HONG KONG 2005

The HKSAR is a founding member of the WTO. Its separate membership reflects Hong Kong's autonomy in the conduct of its external commercial relations, which is guaranteed under the Basic Law.

The WTO provides a fair, predictable and rules-based multilateral trading system for trade in goods, services and trade-related intellectual property rights. It promotes the liberalisation of international trade and serves as a forum for multilateral trade negotiations and dispute settlement among its members. Active participation in the WTO's multilateral trading system is the cornerstone of the HKSAR's external trade policy.

As a small and open economy, the Hong Kong's participation in the WTO is guided by two objectives: first, to sustain the momentum of trade liberalisation, especially in areas of interest to the HKSAR, such as tariffs and services; and second, to strengthen and update the multilateral rules-based trading system so that it remains an effective framework to promote trade expansion and liberalisation, as well as to protect Hong Kong against any arbitrary and discriminatory actions taken by its trading partners.

The HKSAR participates actively in the current round of multilateral trade negotiations launched at the WTO's Fourth Ministerial Conference in Doha, Qatar, in November 2001. Its priority in this round is to seek greater market access for its services sectors and industrial goods. At the Sixth Ministerial Conference hosted by Hong Kong on December 13-18, 2005, WTO members adopted the Hong Kong Ministerial Declaration which set out a series of agreements in the major negotiating areas and a timetable for the next and final phase of the negotiations. The outcome of the conference laid a solid basis for the round to be completed by 2006. Hong Kong's business community will benefit from further liberalisation brought about by the negotiations.

The hosting of the Hong Kong Ministerial Conference demonstrated the commitment of Hong Kong to the WTO. Hong Kong's performance as chair of the conference and as a constructive delegation earned warm appreciation from WTO members from both developed and developing countries. Meticulous arrangements made for the conference underlined Hong Kong's role as an international convention centre. This should help further enhance Hong Kong's international image and its attractiveness to tourists and international trade and business.

As an important services, financial and trading centre and an integral part of the Asia-Pacific economy, Hong Kong continued to play an active role in enhancing regional economic cooperation. In 2005, some 83 per cent of Hong Kong's external trade was conducted with the other 20 member economies of APEC. Hong Kong participates as a full and separate member in APEC and PECC under the name of Hong Kong, China.

APEC is a regional forum for high-level government-to-government dialogue and cooperation on trade and economic issues. Republic of Korea, as the APEC Chair for 2005, set the overall theme as 'Towards One Community: Meet the Challenge, Make the Change'. In November, the Chief Executive represented Hong Kong at the 13th APEC Economic Leaders' Meeting held in Busan. The meeting was preceded by the 17th APEC Ministerial Meeting, where Hong Kong was represented by the Secretary for Commerce, Industry and Technology.

APEC pursues its goal of free and open trade and investment by 2010 for industrialised economies and 2020 for developing economies through work in three areas — trade and investment liberalisation, trade and investment facilitation, and economic and technical cooperation. Hong Kong participates actively in all three. It has been a Vice-Chair of APEC's Committee on Trade and Investment (CTI) since 1996.

PECC is a non-governmental regional forum comprising government officials, business leaders and academics who work in their personal capacity on practical policy issues to enhance trade, investment and economic development in the Pacific region. The Hong Kong Committee for Pacific Economic Cooperation, which advises on and coordinates the HKSAR's participation in and input to the PECC process, continues to play an active role in PECC's various forums, task forces and project groups.

Hong Kong is an observer on the Trade Committee and the Committee on Financial Markets of the Paris-based OECD, which are important forums for discussions on policy matters in respect of trade and financial services. Ideas introduced in these committees are often followed up in other international organisations such as the WTO and eventually translated into binding multilateral agreements or codes.

The Government remains, as always, committed to the primacy of the multilateral trading system under the WTO. That notwithstanding, the Government is open-minded about exploring free trade agreements (FTAs) with trading partners so long as they are in Hong Kong's interests, consistent with WTO provisions and contribute to multilateral trade liberalisation.

The Central People's Government (CPG) and the HKSAR Government agreed on the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) on October 18, 2005.

Under CEPA III, the Mainland agreed to give all products of Hong Kong origin tariff-free treatment starting from January 1, 2006, upon application by local manufacturers and upon the CEPA rules of origin being agreed and met. On the basis of the preferential market access offered to Hong Kong service suppliers in 27 services areas² under the previous two phases, the Mainland agreed to further liberalisation measures spreading across 10 of the areas³ under CEPA III. The liberalisation allows Hong Kong service suppliers to enjoy earlier or preferential access to the Mainland market beyond China's WTO commitments.

The implementation of CEPA under the framework of the WTO will further promote trade and investment flows, as well as exchanges of talent, capital and technology, between Hong Kong and the Mainland.

The surge in trade flow and the improvement of the investment environment in the Mainland brought about by China's accession to the WTO since 2001 has helped boost Hong Kong's external trade and intermediary services. In addition, CEPA opens up many business opportunities in the Mainland for Hong Kong businessmen, and enhances the attractiveness of Hong Kong to overseas investors.

The Government is committed to helping the business community tap into the Mainland market, with the emphasis on the opportunities brought about by China's accession to the WTO and by CEPA. It maintains close contact with the Mainland authorities at different levels through various government bureaux and departments, the Beijing Office of the HKSAR Government, the Hong Kong Economic and Trade Office in Guangdong and quasi-government bodies like the Hong Kong Trade Development Council (TDC). Regular high-level communication is also achieved through mechanisms such as the Hong Kong/Guangdong Cooperation Joint Conference and the CEPA Joint Steering Committee.

Hong Kong has bilateral investment promotion and protection agreements with 15 economies: Australia, Austria, Belgium/Luxembourg, Denmark, France, Germany, Italy, Japan, Republic of Korea, the Netherlands, New Zealand, Sweden, Switzerland, Thailand and the United Kingdom. A primary objective of these agreements is to assure overseas investors of the stable investment environment in Hong Kong.

All quantitative restrictions on textiles exports were eliminated from January 1, 2005, in accordance with the WTO Agreement on Textiles and Clothing. Since then, Hong Kong's textiles and clothing exports have enjoyed quota-free access to the world market. The elimination of quotas has helped Hong Kong's textiles import and export trade by creating an environment that encourages it to continue to leverage its expertise and immense potential to develop into a world-class logistics and sourcing hub for textiles. At the same time, Hong Kong continues to maintain highly effective origin control measures to prevent abuse and to safeguard the interest of Hong Kong's textiles trade.

At the international level, Hong Kong, along with other WTO members and the International Textiles and Clothing Bureau (of which Hong Kong is a member), continues to monitor closely the global textiles trade to ensure that it is fully and truly liberalised, and that it comes under the same multilateral trading disciplines of the WTO as other sectors.

Hong Kong also cooperates with its trading partners to combat illegal transhipment of textiles. In 2005, Hong Kong Customs officers conducted another round of joint factory observation visit in conjunction with US Customs representatives to promote understanding of Hong Kong's anti-transhipment efforts. Such visits are not acts of law enforcement.

The Customs and Excise Department carried out 51 113 factory and consignment inspections and 1 016 investigations during the year to combat false declarations about the origin and value of goods and illegal transhipment of textiles. The department also conducted 1 092 'blitz' check operations on textile consignments at various import and export control points. It successfully prosecuted 939 companies and individual offenders, resulting in the imposition of fines amounting to $18.5 million. It operates a monetary reward scheme to elicit information on textiles origin fraud.

The Trade and Industry Department maintains a comprehensive import and export control licensing system to monitor the flows of strategic commodities through Hong Kong. The system ensures that while Hong Kong has access to advanced products and technologies to sustain its economic development, it is not used as a conduit for the illicit diversion of strategic commodities. The department also administers a permit system to monitor activities involving sensitive chemicals as required by the Chemical Weapons Convention. Hong Kong maintains close cooperation with its trading partners to keep abreast of developments in the international arena on strategic trade control matters, and to make sure that its control arrangement is complementary to those of its trading partners.

In 2005, the Customs and Excise Department investigated 227 cases of unlicensed import and export of strategic commodities and prosecuted 33 offenders, resulting in fines amounting to $500,000. Goods valued at $140,000 were confiscated.

Hong Kong Customs plays an active role in the work of the World Customs Organisation (WCO), which aims to enhance the effectiveness and efficiency of customs administrations and facilitate trade by achieving harmony and uniformity of customs procedures among its members, and the Subcommittee on Customs Procedures (SCCP) of APEC, which is tasked to simplify and harmonise customs procedures to facilitate cross-border trade in the Asia-Pacific region.

In the WCO forum, the department works closely with the WCO vice-chairman representing the Asia-Pacific region on regional matters, and is a co-coordinator of regional activities on enforcement programmes in security, commercial fraud, smuggling and intelligence, customs-business partnership and integrity.

The department also maintains close liaison with the WCO Regional Intelligence Liaison Office (RILO) in Beijing and has seconded an officer to the RILO Beijing Office to enhance the regional intelligence network by exchanging timely intelligence and offering investigative assistance to members in the Asia-Pacific Region.

Hong Kong Customs signed the WCO Letter of Intent on November 10, 2005 to implement the WCO Framework of Standards to Secure and Facilitate Global Trade.

Recognising the importance of international cooperation with other customs administrations and law enforcement agencies in combating transnational customs crimes, the department maintains a good working relationship and close liaison with the customs attachés and representatives of other law enforcement agencies stationed in their consular missions in Hong Kong. Through regular bilateral meetings, the department has enhanced the cooperation with Mainland and other customs administrations in building up a strong network for exchanging intelligence of transnational customs crimes.

Hong Kong Customs has helping with US Customs implement the Container Security Initiative (CSI) since May 2003. The initiative helps the smooth flow of US-bound cargoes originating from Hong Kong and minimises the risk of terrorists making attacks using ocean-going containers.


²	These are: management consulting, convention and exhibition, advertising, accounting, real estate and construction, medical and dental, distribution, logistics, freight forwarding agency, storage and warehousing, transport, tourism, audiovisual, legal, banking, securities and futures, insurance, telecommunications, airport, information technology, patent agency, trade mark agency, job referral agency, cultural, job intermediary, professional qualification examinations and individually owned stores.
³	These are: legal, accounting, audiovisual, construction, distribution, banking, securities, tourism, transport, and individually owned stores.