee on Foreign Investment in the United States (CFIUS) framework, with expanded authorities not specifically targeted at China but undoubtedly applied most energetically in that direction. The question of what is “Chinese” will continue to arise, but in a less obvious and explicit manner than if new restrictions limited to Chinese investment had been imposed.

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These examples illuminate the risk of Hong Kong being drawn closer to the centre of US-China trade battles. They illustrate the scepticism in influential pockets of Washington about how distinct Hong Kong is within the “one country, two systems” model.

Fortunately, there is also a willingness to hear about the special qualities of Hong Kong, and this story resonates deeply with the American psyche. AmCham Hong Kong has experienced this in our own interactions with Washington. The level of attentiveness to on-the-ground views and American businesses’ experiences – both on the mainland and in Hong Kong – has risen as the prospect of a trade war with China has grown more imminent.

Certainly, it is challenging to tell the Hong Kong story effectively to a distant, distracted audience. The difficulties are exacerbated by the US media coverage of Hong Kong, which lacks balance and perspective, even as media outlets rely heavily on Hong Kong as a base of operations because of the freedom and openness it offers.

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Attention tends to concentrate almost exclusively on the political controversies and frustrations around Hong Kong’s democratic development and perceptions of weakened will to defend Hong Kong's political autonomy from mainland encroachment – legitimate issues, but too often glibly conflated with a presumed decay of the core values that define Hong Kong.

That generates a heavily distorted image overseas. The essence of Hong Kong – personal liberty, rule of law, the reliable and independent judiciary, freedom of expression, the “raucous free press” (in the words of one major American newspaper), free flow of information and data, and openness to the global digital world, the free and open markets and the level competitive playing field – is alive and, for the most part, remarkably well. It is why so many of us came here, and remain here. It is woven so deeply into the texture of our lives that we often take it for granted.

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Hong Kong continues to have a robust and hearty infrastructure of values, practices and institutions that could not contrast more starkly with those of the mainland system. At a time of intensified competition with a China that has not evolved into the more open society many hoped for, the US should celebrate and encourage the Hong Kong difference. It is in American's interests to ensure that this struggle does not result, either deliberately or carelessly, in Hong Kong being shoved under the bus.

That is not a foregone conclusion. Much depends on our ability to communicate the importance that Hong Kong’s special status has to us and our businesses. AmCham Hong Kong is pursuing that mission with a sense of both opportunity and urgency, and a hope that other stakeholders in Hong Kong’s future will embrace it in the same spirit.

Jack Lange, an international lawyer based in Hong Kong for the past 25 years, is chairman of the American Chamber of Commerce in Hong Kong. Tara Joseph, a former journalist, is president of AmCham Hong Kong