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Hong Kong-Mainland RTA

A regional trade agreement (RTA) with the Mainland, not preferential treatment, would be mutually beneficial China's entry into the World Trade Organisation is about the only piece of good economic news that Hong Kong has heard in recent months, and it will have long-term implications for both the Mainland and Hong Kong.

Among these are cries by some Hong Kong businesses asking Central, provincial and local officials to grant 'special preferential treatment' to Hong Kong companies. These voices are fuelled by some media reports that do not fully understand WTO rules. This is worrisome for a number of reasons:

(1) It reveals a lack of confidence, and shows businesses think that only through special preferential treatment can Hong Kong companies compete in the Mainland. One could consider this an insult to the many Hong Kong companies which have succeeded in China in past years through hard work and not short-cuts or 'preferences.'

(5) It creates a bad impression of Hong Kong businesses in the mind of Chinese officials and foreign officials/businesses who are going to be annoyed at some Hong Kong companies' constant request for 'special favours.'

(1) Immediately begin discussions with China, as two separate WTO members, on a mutually beneficial, reciprocal regional trade agreement (RTA) -- this is allowable under WTO rules. We are happy to hear that the SAR Government finally is moving forward and has approached the Central Government with a proposal to explore this idea. Premier Zhu Rongji has indicated that China would like to negotiate a regional trade agreement with ASEAN. Hong Kong is negotiating a regional trade agreement with New Zealand, and almost all of the 144 WTO members are included in some sort of regional trade agreement -- also called sometimes a 'free trade agreement,' such as EU and NAFTA -- with the latter consisting of USA, Canada, and Mexico.

In other words, Hong Kong would get some time advantage, but this presupposes that we start a dialogue with Beijing immediately. China would benefit by an early test with a gradual opening to get ready for the formal WTO-mandated opening date. China could also negotiate some additional access to Hong Kong for its businesses. The SAR Government had been reluctant to approach Beijing with this idea. But the Chamber believes that given the recent cries for WTO-violating preferential treatment, and given the recognition that many Hong Kong companies suffer a disadvantage in certain sectors, a regional free trade agreement with Hong Kong might be welcomed by Beijing as a way to 'help' Hong Kong, as well as benefiting China. This RTA, of different content, can even be extended to include Taiwan in the future.

(2) Increase the quantity and improve the quality of the dialogue with Beijing on trade policies and on identifying business opportunities in China. To continue to help international SMEs that want to access the post-WTO China market, Hong Kong middlemen need to have the latest policy and business information. Instead of fixed-time meetings, this dialogue of SAR and Central Government officials should take place continuously. There should be no worry that economic closeness interferes with 'one country, two systems.' TDC and the chambers are doing their part, but the SAR Office in Beijing and the pending one in Guangzhou need to step up the economic liaison and information efforts. A China business policy information office needs to be set up in the government itself right here in Hong Kong.

Time is of the essence as China is expected to develop rapidly after entry into WTO. Hong Kong risks being left behind and losing the fruits of China's gain. To ensure beneficial economic integration, a reciprocal regional free trade agreement would be a useful starting point. The Chamber admits there are many technical difficulties for such an agreement and it may even not be feasible, but the Central Government has been generally open-minded on SAR economic initiatives. Let us stop pestering the SAR Government, Central Government and local governments for WTO-violating 'special preferential treatment.' Instead, let us get on with a fast-paced discussion with Beijing on the mutually beneficial idea of a regional trade agreement.