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Trade
Opinion
Regina Ip
Regina Ip

OpinionAmid the US-China trade war, Hong Kong should be selling the benefits of its special status to Washington

  • Regina Ip says local officials should stress what the US gains by granting Hong Kong special status - like two decades of trade surpluses - rather than giving them ideas on how to end it

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A boat on Victoria Harbour sails past the Wan Chai and Causeway Bay districts on December 17, 2018. Hong Kong is home to more than 1,350 US companies, including many which have regional headquarters or regional offices here. Photo: EPA-EFE
Regina Ip
Ever since the United States fired its first salvo of punitive tariffs at China last March, speculation has been rife that Hong Kong might get caught in the cross-hairs. Trade experts know Hong Kong is too small to be of consequence. The subsequent arrest of Meng Wanzhou, a senior executive of China’s tech titan Huawei, and the deluge of charges against her clearly demonstrate that the eldest daughter of Huawei’s founder is a much more valuable pawn.
The US has been such an important trading and investment partner of Hong Kong that the Legislative Council held an adjournment debate in early December to discuss the economic implications of the US-China trade conflict. Much concern was expressed about Hong Kong possibly losing its “most favoured nation” trading status, yet few fully understood what that status means and the likelihood of losing it in the wake of the US-China trade spat.

“Most favoured nation” status, under the rules of the World Trade Organisation, requires that a member grants the best trading terms to a partner in a trade agreement to all other WTO members. As such, it guarantees non-discriminatory treatment of all WTO members.

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Hong Kong earned this status through decades of hard work as one of the world’s largest trading economies, and through its energetic participation in the General Agreement on Tariffs and Trade (GATT) and its successor organisation the WTO. With support from both China and Britain, Hong Kong became a separate contracting party of GATT in 1986. It’s continuous robust participation in the Uruguay round of international trade negotiations enabled it to become a founding member of the WTO on its establishment in 1995, well ahead of China, Macau and Chinese Taipei.

Because Hong Kong’s reputation as a free-market economy and its status as a separate contracting party of GATT, and its successor organisation the WTO, Hong Kong never required special authorisations under US trade laws to enjoy “most favoured nation” status.

By comparison, by virtue of the Jackson-Vanik amendment of the US Trade Act of 1974, which tied renewal of the “most favoured nation” status of non-market economies to review of the freedom of emigration and the exercise of other human rights, China’s “most favoured nation” status in the US was subject to annual review until then-president Bill Clinton decided to grant it permanent normal trade relations in 2000. China’s “most favoured nation” status in the US ceased to be an issue after it joined the WTO in 2001.

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