Non-textiles Issues

With the coming into effect of the General Agreement on Trade in
Services (GATS) when the WTO was established in January 1995, global
trade in services is now governed by a legally enforceable multilateral
agreement. The HKSAR plays an active role in the WTO forum to ensure
the proper functioning of the GATS and progressive liberalisation of trade
in services. During the year, the HKSAR provided constructive input to
the multilateral negotiations on basic telecommunications and financial
services. The negotiations on basic telecommunications were successfully
concluded on February 15, 1997. The agreement will open up a huge
telecommunications market globally, estimated at US$760 billion per
annum. The commitments will come into effect on February 5, 1998. The
financial services negotiations were successfully concluded on December
13, 1997. The agreement comprises a broad range of commitments to
open up financial markets which account for over 95 per cent of the
world trade in financial services. These commitments are scheduled to
come into effect on March 1, 1999.

Hong Kong joined the Information Technology Agreement concluded in
March 1997 under which participating economies undertook to eliminate
tariffs on information technology products, components and
sub-assemblies by January 2000. It is estimated that more than $170
billion of Hong Kong's domestic exports and re-exports will benefit.

In May 1997, Hong Kong acceded to the WTO Agreement on
Government Procurement under which each party is required to provide
non-discriminatory treatment to the products, services and suppliers of
other parties. Hong Kong's accession to the agreement re-affirms the
continuity of its open, transparent and non-discriminatory procurement
system, and improves access of HKSAR goods and services to the
government procurement markets of other parties.

During the first half of the year, the HKSAR Government and the private
sector continued to emphasise to the USA administration and members of
Congress the adverse effects on Hong Kong's economy if the USA were
to withdraw China's Most Favoured Nation (MFN) trading status, or to
impose conditions on the renewal of the status. On May 30, President
Clinton announced his decision to renew China's MFN trading status
unconditionally for another year. A joint resolution disapproving the
President's decision on MFN was introduced but was defeated by a floor
vote in the House of Representatives on June 24.

The outcome removed for the time being uncertainty over Sino-USA
trade relations, and allowed Hong Kong business people to plan and
conduct their operations accordingly. The Mainland of China and the USA
are Hong Kong's two largest trading partners and good relations between
them are of vital importance to the HKSAR maintaining its status as a
trading, financial and investment centre.

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