Pacific rim deal could benefit even non-signatories, Hong Kong finance minister says
Financial secretary says that while the US-led free-trade deal would increase regional commerce it could create a bloc that excludes China
Hong Kong does not want to see the United States-led free-trade deal in the Pacific Rim signed last week put up "trade barriers" for non-participating countries, Financial Secretary John Tsang Chun-wah said.
Tsang wrote in his blog yesterday that the Trans-Pacific Partnership (TPP) would help its signatories develop their economic potential and would enlarge the pie of regional trade and fuel demand for imports, thus benefiting non-signatories.
But he took note of critics' suggestions that the TPP, involving 12 countries including China's top trade partners the US and Japan, could form a bloc against the mainland.
"As a free-trade agreement, if the TPP excludes certain countries or places, it goes against the agreement's purpose," he wrote. "It will also make it difficult for this multilateral agreement to be effective."
The TPP is seen as a high-level free-trade agreement as it sets rules on everything from international trade and the environment to state-owned enterprises.
Tsang's comments echoed those of the foreign ministry, which earlier stated its hope that the TPP and other agreements would foster free trade in Asia.
He said Hong Kong must continue to raise its competitiveness by exploring new markets and higher-value industries to avoid losing out to rising competition.
Stanley Lau Chin-ho, honorary chairman of the Federation of Hong Kong Industries, said the TPP was unfavourable to Hong Kong, particularly its factory owners operating on the mainland. "The TPP will exert more pressure on Hong Kong factory owners to examine their situations and decide whether to upgrade, shut down or relocate," Lau said.
According to research by Fung Business Intelligence Centre, the TPP forms a mega-tariff-free region and Chinese exports to TPP countries may be subject to higher tariffs, resulting in higher costs than from competing TPP member countries.
The trade pact greatly benefits export-oriented members such as Vietnam and Malaysia, and boosts their competitive edge in the textile, garment and agricultural sectors.
Daniel Poon, principal economist at the Trade Development Council, said the TPP "sidelined" the mainland and Hong Kong.
However, China already had free-trade agreements with eight of the 12 TPP members, he noted, a fact that might help reduce any adverse impact.
"The TPP will hurt the competitiveness of made-in-China exports," Poon said. "This means Hong Kong manufacturers across the border can move their production facilities to Vietnam, which many of them have done and are in the process of doing to stay competitive. Or they have to add value to their exports if they stay put."
Hong Kong-based electronics maker Fittec International Group was considering moving more of its production facilities from the mainland to Vietnam, where it already had a factory, company secretary Michael Cheung Yiu-leung said.
"The TPP is helpful to us if we get orders," he said, noting that even in Vietnam competition was soaring as Samsung relocated its factory there and reduced sourcing from Fittec.
