WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOWT/TPR/M/109/Add.1
17 February 2003
(03-0981)
Trade Policy Review Body
16 and 18 December 2002Original:  English/
anglais/
inglés
TRADE POLICY REVIEW
HONG KONG, CHINA
Minutes of Meeting
Addendum
Chairperson:  H.E. Ms Amina Chawahir Mohamed (Kenya)
This document contains the advance written questions, and replies provided by Hong Kong,
China.1
__________________________________________________________________________________
Organe d'examen des politiques commerciales
16 et 18 décembre 2002
EXAMEN DES POLITIQUES COMMERCIALES
HONG KONG, CHINE
Compte rendu de la réunion
Addendum
Présidente:  S.E.  Mme Amin a Chawahir Mohamed (Kenya)
Le présent document contient les questions écrites communiquées à l'avance et les réponses
fournies par Hong Kong, Chine.1
__________________________________________________________________________________
Órgano de Examen de las Políticas Comerciales
16 y 18 de diciembre de 2002
EXAMEN DE LAS POLÍTICAS COMERCIALES
HONG KONG, CHINA
Acta de la reunión
Addendum
Presidenta:  Excma. Sra. Ami na Chawahir Mohamed (Kenya)
En el presente documento figuran las preguntas presentadas anticipadamente por escrito y las
respuestas facilitadas por Hong Kong, China.1
                                                     
1 In English only./En anglais seulement./En inglés solamente.WT/TPR/M/109/Add.1
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ADVANCE WRITTEN QUESTIONS BY MEMBERS AND REPLIES PROVIDED BY
HONG KONG, CHINA
Questions from Argentina
III. TRADE POLICIES AND PRACTICES BY MEASURE(2) MEASURES DIRECTLY AFFECTING IMPORTS(ii) Tariffs
Question 1
One of the objectives in relation to market access for non-agricultural products in the framework of
the negotiations launched in Doha is for countries to bind all their tariff lines.  The Report by the
Secretariat states that Hong Kong, China has bound less than half of its tariff universe.  Furthermore,
Point III(2)(ii), paragraph 10, of the Report by the Secretariat states that "in some sectors, such as
petroleum, textiles and clothing, and chemicals […], the percentage of bound lines remains low".Would Hong Kong, China please indicate how it in tends to move forward as regards its bound levels
in the framework of the Doha negotiations.
Answer
Members should look at the scope of our tariff binding in context.  As tariff concessions are
exchanged predominantly on the basis of reciprocity, Hong Kong, China being one of the freesttraders in the world is left with no other concession for exchange than scope of binding.  This is
acknowledged by Members as our present scope of binding is the outcome of previous negotiations
plus additional autonomous binding we have ma de since the conclusion of the Uruguay Round.
The scope of binding aside, we have all along maintained a zero-tariff regime; the status of free port
and the pursuit for free trade policy are enshrined in the Basic Law; and we have made unilateralefforts to increase binding over the years.
We look forward to substantial reduction and elimin ation of tariffs by WTO Members under the Doha
Development Agenda (DDA) negotiations.  We have proposed a two-stage approach to achieve this.
In the first stage, Members will follow a formula approach to reduce or eliminate tariffs immediately
upon the conclusion of the DDA negotiations.  Developing Members will be subject to a smallerreduction.  In the second stage, developed Members will eliminate all tariffs within a reasonably short
period of time (say 5 years), whereas developing Members will continue to reduce tariffs over a
longer timeframe.  Hong Kong, China always stands ready to match the concessions by other
Members.
(v) Import prohibitions, restrictions and licensing
Question 2
With regard to import licensing, Point III(2)(v), paragraph 18, of the Report by the Secretariat states
that strategic commodities and sensitive items ar e subject to licensing requirements.  Would Hong
Kong, China please give the definition of such pr oducts provided for in its domestic legislation.WT/TPR/M/109/Add.1
Page 4
Answer
Hong Kong, China follows closely the control list s adopted by major international non-proliferation
regimes.  All items classified as strategic commod ities are specified in the Schedules to the Import
and Export (Strategic Commodities) Regulations of the Import and Export Ordinance, Chapter 60,
Laws of Hong Kong.  Import and export of these items are subject to licensing requirement.  Forcertain sensitive items, in addition to the import and export licensing requirement, licences are
required even if the items are in-transit through Hong Kong.  In other words, bringing sensitive
strategic commodities into and out of Hong Kong, China will require licences even if the goods
remain at all times in or on the vessel or aircraft in or on which they are brought into Hong Kong,
China.  These sensitive items such as certain munitions items, nuclear material, equipment and
facilities, information security products, sensors etc. are listed out in Schedule 2 to the Regulations
mentioned above.  Schedule 2 can be found in our Strategic Commodities Control System Website athttp://www.stc.tid.gov.hk.
(vii) Standards and other technical requirements
Question 3
Point III(2)(vii), paragraph 29, of the Report by the Secretariat states that "Hong Kong, China
continues to maintain a quarantine system for plants and animals based on the recommendations ofthe Asia and Pacific Plant Protection Commission (APPPC)". Would Hong Kong, China please
describe what this sanitary control system involves and how it operates.
Answer
The Asia and Pacific Plant Protection Commission (APPPC) is established under the Plant Protection
Agreement for the Asia and Pacific Region and has the following functions:
(a) the determination of procedures and arrangements necessary for the implementation
of the Agreement and the making of recommendations to the Contracting
Governments accordingly;
(b) the review of reports submitted by the Contracting Governments of progress in the
implementation of the Agreement;  and
(c) the consideration of problems requiring cooperation on a regional basis and of
measures for mutual assistance.
APPPC makes recommendations of procedures and arrangements necessary for the implementation of
the Plant Protection Agreement for the Asia and Pacific Region to prevent the introduction into and
spread within the Asia and Pacific Region of destructive plant pests and diseases.  Hong Kong, China,
as a member of APPPC, follows the Commission’s recommendations and takes measures of
certification, inspection, disinfection, disinfestation, quarantine, prohibition and destruction whennecessary with respect to the importation of plants to control the spread of plant pests and diseases.WT/TPR/M/109/Add.1
Page 5
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(vi) Export finance, insurance and guarantees
Question 4
Point III(3)(vi), paragraph 74, of the Report by the Secretariat gives ranges of figures corresponding
to the export finance, insurance and guarantees provided by the Hong Kong Export Credit InsuranceCorporation (ECIC).  Would Hong Kong, China please provide a per-sector breakdown of these
figures.  Please also provide a detailed description of the conditions under which enterprises are
eligible for such instruments.
Answer
Hong Kong, China does not provide export financing and has not provided any export guarantees for
at lease one decade .  Export credit insurance is provided by the Hong Kong Export Credit Insurance
Corporation (ECIC).  All exporters registered in Hong Kong under the Business RegistrationOrdinance can apply for ECIC policies.
The breakdown, by sector, of exports insured by ECIC in the past three financial years is as follows -
Insured Exports by Sector (in HK$ million)
(I)  April 2001 – March 2002
Sectors Insured Exports %
Clothing 4,823 18
Electronics 3,749 14
Toys 2,877 11
Plastic Articles 1,121 4
Jewellery 1,022 4
Other Sectors 13,089 49
Total: 26,681 100
(II)  April 2000 – March 2001
Sectors Insured Exports %
Clothing 5,087 19
Electronics 3,721 14
Toys 2,675 10
Plastic Articles 1,433 5
Jewellery 1,012 4
Other Sectors 13,330 48
Total: 27,258 100
(III)  April 1999 – March 2000
Sectors Insured Exports %
Clothing & Textiles 5,388 23
Plastic, Metallic & Leather Goods 2,700 11
Toys 2,666 11
Office Machinery & Stationery 2,587 11
Electronics 1,226 5
Other Sectors 9,072 39
Total: 23,639 100
(vii) Export promotion and marketing assistanceWT/TPR/M/109/Add.1
Page 6
Question 5
Point III(3)(vii), paragraph 75, of the Report by the Secretariat states that the Hong Kong Trade
Development Council (HKTDC), as a government agency responsible for export promotion, provides
a series of services to exporters, including the organization of international trade fairs. Would Hong
Kong, China please indicate what type of support it provides for exporters.  Is support granted on thebasis of economic sectors?  How is the budget of the agency managed?
Answer
The Hong Kong Trade Development Council (HKTDC) is a statutory organisation tasked to promote
Hong Kong’s external trade.  With a global network of 42 offices in 27 countries, HKTDC:
- creates global marketing and sales opportunities for Hong Kong’s merchandise and
services industries through its international trade promotion events, staging of trade
fairs in Hong Kong and publication of product / service magazines;
- connects Hong Kong companies with their potential buyers and sellers around the
world through its databank and trade-matching services, including a cyber-
marketplace, hkenterprise.com;
- provides business information and market intelligence through a wide range of
services, including the internet portal, tdctrade.com;
- enhances and promotes the capability of Hong Kong industries through a
comprehensive development/training programme, international image/brand name
promotional activities and the running of a Design Gallery to showcase innovative
Hong Kong products;  and
- reinforces Hong Kong as a global marketplace in the Asia-Pacific region through
corporate relations and business promotion activities around the world, including
support for bilateral committees and Hong Kong business associations in major
markets.
HKTDC receives subvention from the Government on an annual basis.  Currently, government
subvention roughly amounts to 25% of HKTDC’s total income.  HKTDC generates the rest of itsincome through charging fees for its promotional activities and services.
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(i) Incentives
Question 6
Point III(4)(i), paragraph 77, of the Report by the Secretariat states that Hong Kong, China has
extended "various forms of assistance to certain activities […].  Such support has seldom been
industry specific, with the Government largely eschewing attempts to 'pick winners'".  Would HongKong, China please state what form such assist ance took.  Are detailed records kept of such
contributions?
AnswerWT/TPR/M/109/Add.1
Page 7
Paragraph 77 of Chapter III of the Secretariat Report states that Hong Kong, China did “extend
various forms of assistance to certain activities, mainly with a view to providing the necessary
physical, human, and technological infrastructure a nd creating a favourable business environment”.
The paragraph also states that such support has seldom been industry specific, with the Government
largely eschewing attempts to “pick winners”.
We firmly believe that our well-tried policy of free market and free competition can best ensure
efficient allocation of resources by letting the market rather than bureaucrats decide on the course of
our economic development. Government does not pick winners or rescue losers at taxpayers’ expense.
The assistance or funding schemes are introduced with the aim to enhance the competitiveness of
Hong Kong’s enterprises by, for example, promoting innovation and technology, and assisting the
business development of Small and Medium Enterprises (SMEs).  Relevant examples are as follows -
- Innovation and Technology Fund:  the HK$5 billion fund was set up in 1999.  It
seeks to finance projects that contribute to innovation or technology upgrading in
industries, as well as those essential to the upgrading and development of industry in
Hong Kong.
- Patent Application Grant:  The Patent Application Grant provides financial assistance
to first-time patent seekers to apply for patents to protect the intellectual property
rights of their products.  The maximu m amount of funding support is HK$100,000 or
90% of the total cost incurred, which ever is lower.
- SME funding schemes:  the Special Finance Scheme for Small and Medium
Enterprises was launch in August 1998 to address the liquidity crunch problem faced
by SMEs during the Asian financial crisis.  Under the Scheme, all companies,regardless of the industries to which they belong, are eligible to apply for
Government's guarantees for the loans they  borrow from the lending institutions, with
the ceiling of the guarantees for each company being HK$2 million, or 70% of the
loans, whichever is the less.  With a total amount of HK$2.5 billion, the Government
has approved guarantees of about HK$5.8 billion under the Scheme, helping nearly10,000 SMEs secure loan facilities of more than HK$9 billion.  The Scheme was
discontinued in April 2000 since the liquidity problem no longer existed.  In
December 2001 and January 2002, the Government launched four funding schemes
with expected expenditure of HK$1.9 billion to help SMEs secure loans to purchase
business installations and equipment by the provision of guarantees, expand market,
enhance manpower training and improve overall competitiveness.
The schemes cited above are open to industries of all sectors, and all companies registered in Hong
Kong are eligible to apply.  We keep detailed records of the implementation of the schemes.
(a) Tax incentives
Question 7
Would Hong Kong, China please indicate which sect ors and/or enterprises will benefit from the
waivers proposed in the 2002/03 Budget, as mentioned in Point III(4)(i)(a), paragraph 79, of theReport by the Secretariat.
Answer
The one-year waiver of business registration fee announced in the 2002/03 Budget applies across all
sectors.  The same waiver of trade effluent surcharge applies to all the specified trades that emitWT/TPR/M/109/Add.1
Page 8
pollutants and are liable to pay the surcharge.  The waiver for water and sewage charges applies to all
domestic households and non-domestic consumers.  The same concessionary duty rate for ultra-low
sulphur diesel applies to all diesel vehicles from any sector.
(b) R&D and Technology
Question 8
Would Hong Kong, China please indicate the leve l of government involv ement in the Hong Kong
Science and Technology Parks Corporation (HKSTPC).  Please also indicate how the Innovation and
Technology Fund (ITF) and Applied Research Fund (ARF), managed by the Innovation and
Technology Commission, are financed.
Answer
The Government established the Corporation through statute and has one member on the Board of
Directors of the Corporation.  The Government also works closely with the Corporation on its policydirections and development plans and the planning and construction of its infrastructure and facilities.
IV. TRADE POLICIES BY SECTOR
(2) AGRICULTURE
Question 9
Rice import quotas are established in the framework of the Rice Control Scheme which, according to
the information furnished, will be dismantled in January 2003 and only a minimal reserve stock will
be maintained.  Similarly, Point IV(2), paragraph 6, of the Report by the Secretariat states that
imports of rice for the reserve stock will requi re import licences.  Would Hong Kong, China please
clarify whether the reserve stock will be allocated on the basis of the criteria for existing quotas.
Please also provide further details on the relaxation of registration criteria for importers.
Answer
A reserve stock of rice is maintained at a level sufficient for consumption by the local population for
15 days, that is, about 13,500 tonnes, to cater for emergency situation.  It is shared among all
registered stockholders.  Currently, stockholders maintain a quantity of reserve stock proportional to
their respective import quota.  When the rice trade liberalises in 2003, import quotas will be removedand stockholders can decide their own import quantity.  The quantity of reserve stock to maintain will
be proportional to their respective import quantity or sales volume.
At present, registration as a stockholder is subject to a capital requirement of HK$1.5 million, and a
financial requirement of HK$1.5 million in terms of bank credits.  Upon liberalisation in
January 2003, the registration criteria will be relaxed.  The current capital and financial requirements
will be lifted.  Any person carrying on business registered in Hong Kong and interested in dealing
with the rice importing business may apply to be registered as rice importers any time.WT/TPR/M/109/Add.1
Page 9
Question 10
In January 2000, a revised quota system was introduced for imports of hydrochlorofluorocarbons -
HCFCs (Point III(2)(v), paragraph 22, of the Repo rt by the Secretariat).  Would Hong Kong, China
please indicate what the quota application period will be.
Answer
Under the current quota system introduced for import of hydrochlorofluorocarbons (HCFCs), the
quota is renewed at the beginning of each calendar year.  Quotas for a particular year have to be
utilized within that calendar year and the portion of quotas unutilized within the calendar year will
lapse.
Question from Australia
Question 1
Australia is concerned with the reintroduction in 2002 of an extremely high excise on wine in Hong
Kong, China, and the harm caused to wine exporters to Hong Kong, China and to domestic
consumers in Hong Kong, China.  The excise, whic h appears to be designed to be a domestic revenue
raising fiscal measure, imposes a barrier to Australian wine exports to Hong Kong, China which
otherwise enter free of any trade constraints.  Are there plans to phase out the excise?
Answer
Our ad valorem wine duty is a revenue raising measure, and is not a trade barrier against imports from
any places.  It does not discriminate against products from any economy.  Australian wine enjoys
significant market share in Hong Kong.  Our duty is a revenue raising measure, and is not a trade
barrier against imports from any places.  Duty is levied so long as the dutiable goods are consumed
locally, and no matter they are imported or locally produced.  Imported and local products are subjectto the same rate of duties.  The regime is entirely consistent with WTO requirements.
Our duty on wine cannot be regarded as extremely high compared to other economies.  Firstly, it is
difficult to make a comparison of between economies on a like-for-like basis because different
economies adopt tax regimes that vary to a great extent.  Nevertheless, it is worth noting that other
economies commonly have a number of taxes on wine, for instance import tax, excise duty, alcoholtax and sales tax.  On the other hand, we have only one duty on wine, because we wish to keep our
taxation system simple and transparent.
We regularly review all our tax items and duty rates to  see if there is any scope for adjustment in the
context of the overall economic and fiscal situation.
On duty on alcoholic beverages, for instance, we adjusted the duty on liquors, other than wine, with
an alcoholic strength of not more than 30% (for example, beer) from 30% of ex-factory price to 40%
in March 2001.  We raised the duty on wine from 60% of ex-factory price to 80% in the 2002-03Budget.  The increase in duty was in fact very mild, as our duty on wine is levied on an ad valorem
basis on the wine’s ex-factory price, not on its far higher retail price.  Although the tax rate is 80%,
because of its low basis and that we do not have any GST or other types of taxes on wine, additional
duty on an average bottle of wine as a result of  the duty increase was only about HK$6 or US$0.77,
which translated into a single digit percentage increase in the retail price of wine.
We consider that our duty regime on wine is appropriate.  Currently, we have no plan to phase out the
duty.WT/TPR/M/109/Add.1
Page 10
Questions from Canada
Secretariat Report (WT/TPR/S/109)
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(5) FOREIGN INVESTMENT
(ii) Direction of Trade
Paragraph 21
Question 1
Are Business Registration Certificates ever refused and if so on what grounds?  What are the
consequences if a business is not able to obtain a certificate?  Are the certificates used for statistical
and information purposes or do they serve some other purpose?
Answer
Under the provisions of section 6 of the Busine ss Registration Ordinance (Chapter 310, Law of Hong
Kong), the Commissioner of Inland Revenue is not required to register a business if:
(a) it is unlawful;
(b) its name suggests that it is incorporated wi th limited liability when it is not, or, where
it is incorporated with limited liability, its na me suggests that it is incorporated under
a different name; or
(c) its name suggests a connection with the Government or any public body when no
such connection exists or has existed.
So far, the Commissioner has only refused to register a business on the grounds that its name is
objectionable in accordance with section 6 of the Business Registration Ordinance. There is no record
that the Commissioner has ever refused to register a business on the grounds that it is unlawful.
In the case of a business with an objectionable name, the owner is required to submit a new
application for registration under a different name within one month of receiving a formal notice of
refusal by the Commissioner. Failure to do so will result in an offence under the Business Registration
Ordinance, which is subject to penalty.
Business registration is for two main objects:
(a) to oblige businesses to disclose details of their partners for taxation purposes, and
(b) to enable the public to obtain particulars of the make-up of the business, and thus
information on whom they are going to deal with.WT/TPR/M/109/Add.1
Page 11
III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) MEASURES DIRECTLY AFFECTING IMPORTS
(vii) Standards and other technical requirements
(d) Labelling
Paragraph 43
Question 2
We understand that the Hong Kong SAR Government contracted research in summer 2002 to study
the economic impact of a labelling sy stem to identify genetically modi fied ingredients.  What is the
conclusion of this report and how does it affect Hong Kong, China's draft regulation on the labelling
of genetically modified foods?   Is it possible to receive a copy of this report?
Answer
The regulatory impact study is expected to be completed in early 2003.  The result of the study will be
made available to the public once the study is completed.
(viii) Government Procurement
Paragraph 49
Question 3
Paragraph 49 states that "works and services contracts, for instance, are normally split into optimal
scale to avoid excessive market concentration".  How is optimal scale determined, and does this result
in contracts falling below the threshold of the trade agreement?
Answer
In determining the optimal scale for splitting works a nd services contracts, we take into consideration
a number of factors, such as the size of the contract, the nature and geographical location of theworks, risk management, and work programme.  The application of these considerations may result in
certain contracts falling below the threshold of the Agreement on Government Procurement, but this
is not for the purpose of circumventing the requirements of the Agreement.
Paragraph 50
Question 4
What measures does Hong Kong, China plan to take to reduce the number of selective, restricted, or
single tendering procedures used?
Answer
Selective tendering is normally adopted for works contracts for which contractors on the relevant
Approved List are considered.  This approach has to be justified on the basis of the professional and
financial capability required for works contracts of the category and magnitude concerned.  Restricted
and single tendering are tightly controlled as procuring departments have to seek the approval of theWT/TPR/M/109/Add.1
Page 12
Financial Services and the Treasury Bureau in each case.  In each case, justifications have to be
provided having regard to the requirements of WTOGPA.
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(iii) Competition Policy and Regulatory Issues
Paragraph 89-94
Question 5
Canada notes that no significant changes have been made to Hong Kong, China's competition policy
since the last review in 1998 (paragraph 89). Furthermore, the WTO Secretariat Report questions the
efficiency of Hong Kong, China's "sector-specific " approach to competition as a substitute for a
comprehensive competition policy (paragraph 4). The report suggests that an independent agency
might be better to promote and enforce competition than the current sector- regulator approach
(paragraph 92). Hong Kong, China is one of the few WTO Members that promotes a sectoral
approach to competition policy.  Paragraph 94 of the report states that Government
bureaux/departments are regularly requested to id entify and review anti-competitive practices within
their areas of jurisdiction, however, transparency of such reviews is likely a problem given that there
are no statutes to define such anti-competitive practices.
What is Hong Kong, China's view on the effectivene ss of its sectoral approach to competition policy?
Answer
Please refer to the answer at Annex.Question 6
Does the government have any plans to revisit its approach to competition policy?Answer
Please refer to the answer at Annex.
Question 7
Have public guidelines been established to assist regulators in distinguishing and evaluating
competition matters from regulatory concerns?  Are public procedures in place to ensure that
competition concerns are not relegated to a secondary status?
Answer
Please refer to the answer at Annex.WT/TPR/M/109/Add.1
Page 13
Paragraph 96
Question 8
The Consumer Council has recommended the enactm ent of a competition law to cover horizontal and
vertical collusive agreements and abuse of a dominant position as well as the establishment of a
Competition Authority and an appeal body.  What has been the government's response to suchrecommendations?
Answer
Please refer to the answer at Annex.
Paragraph 98
Question 9
Paragraph 98 suggests that while competition in Ho ng Kong, China is generally intense, this might
not be the case more recently with a shift toward s services in the past decade.  Does Hong Kong,
China agree with this view?  What has been the experience with competition in the services sector?
Answer
Please refer to the answer at Annex.(v) Intellectual Property Rights
Question 10
Canada would like to acknowledge the significant steps Hong Kong, China has made in combating
intellectual property piracy.  Is Hong Kong, China planning any additional measures in this area?
And, if so, what are they?
Answer
Hong Kong, China has an established framework fo r protecting intellectual property rights.  We will
continue to review and, as appropriate, impr ove the framework in the light of the changing
environment.
On legislation side, we will commence the new Trade Marks Ordinance in early 2003.  It would
modernize the existing trade mark law, simplify regi stration of marks, increase the range of signs that
can be registered as trade marks, as well as provide a higher standard of trade mark protection.  Weare preparing legislation to prescribe copyright registers under the Copyright Ordinance to facilitate
copyright owners to prove copyright subsistence and ownership in legal proceedings against copyright
infringement.  We aim to commence the relevant legislation also in early 2003.  We are also preparing
amendments to the Copyright Ordinance to, among others, provide a dedicated offence against illicit
reproduction of books by copy-shops.
Apart from legislation, we will also continue our effort on enforcement, public education and close
cooperation with intellectual property rights owners.WT/TPR/M/109/Add.1
Page 14
IV. TRADE POLICIES BY SECTOR
(4) SERVICES
(i) Financial Services
(a) Banking
Paragraph 22
Question 11
Paragraph 22, states that "to obtain a licensed-bank licence, the institution must have been a deposit-
taking company or a restricted-licence bank (or any combination thereof) for not less than three
continuous years."  Please explain the prudential rationale for this market access restriction on
foreign banks?
Answer
At present, a locally incorporated applicant seeking to become a full licensed bank in Hong Kong
must have been a deposit-taking company or a restricted licence bank for at least three continuous
years.  This requirement aims to ensure that th e applicant has accumulated adequate knowledge of the
local market before it is permitted to carry on a full range of banking business in Hong Kong.
It should be stressed that this requirement applies only to an applicant seeking to establish a locally
incorporated bank in Hong Kong.  For a foreign bank which wishes to establish a branch in HongKong, there is no such requirement.  In other words, a foreign bank can directly establish a branch in
Hong Kong without the need to become a restricted licence bank or a deposit-taking company
beforehand.  Once authorised, a foreign bank branch can conduct the full range of banking business.
It can also maintain as many branches as they wish to after the complete relaxation of the three-
building condition in November 2001.
(ii) Telecommunications
Paragraph 35
Question 12
Paragraph 35 notes that "the requirements on performance bonds and on capital expenditure will
also be eliminated."  Would Hong Kong, China be ab le to provide further information on when these
requirements will be eliminated?
Answer
Starting 1 January 2003, the fixed telecommunications market will be fully open. Commitments on
roll-out or capital expenditure and the relevant performance bonds will not be required for all
applicants for offering this service as of 1 January 2003.  Applications for licences have been invited
since January 2002.WT/TPR/M/109/Add.1
Page 15
Paragraph 36
Question 13
Paragraph 36 notes that "licences are required for operating any public telecommunications services.
If an application meets the criteria, a licence will be granted". Can Hon Kong, China explain further
the criteria for obtaining such a license?
Answer
In general, an applicant has to meet criteria such as those relating to the applicant's financial or
technical capabilities etc. to provide a satisfactor y public telecommunications services etc. There are
different criteria for different licences depending on the types of services to offer (e.g. mobile or
fixed). The criteria are set out in the guidelines for application of the licences published in OFTA's
website at http://www.ofta.gov.hk/frameset/documents_index_eng.html.
(iii) Transport
(b) Maritime Transport
Paragraph 49
Question 14
Please explain what is meant by "external cargo" in paragraph 49?  Does this refer to imports and
exports or just imports?  Does Hong Kong, Chi na consider China to be external as Hong Kong,
China is an independent administration?
Answer
'External cargo' refers to all inbound cargo to Hong Kong from other countries or regions and
outbound cargo from Hong Kong to other countries or regions, including transhipment, domestic
exports, re-exports and imports.  These countries or regions include the mainland of China.
Paragraph 51
Question 15
Please explain what is meant by "external transport" in paragraph 51.
Answer
'External transport' means that the transport mode is for transportation of inbound and outbound
cargo, i.e. 'external cargo'.
Paragraph 59
Question 16
Paragraph 59 refers to a number of services m anaged by the Government to safeguard port users'
interests.  Please explain how fees are set up for these services.  Is there discrimination between
domestic and foreign users?
AnswerWT/TPR/M/109/Add.1
Page 16
Fees for various port facilities managed by the Government are set under the cost recovery principle
in order to meet expenses incurred in the provision of such services.  The fee schedules are prescribed
in the relevant legislation.  Subsequent revision of the fees requires consultation with the trade and
approval of the Legislative Council.  There is no discrimination between domestic and foreign users
Question 17
Paragraph 59 states that there are no competition or antitrust laws governing the operation of
maritime transport.  If there is no formal statuary requirement prescribing competition as the law of
the land, how would one challenge or make a complaint about anti- competitive practices?  Is there a
domestic law or rule governing this?
Answer
Please refer to the answer at Annex.Questions from Canada
Secretariat Report (WT/TPR/S/109)
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(5) FOREIGN INVESTMENT
(ii) Direction of Trade
Paragraph 21
Question 1
Are Business Registration Certificates ever refused and if so on what grounds?  What are the
consequences if a business is not able to obtain a certificate?  Are the certificates used for statistical
and information purposes or do they serve some other purpose?
Answer
Under the provisions of section 6 of the Busine ss Registration Ordinance (Chapter 310, Law of Hong
Kong), the Commissioner of Inland Revenue is not required to register a business if:
(a) it is unlawful;
(b) its name suggests that it is incorporated wi th limited liability when it is not, or, where
it is incorporated with limited liability, its na me suggests that it is incorporated under
a different name; or
(c) its name suggests a connection with the Government or any public body when no
such connection exists or has existed.
So far, the Commissioner has only refused to register a business on the grounds that its name is
objectionable in accordance with section 6 of the Business Registration Ordinance. There is no record
that the Commissioner has ever refused to register a business on the grounds that it is unlawful.
In the case of a business with an objectionable name, the owner is required to submit a new
application for registration under a different name within one month of receiving a formal notice ofWT/TPR/M/109/Add.1
Page 17
refusal by the Commissioner. Failure to do so will result in an offence under the Business Registration
Ordinance, which is subject to penalty.
Business registration is for two main objects:
(a) to oblige businesses to disclose details of their partners for taxation purposes, and
(b) to enable the public to obtain particulars of the make-up of the business, and thus
information on whom they are going to deal with.
III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) MEASURES DIRECTLY AFFECTING IMPORTS
(vii) Standards and other technical requirements
(d) Labelling
Paragraph 43
Question 2
We understand that the Hong Kong SAR Government contracted research in summer 2002 to study
the economic impact of a labelling sy stem to identify genetically modi fied ingredients.  What is the
conclusion of this report and how does it affect Hong Kong, China's draft regulation on the labelling
of genetically modified foods?   Is it possible to receive a copy of this report?
Answer
The regulatory impact study is expected to be completed in early 2003.  The result of the study will be
made available to the public once the study is completed.
(viii) Government Procurement
Paragraph 49
Question 3
Paragraph 49 states that "works and services contracts, for instance, are normally split into optimal
scale to avoid excessive market concentration".  How is optimal scale determined, and does this result
in contracts falling below the threshold of the trade agreement?
Answer
In determining the optimal scale for splitting works a nd services contracts, we take into consideration
a number of factors, such as the size of the contract, the nature and geographical location of the
works, risk management, and work programme.  The application of these considerations may result in
certain contracts falling below the threshold of the Agreement on Government Procurement, but this
is not for the purpose of circumventing the requirements of the Agreement.
Paragraph 50WT/TPR/M/109/Add.1
Page 18
Question 4
What measures does Hong Kong, China plan to take to reduce the number of selective, restricted, or
single tendering procedures used?
Answer
Selective tendering is normally adopted for works contracts for which contractors on the relevant
Approved List are considered.  This approach has to be justified on the basis of the professional and
financial capability required for works contracts of the category and magnitude concerned.  Restricted
and single tendering are tightly controlled as procuring departments have to seek the approval of the
Financial Services and the Treasury Bureau in each case.  In each case, justifications have to be
provided having regard to the requirements of WTOGPA.
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(iii) Competition Policy and Regulatory Issues
Paragraph 89-94
Question 5
Canada notes that no significant changes have been made to Hong Kong, China's competition policy
since the last review in 1998 (paragraph 89). Furthe rmore, the WTO Secretariat Report questions the
efficiency of Hong Kong, China's "sector-specific " approach to competition as a substitute for a
comprehensive competition policy (paragraph 4). The report suggests that an independent agency
might be better to promote and enforce competition than the current sector- regulator approach
(paragraph 92). Hong Kong, China is one of the few WTO Members that promotes a sectoral
approach to competition policy.  Paragraph 94 of the report states that Government
bureaux/departments are regularly requested to id entify and review anti-competitive practices within
their areas of jurisdiction, however, transparency of such reviews is likely a problem given that there
are no statutes to define such anti-competitive practices.
What is Hong Kong, China's view on the effectivenes s of its sectoral approach to competition policy?
Answer
Please refer to the answer at Annex.
Question 6
Does the government have any plans to revisit its approach to competition policy?Answer
Please refer to the answer at Annex.Question 7
Have public guidelines been established to assist regulators in distinguishing and evaluating
competition matters from regulatory concerns?  Are public procedures in place to ensure thatcompetition concerns are not relegated to a secondary status?WT/TPR/M/109/Add.1
Page 19
Answer
Please refer to the answer at Annex.
Paragraph 96
Question 8
The Consumer Council has recommended the enactm ent of a competition law to cover horizontal and
vertical collusive agreements and abuse of a dominant position as well as the establishment of a
Competition Authority and an appeal body.  What has been the government's response to such
recommendations?
Answer
Please refer to the answer at Annex.
Paragraph 98
Question 9
Paragraph 98 suggests that while competition in Hong Kong, China is generally intense, this might
not be the case more recently with a shift toward s services in the past decade.  Does Hong Kong,
China agree with this view?  What has been the experience with competition in the services sector?
Answer
Please refer to the answer at Annex.
(v) Intellectual Property Rights
Question 10
Canada would like to acknowledge the significant steps Hong Kong, China has made in combating
intellectual property piracy.  Is Hong Kong, China planning any additional measures in this area?
And, if so, what are they?
Answer
Hong Kong, China has an established framework fo r protecting intellectual property rights.  We will
continue to review and, as appropriate, impr ove the framework in the light of the changing
environment.
On legislation side, we will commence the new Trade Marks Ordinance in early 2003.  It would
modernize the existing trade mark law, simplify regi stration of marks, increase the range of signs that
can be registered as trade marks, as well as provide a higher standard of trade mark protection.  We
are preparing legislation to prescribe copyright registers under the Copyright Ordinance to facilitate
copyright owners to prove copyright subsistence and ownership in legal proceedings against copyright
infringement.  We aim to commence the relevant legislation also in early 2003.  We are also preparing
amendments to the Copyright Ordinance to, among others, provide a dedicated offence against illicit
reproduction of books by copy-shops.WT/TPR/M/109/Add.1
Page 20
Apart from legislation, we will also continue our effort on enforcement, public education and close
cooperation with intellectual property rights owners.
IV. TRADE POLICIES BY SECTOR
(4) SERVICES
(i) Financial Services
(a) Banking
Paragraph 22
Question 11
Paragraph 22, states that "to obtain a licensed-bank licence, the institution must have been a deposit-
taking company or a restricted-licence bank (or any combination thereof) for not less than three
continuous years."  Please explain the prudential rationale for this market access restriction on
foreign banks?
Answer
At present, a locally incorporated applicant seeking to become a full licensed bank in Hong Kong
must have been a deposit-taking company or a restricted licence bank for at least three continuous
years.  This requirement aims to ensure that th e applicant has accumulated adequate knowledge of the
local market before it is permitted to carry on a full range of banking business in Hong Kong.
It should be stressed that this requirement applies only to an applicant seeking to establish a locally
incorporated bank in Hong Kong.  For a foreign bank which wishes to establish a branch in Hong
Kong, there is no such requirement.  In other words, a foreign bank can directly establish a branch in
Hong Kong without the need to become a restricted licence bank or a deposit-taking company
beforehand.  Once authorised, a foreign bank branch can conduct the full range of banking business.It can also maintain as many branches as they wish to after the complete relaxation of the three-
building condition in November 2001.
(ii) Telecommunications
Paragraph 35
Question 12
Paragraph 35 notes that "the requirements on performance bonds and on capital expenditure will
also be eliminated."  Would Hong Kong, China be ab le to provide further information on when these
requirements will be eliminated?
Answer
Starting 1 January 2003, the fixed telecommunications market will be fully open. Commitments on
roll-out or capital expenditure and the relevant performance bonds will not be required for all
applicants for offering this service as of 1 January 2003.  Applications for licences have been invitedsince January 2002.
Paragraph 36WT/TPR/M/109/Add.1
Page 21
Question 13
Paragraph 36 notes that "licences are required for operating any public telecommunications services.
If an application meets the criteria, a licence will be granted". Can Hon Kong, China explain further
the criteria for obtaining such a license?
Answer
In general, an applicant has to meet criteria such as those relating to the applicant's financial or
technical capabilities etc. to provide a satisfactor y public telecommunications services etc. There are
different criteria for different licences depending on the types of services to offer (e.g. mobile or
fixed). The criteria are set out in the guidelines for application of the licences published in OFTA's
website at http://www.ofta.gov.hk/frameset/documents_index_eng.html.
(iii) Transport
(b) Maritime Transport
Paragraph 49
Question 14
Please explain what is meant by "external cargo" in paragraph 49?  Does this refer to imports and
exports or just imports?  Does Hong Kong, Chi na consider China to be external as Hong Kong,
China is an independent administration?
Answer
'External cargo' refers to all inbound cargo to Hong Kong from other countries or regions and
outbound cargo from Hong Kong to other countries or regions, including transhipment, domestic
exports, re-exports and imports.  These countries or regions include the mainland of China.
Paragraph 51
Question 15
Please explain what is meant by "external transport" in paragraph 51.
Answer
'External transport' means that the transport mode is for transportation of inbound and outbound
cargo, i.e. 'external cargo'.
Paragraph 59
Question 16
Paragraph 59 refers to a number of services m anaged by the Government to safeguard port users'
interests.  Please explain how fees are set up for these services.  Is there discrimination between
domestic and foreign users?
AnswerWT/TPR/M/109/Add.1
Page 22
Fees for various port facilities managed by the Government are set under the cost recovery principle
in order to meet expenses incurred in the provision of such services.  The fee schedules are prescribed
in the relevant legislation.  Subsequent revision of the fees requires consultation with the trade and
approval of the Legislative Council.  There is no discrimination between domestic and foreign users
Question 17
Paragraph 59 states that there are no competition or antitrust laws governing the operation of
maritime transport.  If there is no formal statuary requirement prescribing competition as the law of
the land, how would one challenge or make a complaint about anti- competitive practices?  Is there a
domestic law or rule governing this?
Answer
Please refer to the answer at Annex.Questions from Chinese Taipei
I. ECONOMIC ENVIRONMENT
(1) RECENT ECONOMIC DEVELOPMENT
(i) Economic Performance
WT/TPR/S/109, paragraph 2
Question 1
The unemployment rate has been rising in Hong Kong since the second half of 2001 and now stands
at its highest level since the 1980s. In addition, the linked exchange-rate system and China's strong
magnetic pull have led to growing deflationary pr essure. In response to these unemployment and
deflation problems, what measures has the Hong Kong government adopted or is planning to adopt?
Answer
Deflation
In a move to break out of the existing deflationary environment, we will have to rely on injection of
new money, investment and consumption from external sources into our economy.  There are at least
three main sources of outside money, outside investment and outside consumption.  First is to attract
foreign companies to use Hong Kong, China as their base, e.g. by setting up regional headquarters orregional offices, to invest in the Mainland of China.  Moreover, it is important to attract Mainland
companies to use Hong Kong, China as a base to interact with the rest of the world.  This is indeed the
role of Hong Kong, China as a major services hub in the region.
The second source of foreign money that we are attracting is tourists.  Hong Kong is already a major
tourist hub.  The number of incoming visitors has increased strongly in double-digits so far in this
year.  We will continue to do everything we can to build up Hong Kong as a better tourist destination.
The third area is to attract new capital through our financial sector.  We are attracting a lot of
companies from all round China - and hopefully from all round Asia - to be listed in our markets.
And our markets attract money not just from our residents but actually all over the world.WT/TPR/M/109/Add.1
Page 23
Unemployment
The Government has embarked on a number of initiatives aimed at creating jobs.  Examples are set
out below.
The Youth Work Experience and Training Scheme (YWETS) provides work experience and job-
related training for young people aged 15-24 with education attainment below degree level. It waslaunched in July 2002. The Labour Department  works closely with all strategic partners including the
Non-Government Organisations (NGOs), employers and training institutes, to ensure the smooth
implementation of the Scheme.  The Government has allocated $400 million to Labour Department
for the Scheme, which will cater for 10 000 youngsters in the next two years.
The Labour Department launched the Re-employmen t Pilot Programme for the Middle-aged (RPP) in
February 2001 which is a special programme comprising employment and career counselling services
for the middle-aged long-term unemployed. The target clients of the RPP are those unemployedpeople aged above 40, and have been unemployed for more than three months. Funds of $9.8 million
are allocated to the one-year pilot scheme, with  a view to serving 2000 job-seekers.  Given the
favourable response, the programme has been extended for another 12 months to help another 2000
job-seekers.
(ii) Macroeconomic policies
(b) Fiscal Policy
WT/TPR/S/109, paragraph 9
Question 2
Hong Kong ran a fiscal deficit for three of the f our years from 1998 to 2001. The deteriorating fiscal
position could exert a negative pressure on the Hong Kong dollar's fixed exchange-rate to the USdollar. These deficits have persisted over recent years, despite the Hong Kong government's efforts to
stimulate the economy and restore fiscal balance. W hat measures are now being taking by the Hong
Kong government in response to this situation?
Answer
We face a structural deficit problem as our economy undergoes structural adjustment following the
Asian financial crisis and amidst a slowdown of the world economy. To tackle our deficit problem,
the Financial Secretary has set in his 2002 Budget targets of restoring fiscal balance and reducing
public expenditure to 20% of GDP or below in 2006-07. Our plan is to achieve these targets through
reviving the economy, strictly controlling expenditure and appropriately raising revenue in the next
few years. We will make the best use of our limited resources to meet the needs of the community
through re-prioritising, re-organising, and re-engineering our work, and making the best use of the
market and the private sector in the delivery of services. We have no plan to change the Hong Kongdollar/US dollar pegged exchange-rate.
WT/TPR/S/109, paragraph 12
Question 3
Starting in early 2002, Hong Kong has been implem enting several policies to increase revenue
through taxes. Among these, the excise duty on wine was raised from 60% to 80%, but the excise duty
on beer and liquor has not yet been adjusted. Please  explain which factors the government took intoWT/TPR/M/109/Add.1
Page 24
account when deciding to increase the excise duty and to set the level of increase of the excise duty
rate on wine.
Answer
We regularly review all our tax items and duty rates to  see if there is any scope for adjustment in the
context of the overall economic and fiscal situation.
On duty on alcoholic beverages, for instance, we adjusted the duty on liquors, other than wine, with
an alcoholic strength of not more than 30% (for example, beer) from 30% of ex-factory price to 40%
in March 2001.  We raised the duty on wine from 60% of ex-factory price to 80% in the 2002-03
Budget.  The increase in duty was in fact very mild, as our duty on wine is levied on an ad valorem
basis on the wine's ex-factory price, not on its far higher retail price.  Although the tax rate is 80%,
because of its low basis and that we do not have any GST or other types of taxes on wine, additional
duty on an average bottle of wine as a result of  the duty increase was only about HK$6 or US$0.77,
which translated into a single digit percentage increase in the retail price of wine.
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(4) TRADE POLICY OBJECTIVES AND ARRANGEMENTS
(ii) Regional cooperation initiatives
WT/TPR/S/109, paragraph 18
Question 4
Since Hong Kong reverted to the People's Republic of China, its trade ties with China have become
closer, and it proposed to establish between Mainland China a free-trade area, namely, the Closer
Economic Partnership Arrangement (CEPA). We would like to learn what the definition of "Hong
Kong companies" will be and what will be the rule s of origin under the CEPA framework. According
to Article 24.4 of GATT 1994, free-trade agreements should not raise barriers to the trade of other
WTO Members with such territories. Thus, we would like Hong Kong to confirm that any future
regulations under the CEPA framework will not affect the rights of other WTO Members.
Answer
Consultations on the Mainland/Hong Kong Closer  Economic Partnership Arrangement (CEPA),
formally commenced in January 2002, are in progress.  Being Members of the WTO, China and Hong
Kong, China have agreed before the consultations that CEPA should be fully consistent with WTO
rules.
China and Hong Kong, China are now working on th e definition of "Hong Kong companies" and the
rules of origin under the CEPA framework. No conc lusions have been reached yet, but we will ensure
that the outcomes are transparent, objective, and above all fully WTO consistent.WT/TPR/M/109/Add.1
Page 25
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) MEASURES DIRECTLY AFFECTING IMPORTS
(ii) Tariffs
WT/TPR/S/109, paragraph 10
Question 5
We welcome Hong Kong's decision, in effect since 1998, to raise binding coverage on non-
agricultural products from 26% to 33%. However, although goods now imported into Hong Kong are
not subject to any tariff or import tax, the 33% binding coverage of non-agricultural products still
seems too low. In order to raise the level of pred ictability in Hong Kong's market, we would like to
ask Hong Kong to move the binding coverage rate up to 100% during the new round of negotiations
on non-agricultural products.
Answer
Members should look at the scope of our tariff binding in context.  As tariff concessions are
exchanged predominantly on the basis of reciprocity, Hong Kong, China being one of the freest
traders in the world is left with no other concession for exchange than scope of binding.  This is
acknowledged by Members as our present scope of binding is the outcome of previous negotiations
plus additional autonomous binding we have ma de since the conclusion of the Uruguay Round.
The scope of binding aside, we have all along maintained a zero-tariff regime; the status of free port
and the pursuit for free trade policy are enshrined in the Basic Law; and we have made unilateral
efforts to increase binding over the years.
We look forward to substantial reduction and elimin ation of tariffs by WTO Members under the Doha
Development Agenda (DDA) negotiations.  We have proposed a two-stage approach to achieve this.In the first stage, Members will follow a formula approach to reduce or eliminate tariffs immediately
upon the conclusion of the DDA negotiations.  Developing Members will be subject to a smaller
reduction.  In the second stage, developed Members will eliminate all tariffs within a reasonably short
period of time (say 5 years), whereas developing Members will continue to reduce tariffs over a
longer timeframe.  Hong Kong, China always stands ready to match the concessions by otherMembers.WT/TPR/M/109/Add.1
Page 26
(iii) Other charges affecting imports
WT/TPR/S/109, Table III.3
Question 6
Table III.3 shows that an excise duty of HK$197/kg is levied on Chinese prepared tobacco, but that
HK$974/kg is levied on all other manufactured tobac co except tobacco intended for the manufacture
of cigarettes. Please provide more detailed defin itions of these two items and explain the rationale
behind the difference in excise duty rates.
Answer
In accordance with the Dutiable Commodities Ordinance of Hong Kong, China, duty is levied on the
following four types of tobacco at different rates: -
(a) cigarettes (HK$804 per 1000 sticks);
(b) cigars (HK$1,035 per kg);(c) Chinese prepared tobacco (HK$197 per kg); and
(d) all other manufactured tobacco except tobacco intended for the manufacture of
cigarettes (HK$974 per kg).
"Cigarette", "cigar", "Chinese prepared tobacco" and "manufactured tobacco" are defined in
section 65 of the Dutiable Commodities Ordinance.
The definition of Chinese prepared tobacco can be found on the web site
http://www.justice.gov.hk/home.htm. The same duty rate is applied for this type of tobacco,
irrespective of sources of import and of whether it is produced domestically.
The lower duty rate for Chinese prepared tobacco was put in place originally to combat smuggling
activities.  It has not been adjusted upwards because of community concern on the impact of anincrease in the duty rate on consumers, who are mainly elderly people not able to afford higher prices
in Chinese prepared tobacco.
(vii) Standards and other technical requirements
(a) Sanitary and phytosanitary
WT/TPR/S/109, paragraph 31
Question 7
It is noted that in order to protect the health of Hong Kong residents, Hong Kong requires that
perishable product imports (such as meat or milk) be attached with an official health certificate from
a Hong Kong Government-approved authority of the exporting country. Please explain the criteria for
such health certificates in each category of perishable products.WT/TPR/M/109/Add.1
Page 27
Answer
In case of meat, the certification should include -
The animals should be derived from non-epizootic areas, free from zoonotic diseases with
public health impact; slaughtered and processed in a hygienic manner and do not contain
contaminants or residues which render the product unfit for human consumption; passed ante-mortem and post-mortem inspections; and found fit for human consumption.
In case of milk, the certification should include -
The milk is derived from healthy cows; processed and packed under hygienic conditions for
the destruction of pathogens; meets certain prescribed compositional standards; and the
product is fit for human consumption.
(viii) Government procurement
WT/TPR/S/109, paragraph 44
Question 8
It is showed that purchases by the Government declined from 6.7% of GDP in 1998 to 3.8% in 2001.
Could Hong Kong please comment on this trend? Does this decline reflect any changes in the
Government's procurement policies?
Answer
The volume of purchase depends on the level of activities based on demand.  The decline does not
reflect any change in the Government's procurement policies.
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Procedures
WT/TPR/S/109, paragraph 57
Question 9
Does Hong Kong impose any conditions on the issuance of certificates of origin, besides requiring a
business to be a legally registered manufacturer? For instance, does it make export performance a
condition? Also, what is the basis for determining the authenticity of a certificate of origin? If a
foreign government questions the authenticity of a Hong Kong certification of origin, can the Hong
Kong government help to verify it? Is the verification process handled by the Trade and Industry
Department and the authorities empowered to issue ce rtificates of origin? What is the verification
procedure? How do other relevant agencies handle cases of counterfeit certificates of origin?
Answer
A Certificate of Hong Kong Origin (CHKO) is a statutory document and is only issued to a
manufacturer who has a valid Factory Registration (F R) with the Trade and Industry Department.  To
qualify for the issuance of a CHKO, the goods must be either a natural produce of Hong Kong, China,or the product of a manufacturing process in Hong Kong, China which has changed permanently andWT/TPR/M/109/Add.1
Page 28
substantially the shape, nature, form or utility of the basic materials used in manufacture.  Export
performance of goods covered by the CHKO is not a condition of issuance.
A CHKO is issued by the certificate-issuing authorities authorized under the laws of Hong Kong,
China.  There are six certificate-issuing authorities: the Trade and Industry Department and five
Government Approved Certification Organizations  (GACOs).  The five GACOs are the Hong Kong
General Chamber of Commerce; the Federation of Hong Kong Industries; the Chinese Manufacturers'
Association of Hong Kong; the Indian Chamber of  Commerce, Hong Kong; and the Chinese Chamber
of Commerce.
The Trade and Industry Department assists in handling enquiries raised by foreign governments on
the authenticity of a CHKO.  Verification of authenticity of certificates of origin is conducted by the
Hong Kong Customs and Excise Department, whose officers have the legal authority to enforce the
laws.  Results of Customs investigations are directly conveyed to the foreign governments.
Applicants of a CHKO have to declare that information furnished in the application is true and
correct.  False declaration on a CHKO is a criminal offence subject to severe punishment.  Moreover,
a company found to be using counterfeited CHKOs fo r export is also liable to prosecution.  Any
person who commits such offences is liable to a fine of HK$500,000 and to imprisonment for 2 years.
(vi) Export finance, insurance, and guarantees
Question 10
Since 1998, the Hong Kong Credit Insurance Corporati on (ECIC) has put into effect several policies
to support exports by SMEs. These include, for example, measures like the Credit Guarantee Scheme,
the Special Finance Scheme for SMEs, provision of export financing for SMEs, etc. Please explain
what qualifies as an SME for the ECIC. What qualif ications are set for the applications for the
aforementioned measures? How effective have these measures been? Do these measures conform to
the relevant WTO rules?
Answer
ECIC does not adopt a particular definition of an SME for the purposes of providing export credit
insurance services.  But over 98% of ECIC's policyholders fall within the general definition of a SMEused in Hong Kong, China (a company in the manufacturing sector with 100 or less employees, or a
company in the non-manufacturing sector with 50 or less employees).
Credit Guarantee Scheme (CGS)
Under the CGS, an exporter registered in Hong Kong, China under the Business Registration
Ordinance, and who was the principal in a contract of sales involving export of goods or services from
Hong Kong, China, was eligible to apply for credit guarantee under the CGS.
The CGS was intended to help SME exporters, as reflected in the value limits (50% of the loan
amount granted by an financial institution or HK$2 million, whichever was less; and the total amount
of credit guarantee for an exporter at any one time should not exceed HK$6 million).  During the three
months when the CGS lasted1, altogether 54 applications were approved, and the total loan amount
                                                     
1 The CGS was merged with the Special Finance Scheme for SMEs in August 1988. The Special
Finance Scheme for SMEs was launched to help all types of SMEs in obtaining loans for lending institutions.The launching of the CGS coincided with the deepening of the liquidity crunch in the aftermath of the Asian
Financial Crisis, which the CGS was not designed to address.WT/TPR/M/109/Add.1
Page 29
involved was HK$51.24 million (the average loan amount was HK$0.95 million per approved
application).  We believe the CGS served the intended purpose of helping exporters to get export
financing.
ECIC Supported Export Finance for SMEs
Under an arrangement between ECIC  and lending institutions, ECIC policyholders can obtain export
finance by assigning the lending financial institutions as beneficiaries of claims under their ECIC
policies.  The policyholders do not need to provide other collateral.  All ECIC policyholders are
eligible to join the arrangement.  Again the target ed beneficiaries are SMEs.   The upper limit of the
credit line granted by a lending institution to an exporter is HK$ 3 million at any point of time ,
subject also to a sub-limit of HK$1 million per overseas buyer.
The arrangement has been warmly welcomed by the ECIC policyholders.  During the period from
May 2000 (the inception of the arrangement) to November 2002, 180 policyholders obtained exportfinancing under the arrangement, and the total insurance exports amounted to HK$1,780 million.  As
at 13 December 2002, 39 lending institutions participated in the arrangement.
The Special Finance Scheme for SMEs (SFS)
The SFS was launched in August 1998 by the Government (not ECIC) at a maximum commitment of
HK$2.5 billion to help SMEs to cope with the then prevailing liquidity crunch problem during theAsian financial crisis.  Under the SFS, the Government act as the guarantor for SMEs' loans approved
by lending institutions for an amount of up to 70% of the loan and no more than HK$2 million over a
period of up to 2 years.  The Scheme was discontinued in April 2000 as the liquidity crunch problem
subsided.
The Scheme benefited nearly 10,000 enterprises in securing more than HK$9 billion of loan.  As such,
we believe that the SFS was an effective and timely measure in relieving the financial hardship of
many SMEs at a time of severe liquidity crunch.
All companies registered in Hong Kong, China under the Business Registration Ordinance were
eligible to apply for support under the SFS.  It is not contingent upon export performance or the use of
domestic over imported goods.  It conformed to the Agreement on Subsidies and CountervailingMeasures.
Conformity to the Agreement on Subsidies and Countervailing Measures
None of the schemes/arrangement outlined above is specific to any enterprises and industries or
contingent upon export performance or the use of domestic over imported goods.  All of them
conformed to the Agreement on Subsidies and Countervailing Measures.WT/TPR/M/109/Add.1
Page 30
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(iii) Competition policy and regulatory issues
WT/TPR/S/109, paragraph 91
Question 11
My delegation has taken note of the fact that Hong Kong, in order to maintain a high level of free
trade and to reduce unnecessary interference, has not yet enacted comprehensive competition laws,
but instead considers the situation for each industry separately, and when necessary, it sets laws
restricting competition in certain special industr ies. It is understood that the Hong Kong Consumer
Council and Competition Policy Advisory Group at present can only refer complaints about unfair
competition to the relevant authorities at their di sposal. Since this method is not mandatory and each
of the relevant authorities has the right to decide independently whether a complaint is legitimate,
how does Hong Kong ensure that the separate au thorities follow the same standards? Furthermore,
how does it ensure that a business found to e ngage in unfair competition receive punishment and
correct its practice of unfair competition? Please also explain how a business may apply for relief
when unfair competition occurs?
Answer
Please refer to the answer at Annex.
IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
WT/TPR/S/109, paragraph 2
Question 12
The 2002-03 Budget Speech states that Hong Kong, China needs to focus on "high-value-added"
economic activities, and lists four particularly im portant areas. In addition, the government will take
"appropriate measures" to secure projects deemed beneficial to the economy when the private sector
is not ready to invest in them . We would like to know what me asures Hong Kong will be taking to
boost "high-valued-added" economic activities in Hong Kong, China. Will those appropriate
measures be applied to foreign services suppliers? Does this indicate that Hong Kong is beginning toplace special emphasis on the development of certai n industries? What criteria are used for deciding
which sectors are qualified as "high-value-added" economic activities, and for deciding which
measures are taken? Will these measures be in compliance with WTO rules? Will Hong Kong, China
submit its notifications pursuant to Article 25 of Agreement on Subsidies and Countervailing
Measures?
Answer
The description of Government's role as a proactive market enabler did not signify a change in the
Government economic role per se.  Nor does it signify a new policy of picking winners.  The message
is that the Government will re-double its efforts to strengthen its role in enhancing our business-
friendly institutional framework and infrastructural support for enterprises to flourish and to
encouraging more investments.
The major aspects of this role are –WT/TPR/M/109/Add.1
Page 31
(a) Maintaining a business-friendly institutional framework
(b) Providing necessary support infrastructure
(c) Raising the quality of our human capital
(d) Securing access for our enterprises to external markets
(e) Facilitating beneficial projects
Hong Kong, China does not grant or maintain any subsidies that are specific to an enterprise or
industry or group of enterprises or industries within  the meaning of Article 2 of the ASCM.   There is
therefore no need for Hong Kong, China to submit any notification pursuant to Article 25.2 of the
Agreement on Subsidies and Countervailing Measures (ASCM).
In short, all government assistance programmes  provided by the Hong Kong, China are in full
compliance with WTO rules, including the provisions of ASCM.  We have no difficulties all along in
fulfilling the obligations contained therein.
(2) AGRICULTURE
WT/TPR/S/109, paragraph 3
Question 13
Hong Kong's Agriculture, Fisheries and Conservatio n Department (AFCD) operates three funds (the
Kadoorie Agricultural Aid Loan Fund, Vegetable Marketing Organization Loan Fund, and J. E.Joseph Trust Fund) to meet the credit requiremen ts of farmers. The Department also provides
emergency relief grants for farmers who suffer losses due to natural disasters. It is understood that
the three funds are financed with non-governmen tal resources. We would like Hong Kong, China to
explain the resource of these funds, and how it ensures that these funds are not used to influence the
entry of foreign agricultural products into its domestic market.
Answer
The source of capital and purpose of the three funds are given in the table below.  All these funds are
administered directly by the Director of the Agriculture, Fisheries and Conservation.  They are
intended to support genuine production of the local agriculture and fisheries industry.  Any attempt to
use the funds to control the domestic market of agricultural products is not permitted.
Applicants for loans from the funds are required to  state the purpose of the loans during application.
Farm visits are paid to ensure that the loans are used for the intended production purpose.  Farmers
who are found to have used the loans for other pu rpose are required to repay the loan immediately.
Fund Source of funding Purpose
Kadoorie Agricultural
Aid Loan Fund
(KAALF)The Fund was established in 1955 under the Kadoorie Agricultural
Aid Loan Fund Ordinance with a capital of $500,000.  Half of this
sum was donated by the Hong Kong Government and the other half
by Lord KADOORIE, L.L.D., J.P. and Sir Horace KADOORIE,
J.P..  Government further donated $750,000 in 1957, $500,000 in
1960 and $500,000 in 1971.  The Kadoorie brothers also generouslydonated another $500,000 in 1971, bringing the capital of the Fund
to $2,750,000.
Income is derived from interest on loans and on bank deposits.Loans from this Fund are granted to
farmers and mariculturists to meet their
development and working capital needs.
The loans are used to purchase the
necessary inputs such as breeding stocks,
feed or fertilizers to maintain production; toimprove farm and fish culture productivity
and to meet environment requirements.
J.E. Joseph Trust Fund The Fund has a capital of $4,261,107 with $459,554 being the The Fund is established for the purpose o fWT/TPR/M/109/Add.1
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Fund Source of funding Purpose
(JEJTF) original amount paid to the Trustee in 1954, $1,553 being a further
payment made by the Hong Kong and Shanghai Banking (Trustee)
Ltd. in 1961, $750,000 contributed by the Hong Kong Government
in July, 1957 as a special relief fund following the disastrous floodsin May that year, $3,000,000 donated by a private individual in
1991 and $50,000 donated by the agricultural industry in
1996/1997.
Income is derived from interest on loans and on bank deposits.encouraging and improving agriculture in
the New Territories by making loans to
farmers' co-operative societies for use
either as development or working capital.
Vegetable MarketingOrganization Loan
Fund (VMOLF)The Fund was established in 1953 with a capital of $2,608,000
donated by the Vegetable Marketing Organization.
Income is derived from interest on loans and on bank deposits.The Fund is established for the purpose o
f
assisting farmers in crop production.
(4) SERVICES
WT/TPR/S/109, paragraph 14
Question 14
We notice that Hong Kong's specif ic commitments cover eight sectors and do not include horizontal
commitments. Does Hong Kong intend to further open it s services markets? If this is the case, please
indicate the sectors in order of priority. Will Hong Kong, China make its horizontal commitments in
the future?
Answer
The fact that Hong Kong, China did not make any horizontal commitments also means that we have
actually not imposed any horizontal restrictions as commonly found in the sector of horizontal
commitments.  Most notably, we maintain a very fr ee regime for establishing business presence in all
those sectors listed in the schedule and there is no horizontal Mode 3 restrictions regarding land, tax,
or nationality.
Hong Kong, China's Uruguay Round commitments cover a number of strategic and infrastructural
service sectors.  We are keen to explore with Members ways to achieve further liberalisation in this
round of negotiations, with a view to achieving a package that will be to the benefit of and acceptable
to all Members.  Indeed, we have been at the foreground of urging greater liberalisation in a number
of key service sectors.  As indicated in various multilateral meetings and informal groups, HongKong, China places high priority on sectors such as telecommunication, audio-visual, financial,
maritime and logistics-related services.
(i) Financial services
(a) Banking
WT/TPR/S/109, paragraph 18
Question 15
There are three type of banking institution in Hong Kong, China: licensed banks, restricted-licence
banks and deposit-taking companies. It is understood that this system is designed to protect depositors
and the stability of the banking industry. However, restricted-licence banks and deposit-taking
companies must be in operation for at least three years before they can apply to become licensed
banks. Is Hong Kong thinking of simplifying this system?
AnswerWT/TPR/M/109/Add.1
Page 33
Hong Kong, China has no plan to convert the existi ng three-tier system into a two-tier system or a
single licensing system in the near future.  Having said that, we do not think that the existing system
poses any barriers for foreign banks to seek access to the banking market of Hong Kong, China.  In
fact, the three-tier system is commonly regarded as a flexible means to facilitate foreign banks to enter
the domestic market (i.e. foreign banks which do not satisfy the authorization criteria for banks canapply to become a restricted licence bank or a deposit-taking company).
WT/TPR/G/109, paragraph 64
Question 16
According to the Securities and Futures Ordinance enacted in March 2002, existing registrants
operating as sole-proprietors or partnerships should incorporate their business before the end of the
transitional period if they wish to continue the regulated activities. On the subject of  "trading
derivative products for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise" as stated in  Hong Kong's Schedule of Specific Commitments for
service industries, regarding the mode of commercial presence, there are some restrictions in terms of
national treatment. For dealing in commodities fu tures, there is a residence requirement in Hong
Kong, in respect of a sole proprietor, or in the case of a partnership or company, in respect of at least
one partner or director must be a registered dealer. Will the above restrictions in Hong Kong'sSchedule of Specific Commitments be modified or relieved when the new Ordinance becomes
operational?
Answer
With a view to ensuring effective prudential control over investors' assets and continuity of business,
existing service supplies operating as sole proprietors or partnerships are given a transitional period ofincorporate locally for their continued supply of services.  We will consider removing the residence
requirement currently inscribed as national treatment limitations in the GATS schedule of Hong
Kong, China in the context of the ongoing services negotiations.
(ii) Telecommunications
WT/TPR/S/109, paragraph 38
Question 17
Hong Kong still does not have any intergovernmental or bilateral agreements on provision of basic
telecommunication networks or services. Does Hong K ong plan to sign any agreements in this area?
Answer
Hong Kong, China has no immediate plan to sign any intergovernmental or bilateral agreements on
basic telecom services.
(iv) Tourism
WT/TPR/S/109, paragraph 65
Question 18WT/TPR/M/109/Add.1
Page 34
Hong Kong, China enacted the Travel Agents (Amendment) Ordinance, which introduces licensing
requirements for persons/companies carrying on the business of an inbound travel agent. Would the
licensing requirements meet Hong Kong's obligations under GATS Article VI?
Answer
Yes.  The licensing requirements under the Travel Agents (Amendment) Ordinance comply with
Hong Kong, China’s obligations under GATS Article VI.
The Travel Agents (Amendment) Ordinance, which came into effect on 1 November 2002, puts in
place a licensing system to regulate inbound travel agents.  The legislation is complemented by
industry's self-regulation.
Under the Ordinance, all inbound travel agents are required to apply for a licence from the Registrar
of Travel Agents (RTA) of the Government and be  a member of the Travel Industry Council of Hong
Kong (TIC).
The main purpose of the Ordinance is to ensure the quality and standards of services provided by
inbound travel agents to visitors.  There is no nationality requirement on the people applying for a
licence or as a member of the TIC.  The Government does not limit the number of licences issued and
impose any requirement, cap or floor of foreign capital ownership in the travel agent service.
Question 19
It is understood that Hong Kong, China is curre ntly planning to add a new licensing mechanism
whereby all travel guides are required to take an examination and obtain a tour guide's licence before
working as guides. What is the current status and general direction of these plans? Can Hong Kong,
China please confirm that they will conform to GATS Article 6, Paragraph 4?
Answer
The requirement for tour guides to receive specified training and examination is not a new licensing
requirement under the Travel Agents (Amendment) Ordinance 2002.  It is a move to bring formal
training to the tour guides to improve and upgrade their quality of service and skills to ensure that
they are able to provide a reasonable standard of service to visitors.  The arrangement conforms to the
objectives of paragraph 4 of GATS Article VI.
IV. SECTORAL DEVELOPMENT
A. Developments in Trade in goods
(a) Textiles and Clothing
WT/TPR/G/109, paragraph 50
Question 20
The Industry and Trade Department has enhanced adm inistrative actions against origin malpractice
of textiles and clothing. We would like to ask Hong Kong, China to provide us with the specific names
and content of these measures as well as information on how effective these measures have been in
terms of preventing illegal transshipment of textiles and falsification of origin.
AnswerWT/TPR/M/109/Add.1
Page 35
Being a responsible trading partner, Hong Kong, China is firmly committed to fulfilling its
obligations under the WTO Agreement on Textiles and Clothing, including the prevention of origin
malpractice.  Origin fraud is an offence under the laws of Hong Kong, China.  Apart from legal
sanctions upon conviction, prompt and parallel administrative penalties are also imposed independent
of the legal actions.  These administrative actions may take such form as discounting non-complyingshipments as not being eligible for gaining quota allocation, permanent forfeiture or surrender of
quotas, suspension of one's export rights, and even de-registration of its factory registration etc.  All
these sanctions have all along served very effectiv e deterrent and help bolster origin compliance in
Hong Kong, China.
As part of Hong Kong, China's ongoing efforts to maintain the integrity of its textiles export control
system, an array of enhanced administrative actions (EAA) have been rolled out following a review of
the enforcement measures in 1998 to further enhance deterrence against origin malpractice, and totailor special sanctions for repeated violators.  Additional measures taken under the scheme include:
(a) permanent surrender of equivalent quotas involved in the non-complying shipments
by the offending party.  Failure to surrender such quotas in full within the stipulated
period (normally one month) will result in an immediate suspension of all export
facilities for the trader in respect of the relevant market for 12 months, and thereafterforfeiture of all its quota holdings in that market;
(b) discounting of performance of the non-complying shipment as not being eligible to
gain quota allocation.  The threat of a reduced quota allocation passes on the
responsibility to the quota supplier to ensure origin compliance of the goods exported
under his quota;
(c) debarment from teaming up with other parties in the same case for future licence
applications for a period of 12 months  This severs the links among conspiring parties
in any origin malpractice; and
(d) rejection of all licensing and certification applications for recidivists for a period of 6
months.  This is tantamount to denying all the export activities of the culpable partiesto all restrained markets, and in turn driving them out of business altogether.
From the experience so far, the EAA which runs side by side with the vigorous enforcement actions
of Hong Kong Customs has helped foster greater origin compliance among textiles traders.
WT/TPR/S/109, paragraph 68
Question 21
It is understood that the Hong Kong Customs auth ority regulates the export and import of textiles
through inspections of cargo at factories and at entry and exit points. Please provide us with thedetails of the Customs authority's regulation on the export of textiles and the results of implementing
this regulation. Does it have any effect on the re-export and export of textiles?
Answer
The Customs and Excise Department (Hong Kong Customs Authority) and the Trade & Industry
Department jointly operate a comprehensive textiles export control system.
Under the Import & Export Ordinance and its subsidiary regulations, all import, export, re-export and
transshipment of textiles and clothing, with minor exceptions, are subject to licensing control unlessWT/TPR/M/109/Add.1
Page 36
exemptions have been otherwise provided for.  Exemptions are principally provided for under a
special scheme but do not apply to textiles export to restrained markets, i.e. the USA, the EU and
Canada.  The basic requirement for the issue of an export licence is that the goods concerned must be
of Hong Kong origin.  Origin compliance is verified by officers of the Customs and Excise
Department through on-site inspections at the factory while the origin-conferring process is inprogress and through factory audit checks to ascertain a factory's production capacity vis-à-vis its
exports performance.
As part of the control mechanism, the law requires all carriers not to accept for export any textiles and
clothing until there is produced a valid licence.  Th ey are also required, after shipment of the goods, to
return the cargo manifest to the Trade & Industry Department for verification against particulars on
the licence.
Hong Kong Customs Authority takes a serious view  on traders who breach any of the conditions of
the textiles export controls system.  Apart fr om prosecution under the Import & Export Ordinance
which provides for a maximum penalty of HK$500,000 and two years' imprisonment for each count
of offence, seized textiles and clothing which form the subject matter of the prosecution are liable to
forfeiture.  In addition, the Trade & Industry Department may take administrative actions against
illicit traders including permanent forfeiture of quota and denial of licensing facilities.
B. Developments in Services
(a) Financial Services
(iii) Insurance
WT/TPR/G/109, paragraph 66
Question 22
We understand that Hong Kong, China is an internationally renowned hub of finance, maintaining a
fair operating environment for insurers and in surance intermediaries from around the world.
However, as the international economic environment has changed over the years, the trend toward
forming linkages between financial and non-financial industries has become more pronounced. We
would therefore like to learn whether Hong Kong, Ch ina will also permit its banks, securities firms,
and insurance companies to invest in setting up in surance intermediaries. Please provide us with
information on the relevant laws and regulations.
Answer
Hong Kong, China has an open insurance market.  In Hong Kong, China, insurance intermediaries
mean either insurance agents or insurance brokers.
Under the Insurance Companies Ordinance (ICO) of  Hong Kong, China, a person shall not hold
himself out as:
- an insurance agent unless he is an appointed insurance agent; or
- an insurance broker unless he is an authorized insurance broker.
The registration of appointed insurance agents and the authorization of insurance brokers are provided
under sections 66 and 69 of ICO respectively.  Banks, securities firms and insurers, irrespective of
their place of origin, can set up insurance intermediaries, provided that they meet the relevantWT/TPR/M/109/Add.1
Page 37
requirements.  For example, the applicants are required to pass the qualifying examination under the
Insurance Intermediaries Quality Assurance Scheme and to attend the Continuing Professional
Development Programme.  Moreover, the chief executives of insurance brokers are required to be fit
and proper persons.  "Fit and Proper" consideration covers competence and honesty, and relevant
factors include financial status, character, reputation, integrity, reliability, qualifications, experienceand competence.   There is a level playing field in the vetting of applications made by foreign
applicants and those made by applicants based in  Hong Kong, China, except for immigration control
(such as possession of work visa by applicants who are not Hong Kong residents).
(c) Broadcasting
WT/TPR/G/109, paragraph 76
Question 23
Hong Kong's government decided, following its 1998 Review of Television Policy, to open up the
television market for competition. There is no limit on the licences to be issued, subjected to physical
or technological constraints. Please explain the exact scope of "the television market." Does this refer
to the "broadcast television market," the "cable television market," and the "satellite television
market" as a whole? Furthermore, regarding no limit on the licences to be issued, does this mean that
television companies are regarded as ordinary companies, and that they only have to be registered ascompanies in order to operate? Or does it me an that they still have to obtain the Hong Kong
government's "special permission" before they can op erate? In either case, please explain what is
needed to apply for registration or to apply for special permission? What is the procedure? Are these
rules also applied to foreigners?
Answer
General background on the regulatory regime
We have separated the licensing and regulatory frameworks for "carriage" and "provision" of
television programme services with the commencem ent of the Broadcasting Ordinance (Chapter 562,
Laws of Hong Kong) (BO) in July 2000.  Unde r the new regulatory framework, transmission
networks are licensed and regulated under the Telecommunications Ordinance while televisionprogramme services, irrespective of the transmission means (terrestrial, cable, satellite or otherwise),
are licensed and regulated under the BO.  Television programme service providers who do not want to
make investments on the infrastructure themselves can hire any carrier to transmit their television
programme services.  The BO now provides a tec hnology-neutral, fair, pro-competition and business-
friendly statutory framework sufficiently flexible to embrace new services made possible by
convergence in technologies.
No one may provide a broadcasting service in or from Hong Kong, China except under and in
accordance with a licence.  There are four categories of broadcasting services under the BO, namely,
domestic free, domestic pay, non-domestic and other licensable (i.e. services catering for hotel rooms
or niche markets) television programme services.  The services are regulated according to the
characteristics, pervasiveness and influence of the service rather than the mode of transmission.
Domestic free TV, which is required to be prov ided throughout Hong Kong, China, is the most
pervasive and is subject to the most stringent regulation both structurally (i.e. foreign and cross-media
ownership restrictions) and in terms of the content.
Only a "company" as defined in section 2(1) of the Companies Ordinance (Chapter 32, Laws of Hong
Kong) may apply for a broadcasting service licence.  The Broadcasting Authority has issued guidanceWT/TPR/M/109/Add.1
Page 38
notes for the application of the four categories of licences.  The guidance notes may be downloaded at
the BA's website at http://www.hkba.org.hk.
Responses to the specific questions
Does "the television market" refer to the "broadcast television market", the "cable television market"
and the "satellite television market" as a whole?
As explained above, our regulatory regime is technology-neutral and licences for the following four
types of services are issued:
(a) domestic free television programme service;
(b) domestic pay television programme service;
(c) non-domestic television programme service; and
(d) other licensable television programme service.
We do not have a ceiling on the number of licences that may be issued for each type of service,
subject to physical or technological constraint (e.g. there is no spare frequency for terrestrial
broadcasts).
Does a television company need to be registered as a company in order to operate?
A broadcasting service licensee has to be a "company" as defined under section 2(1) of the Companies
Ordinance.
Does a company need to obtain the Hong Kong Gover nment's "special permission" before they can
operate?
As explained before, a licence is required to provide a broadcasting service in and from Hong Kong.
There is no special permission as such.
What are the procedures and requirements for application for a licence?  Are these rules also
applicable to foreigners?
An applicant needs to submit the application to the Broadcasting Authority in the specified form.  The
requirements include that the applicant and all persons exercising control of the applicant are fit and
proper persons and that the applicant meets the definition of "company" under the Companies
Ordinance.  The rules are applied without discrimination.  For details, please refer to the guidancenotes and application forms at the BA's website.
Question 24
In addition, in 2000, Hong Kong granted eight ne w non-domestic television programme service
licences. Does this "television programme service" refer only to the supply of television programmes?
Or does it refer to the management of television op erations? Moreover, did the issuance of these
licences stem from the 1998 policy review? We would like to know the market access and national
treatment conditions in this regard.
AnswerWT/TPR/M/109/Add.1
Page 39
General background information
Eight new non-domestic television programme service licences have been granted since the BO came
into effect in 2000.  The four satellite television uplink and downlink licences issued prior to the
enactment of the BO are deemed to be non-domestic television programme service licences issued
under the BO.  There are now altogether 12 such licences.
A "television programme service" refers to the provision of a television programme (content) service
and is distinguished from a "carrier" service, as explained in the answer to the previous question.
Moreover, a broadcasting service provider is free to negotiate and acquire programme rights with any
programme/channel supplier, who does not require a licence for supplying programmes to
broadcasters in Hong Kong, China.  A "television programme service" is defined under the BO, inter
alia, as the provision of a service that includes television programmes for transmission by
telecommunications that are readily accessible to, or made available to, the general public in oroutside Hong Kong, China or to persons, in 2 or more specified premises, simultaneously or on
demand, whether on a point-to-point or a point-to-multipoint basis, or any combination thereof,
having equipment appropriate for receiving that service.
There are no restrictions on market access or national treatment for non-domestic television
programme services.  However, at least one director or principal officer of the licensee has to be forthe time being ordinarily resident in Hong Kong, China and has been ordinarily resident in Hong
Kong, China for at least one continuous period of not less than 7 years.  This residency requirement
applies irrespective of the nationality, residential status or citizenship of the director or principal
officer.  In other words, even a Hong Kong perman ent resident has to be for the time being ordinarily
resident in Hong Kong, China to satisfy this requirement, which is necessary for liaison purposes onregulatory matters.
Responses to the specific questions
Does "television programme service" refer only to the supply of television programmes, or does it
refer to the management of television operations?
It means the provision of a service that includes television programmes for transmission by
telecommunications, as defined in section 2(1) of the BO.
Did the issuance of the non-domestic television programme service licences stem from the 1998 policy
review?
No, four licences to establish uplink and downlink stations for provision of non-domestic television
services had been issued prior to the 1998 review.
Are there restrictions on market access and national treatment conditions in respect of the provision
of non-domestic television programme services?
No.  Please see the background information above.
(d) Professional Services
(ii) Liberalization of Legal Services
WT/TPR/G/109, paragraph 80
Question 25WT/TPR/M/109/Add.1
Page 40
It is understood that an amendment was made to the Legal Practitioners Ordinance in June 2000, so
that barristers from the commonwealth countries  and non-commonwealth countries would be subject
to the same admission criteria. However, the Secretary for Justice has not yet announced the date
when this amendment will come into effect. We are interested to learn when the Amendment will be
put into effect.
Answer
The commencement date of the amendments relating to the admission criteria of barristers is subject
to the relevant rules being made by the Bar Council.  The expected commencement date is early 2003.
Questions from Colombia
III. TRADE POLICIES AND PRACTICES BY MEASURES
(2) MEASURES DIRECTLY AFFECTING IMPORTS
(vii) Standards and other technical requirementsQuestion 1
In Section (2) Measures directly affecting imports, literal  (vii) Standards and other technical
requirements, paragraph 31 the Secretariat's report indicates: "the authorities state that sanitary and
phytosanitary controls on imported food are imposed solely on public health grounds and on the basis
of scientific evidence.  Imports of perishable products (e.g. milk, milk beverages, frozen confections,game, meat, and poultry) have to be accompanied by official health certificates issued by recognized
overseas authorities".
Colombia' authorities would like to know the list of  the overseas recognized authorities by Hong Kong
China. What are the procedures to make such recognition?
Answer
Before recognizing a foreign authority for the inspection and certification of game, meat and poultry
for export, we will assess the following information -
(a) the animal disease situation in the exporting place;
(b) the legislation in the exporting place governing hygienic standards of game, meat or
poultry and the residues of veterinary drugs in game, meat and poultry;
(c) the facilities and hygienic standards of the farms;
(d) the location of slaughterhouses/processing plants and facilities for handling,
processing, production, storage and transp ort of game, meat or poultry and their
hygienic standards;
(e) details of inspection of game, meat or poultry in the ante and post-mortem process;
(f) training, qualifications and international recognition of officers responsible for the
inspection process;
(g) the format of the official veterinary and health certificate which is to be issued; andWT/TPR/M/109/Add.1
Page 41
(h) the official name of the authority responsible for issuing veterinary and health
certificates.
Based on past compliance history and other relevant information, an authority in a foreign economy
may be included in a recognized list.  Products accompanied by official certificates issued by a
recognized authority will be subject to lesser regulatory checks at the point of entry.  A list of theserecognized authorities is as follows.
List of Recognized Authorities
(in respect of Game, Meat and Poultry)
Country Recognized Authority
Argentina The National Service of Agri-Food Health and Quality of the Secretary of Agriculture,
Livestock, Fisheries and Food
Australia The Department of Agriculture, Fisheries and Forestry
Botswana The Department of Animal Health and Production
(in respect of beef only)
Brazil Ministry of Agriculture and Food Supply
(in respect of beef, pork and poultry only)
Canada The Canadian Food Inspection Agency 
People's Republic of China Entry-Exit Inspection And Quarantine Bureau
Denmark The Ministry of Agriculture
France The Ministry of Agriculture and Fisheries
(in respect of poultry only)
Germany The Ministry of Health
Japan The Ministry of Health and Welfare
(in respect of beef only)
Kenya The Ministry of Agriculture and Animal Husbandry
The Republic of Korea The Ministry of Agriculture and Forestry
(in respect of poultry only)
Malawi The Commissioner for Veterinary Services
(except in respect of pork)
Namibia The Directorate of Veterinary Services
(except in respect of pork)
Netherlands The National Inspection Service for Livestock and Meat of the Ministry of Agriculture, Nature
Management and Fisheries
New Zealand The Ministry of Agriculture
Poland General Veterinary Inspectorate
(in respect of poultry only)
Singapore Agri-food and Veterinary Authority
(in respect of meat only)
South Africa The National Department of Agriculture
Sweden The National Food Administration
(in respect of pork only)
Thailand The Department of Livestock Development
(in respect of poultry only)
United Kingdom The Ministry of Agriculture, Fisheries and Food
The Department of Agriculture for Northern Ireland
United States of America The United States Department of Agriculture
Uruguay The Ministry of Livestock, Agriculture and Fisheries
(in respect of meat derived from bovine animals only)
Zambia The Department of Research and Specialist Services - Animal Production and Health, the
Ministry of Agriculture, Food and Fisheries
(except in respect of pork)
Zimbabwe The Department of Veterinary Services of the Ministry of Lands, Agriculture and Rural
Resettlement
(in respect of beef only)WT/TPR/M/109/Add.1
Page 42
For other food products, we will also assess simila r information in respect of the foreign inspection
and certification authority.  However, we do not publish a recognized list in respect of these products
and each case will be considered separately on its own merits.
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(i) IncentivesQuestion 2
In Section III. Trade policies and practices by measure, literal (4) Other measures affecting
production and trade, (i) Incentives, paragraph 77, the Secretariat's report indicates that recently the
Financial Secretary stated in his 2002 – 2003 Budget  Speech that "the Government should be a
proactive market enabler" and that Hong Kong, Ch ina needs "to focus on high-value-added economic
activities" (financial services, logistics, tourism, and producer and professional services).   The
Financial Secretary also indicated that the Govern ment would secure projects beneficial to the
economy as a whole when the private sector is not ready to invest in them. "
Colombia's private and public sector are interested to promote the export professional services to
new markets. We would like to know which sub-sectors and which programs the Hong Kong, China
Government is focusing his efforts. We also appreciate if Hong Kong can provide detailed
information regarding to legislation that regulates this sector in particular.
Answer
The role of "proactive market enabler" does not augur a new policy of picking winners or "focusing"
on individual professions.  The Government continues to uphold its long-standing free-market
philosophy.
Regarding information on legislation regulating various profession, information on some major
professions is provided below.
Barristers and Solicitors
Lawyers are admitted to practise in Hong Kong, China either as solicitors or barristers, and there are
different admission requirements for the two branches of the profession.
Such requirements are provided in the Legal Practitioners Ordinance ("the Ordinance").  Pursuant to
the Ordinance, the two professional bodies, name ly the Law Society and the Bar Association, are
vested with the power to regulate solicitors and barristers in areas such as practice, conduct,
discipline, examination and continuing education by way of subsidiary legislation.  It is provided in
the Ordinance that these rules and regulations made by the Law Society and the Bar Association
would require the prior approval of the Chief Justice.
Solicitors
The Court may admit a person as a solicitor of the High Court if the Court considers him a fit and
proper person to be a solicitor and who has complied with requirements prescribed by the Law
Society Council with respect to the employment a trainee solicitor, passing of examinations and
completion of courses.WT/TPR/M/109/Add.1
Page 43
A person will need to enter into a two-year trainee solicitor contract if he has passed or received a
certificate of completion or certificate of satisfactory completion as the case may be in the
Postgraduate Certificate in Laws and such examination or course required by the Law Society.
Barristers
Under the current legislation, a person may be admitted as a barrister in Hong Kong, China if he
satisfies the following general admission requirements -
(a) He has been called to the Bar in England or Northern Ireland or admitted as an
advocate in Scotland and has practised as a barrister or advocate in the United
Kingdom for at least 3 years, or is a Hong Kong permanent resident, or has been
ordinarily resident in Hong Kong for at  least 7 years (Under the amended Ordinance
which will come into effect later, barristers from Commonwealth countries and non-
Commonwealth countries would be subj ect to the same admission criteria);
(b) He has obtained a degree in law in the University of Hong Kong, the City University
of Hong Kong or the City Polytechnic of Hong Kong and has obtained a Postgraduate
Certificate in Laws (PCLL);
(c) He has obtained a PCLL and is a permanent Hong Kong resident, or is a
Commonwealth citizen or citizen of the Republic of Ireland who has been ordinarilyresident in Hong Kong for at least 7 years (This criterion will be changed when an
amendment to the Ordinance comes into effect in 2003); or
(d) He has been admitted as a solicitor in Hong Kong, China for at least 3 years before
his application for admission and during that time he was in practice as a solicitor in
Hong Kong or employed by the Hong Kong Government as legal officer.
Medical Practitioners
In accordance with the Medical Registration Ordinance (Chapter 161, Laws of Hong Kong), persons
can register with the Medical Council of Hong Kong if –
(a) they have been awarded a degree of medicine and surgery by the University of Hong
Kong and the Chinese University of Hong Kong and have satisfactorily completedthe required internship for full registration as medical practitioners in Hong Kong; or
(b) they are holders of other relevant medical qualifications and have passed the
Licensing Examination conducted by the Licentiate Committee of the Medical
Council and thereafter undergo a period of internship training of not less than 12
months.
Chinese Medicine Practitioners
The Chinese Medicine Ordinance (Cap 549), among other things, provides for the Chinese Medical
Council of Hong Kong and the requirement for registration of Chinese medicine practitioners.
Listed Chinese Medicine Practitioners
Under the transitional arrangements, "Grandfather s" who were practising Chinese medicine on
3 January 2000 will be allowed to continue their practice as "Listed Chinese medicine practitioners"WT/TPR/M/109/Add.1
Page 44
until their application for registration is approved/rejected, or on a date to be appointed by the
Secretary for Health, Welfare and Food, whichever is the earlier.
Listed CMP who have been practising Chinese medicine in Hong Kong for 15 years or more
immediately preceding 3 January 2000, or those who ha ve been practising for 10 years or more and
with recognised qualifications, will be eligible for direct registration.  Those with less than 10 years ofexperience but with recognised qualifications will be required to undertake a Registration Assessment,
passing of which will make them eligible for registration.  Those with less than 10 years of experience
and no recognized qualifications will have to pass the Licensing Examination before being eligible for
registration.
Chinese Medicine Practitioners not eligible for transitional arrangements
After this one-off listing exercise for the "Grandfat hers", in future all applicants for registration as
Chinese medicine practitioners are required to pass the Licensing Examination and only holders ofbachelor degree in Chinese medicine or equivalent qualifications recognised by the Chinese Medicine
Council are allowed to sit for the Licensing Examination.  The Licensing Examination will be held
annually and there is no limit on the number of attempts a candidate is allowed to make.
Accountants
The Hong Kong Society of Accountants (HKSA) is a statutory licensing body of accountants in Hong
Kong.  It is established under the Professional Accountants Ordinance (Chapter 50, Laws of Hong
Kong).  A person can qualify for registration as a professional accountant in Hong Kong, China, i.e. a
member of the HKSA if he/she –
- has passed the examinations prescribed by the Council of the HKSA, or is a member
of an accountancy body approved by the Council as being of a standard similar to thatof the Society and has passed such examinations of that accountancy body;
- has attained the aged of 21;
- is of good character and is a fit and proper person; and
- has satisfied the practical experience requirement.
A professional accountant has to obtain a practising certificate before he/she can practise as a certified
public accountant in Hong Kong, China.  To obtain a practising certificate, he/she has to be ordinarily
resident in Hong Kong, China (present in Hong Kong, China for not less than 180 days in the
preceding 12 months in this context); possess such professional experience and knowledge of local
law and practice as the HKSA Council may consider necessary; and has passed an examination in
local law and taxation.  This is to ensure that certified public accountants are familiar with relevant
local laws and practices to maintain quality of service.
Both local and foreign service providers are subject to the same sets of professional accountant
registration criteria and certified public accountant practising certificate requirements (which include
for the latter, among others, residency requirements).
There are no additional regulatory requirements for operation which discriminate between domestic
and foreign service providers.
Construction & Engineering Related Professional ServicesWT/TPR/M/109/Add.1
Page 45
Currently there are 5 registration boards for the registration of professionals in construction and
engineering services, namely,
(1) Architects Registration Board – Architects Registration Ordinance (Chapter 408, Laws of
Hong Kong)
(2) Engineers Registration Board – Engineers Re gistration Ordinance (Chapter 409, Laws of
Hong Kong)
(3) Landscape Architects Registration Board – Landscape Architects Registration Ordinance
(Chapter 516, Laws of Hong Kong)
(4) Planners Registration Board – Planners Regi stration Ordinance (Chapter 418, Laws of Hong
Kong); and
(5) Surveyors Registration Board – Surveyors Registration Ordinance (Chapter 417, Laws of
Hong Kong).
Qualifications for registration are the same for these registration boards, which are in essence,
membership of the corresponding professional institute in Hong Kong, China or an equivalent
professional qualification, ordinarily resident in Hong Kong, China and one year's relevant
professional experience in Hong Kong, China.
Questions from the European Union
Government Report (WT/TPR/G/109)
III. TRADE POLICY DEVELOPMENT
C. REGIONAL TRADE AGREEMENTS
Question 1
The report states that discussions are ongoi ng on the possible conclusion of an FTA with New
Zealand on the one hand and with mainland of China on the other. It is indicated that in both cases,
these FTAs would cover trade in goods, trade in services and investment. The EC would appreciate it
if Hong Kong, China could
- give more details on the state-of-play of these discussions and on a possible
timetable.
- confirm that these FTAs (and in particular the one with the mainland of China) will
also cover financial services. If the answer is negative, could Hong Kong, China
indicate how this would reconcile with GATS Art. V requirement that a FTA on
services should have a “substantial sectoral coverage”?
- indicate how a “Hong Kong, China enterprise” would be defined in the context of
these FTAs.
Answer
(1) Hong Kong, China and New Zealand commenced negotiations on a Closer Economic
Partnership Agreement in May 2001. The negotiations encompass a wide-ranging scope withWT/TPR/M/109/Add.1
Page 46
emphasis on trade and investment liberalisation and facilitation. Five rounds of negotiations
have been held.
The proposed Mainland/Hong Kong Closer Economic Partnership Arrangement (CEPA) will
cover three areas – trade in goods, trade in services, and trade and investment facilitation.
Consultations, formally commenced in January 2002, are ongoing.
Definite timetables for completion of work in respect of these two FTA initiatives have not
been set but all parties involved are committed to concluding the consultations as soon as
possible.
(2) Consultations on the FTAs are in progress and we are unable to comment at this stage
whether and how a particular service sector will be covered.  Nonetheless, Members can be
assured that the initiatives will be fully consistent with relevant WTO rules including those
pertaining to sectoral coverage of FTAs.
(3) Discussion on the definition of “Hong Kong en terprises” or "Hong Kong companies" in the
context of these FTA initiatives have not yet been concluded. But we will ensure that the
outcomes are transparent, objective, and above all fully WTO consistent.
IV. SECTORAL DEVELOPMENTS
B. DEVELOPMENTS IN SERVICESQuestion 2
(para 63) The report states that in 2000, through the merger of two exchanges and three clearing
houses, the Hong Kong, China Exchanges and Clearing Limited (HKEx) was established and became
a listed company. This merger seeks to create a new market structure to achieve higher efficiency,
cost reduction and better risk management. But at th e same time, HKEx is also entrusted with vetting
companies seeking to lis t in Hong Kong, China.
- The EC would appreciate it if Hong Kong, China could explain if this gives rise to a
potential conflict of interest between the HKEx’s need to turn a profit and its
responsibilities as market regulator?
- We would also like to get further clarif ication on the delineation and division of
responsibilities among the HK Government, the Securities & Futures Committee and
the HKEx within the three-tiered regulatory structure.
Answer
The law enabling the merger exercise2 stipulates that the HKEx in performing its public functions has
to take into account public interest, and if the public interest comes into conflict with its shareholders’
interest, the public interest must prevail.
Specifically, section 8 of the Merger Ordinance imposes certain statutory duties on HKEx.  In
discharging those duties, HKEx has to act in the interests of the public, having particular regard to the
interests of the investing public.  If a conflict of interest situation arises, HKEx must subordinate the
other interests to public interest.  Under common law, all directors of HKEx have the fiduciary duty to
                                                     
2 This refers to the Exchanges and Clearing Houses (Merger) Ordinance ("the Merger Ordinance")
enacted in February 2000.WT/TPR/M/109/Add.1
Page 47
act honestly, in good faith and in the best interests of the company.  It is in the interest of HKEx to
comply with the statutory duties imposed on it under section 8 of the Merger Ordinance.  Hence, all
directors of HKEx, in discharging their fiduciary duties owed to HKEx, have to ensure that HKEx’s
statutory duties are complied with.  That is, all HKEx directors have to ensure that HKEx places
public interest in priority over any other interests.
The law also enshrines a range of safeguards to ensure that the SFC, as the regulator of the HKEx, has
adequate powers to monitor and supervise the performance of functions by the HKEx.  In particular,
section 14 of the Merger Ordinance provides that  the SFC may give directions to HKEx where the
SFC is satisfied that a conflict of interest exists or may come into existence between the interest of
HKEx and the interest of the proper performance of HKEx’s statutory functions, including its listing
functions.  The SFC may direct HKEx to take such steps as specified to remedy the conflict of interest
or the matters occasioning the conflict of interest.
Question 3
(para 64) Furthermore, the Securities and Futures Ordinance, enacted in March 2002, seeks to
provide a more transparent and coherent regulatory regime. The EC would appreciate it if Hong
Kong, China could give more details of the way that the new legislation will tackle listing agreements
that are poorly enforced and provide a timetable of its bringing into operation.
Answer
Certain provisions in the Securities and Futures Ordinance (SFO) and the subsidiary legislation made
thereunder will contribute towards improving the standard of corporate governance of listed
companies in Hong Kong, China.  The most notable improvement is to strengthen enforcement of the
non-statutory Listing Rules by introducing the “dual filing” arrangements under the Securities andFutures (Stock Market Listing) Rules.
Under the dual filing arrangements, a company applying to list its securities for trading on the stock
exchange will be required to submit copies of its listing application to the Securities and Futures
Commission (SFC) within one business day after the same is submitted to the stock exchange.  (To
facilitate compliance, the Rules enab le the applicant to fulfil this obligation by authorizing the stock
exchange to file the materials with the SFC on its behalf.)
The SFC may require the applicant to supply furthe r information.  The SFC may object to the listing if
the applicant fails to comply with such a requirement, or it appears to the SFC that the applicant has
supplied false or misleading information in its application, or it is not in the public interest or in the
interest of the investing public.  Similar filing requirements will apply to public statements and other
on-going disclosure of information by listed companies to the public pursuant to requirements under
the stock exchange’s Listing Rules or other applicable laws.
With these dual filing requirements and power to request additional information from listed
companies or listing applicants, the SFC, as the statutory regulator, is able to employ its investigatory
powers in gathering evidence and establishing the facts.  Where appropriate, the SFC may bring
offenders to prosecution in the Court.  This is considered and generally accepted by market
participants in Hong Kong, China as an effective deterrent against disclosure of false or misleadinginformation and as a positive move to improve the quality of corporate information disclosure.
There are also other measures in the SFO which we believe would help improve corporate governance
and upgrade the quality of the capital market in Hong Kong, China.  They include -WT/TPR/M/109/Add.1
Page 48
- criminalising disclosure of false or misleading information inducing investors to enter
into securities transactions, with a penalty maxima of 10 years’ imprisonment and a
fine of $10 million;
- providing investors with a new private right of action to seek compensation for
pecuniary losses arising from reliance on false or misleading communications,including those issued by listed companies; and
- providing auditors of listed companies st atutory immunity from civil liability for
reporting suspected corporate misconduct to the SFC.
We have announced our plan to bring the SFO and its subsidiary legislation into operation on
1 April 2003.
F. COMPETITION POLICY
Question 4
Hong Kong, China’s domestic market has a lack of  regulation on competition policy. Does Hong
Kong, China share our view that this situation pe rmits a system of entrenched cartels which might
have a negative impact in terms of efficiency and impede the entrance of foreign competitors? How
does Hong Kong, China guaranty the effective application of a loyal competition on its market?
Would Hong Kong, China not consider the establishmen t of a multilateral framework for competition
policy as a good solution to promote free trade in a fair and transparent manner also on its territory?
Answer
Please refer to the answer at Annex.Question 5
Does the Government agree that in the current econom ic situation it would be convenient to improve
competition in particular in those sectors indicate d in the Secretariat’s report (page 40, § 98), such as
real estate and transportation?
Answer
Please refer to the answer at Annex.Report by the Secretariat (WT/TPR/S/109)
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(3) TRADE POLICY FORMULATION AND IMPLEMENTATION
Question 6
To what extent does Hong Kong, China take envi ronmental issues and impacts into account when
developing and implementing its trade policy?WT/TPR/M/109/Add.1
Page 49
Answer
Hong Kong, China fully supports the objective of sustainable development and recognises that trade
and environment could be mutually supportive.  Since 1992, environmental implications arising from
policy proposals including trade policy are required to be stated clearly in their submissions to the
Executive Council, an organ for assisting th e Chief Executive of the Hong Kong Special
Administrative Region for policy making.  In addi tion, since December 2001, we have put in place a
sustainability assessment system to facilitate the integration of sustainability principles into the
Government’s decision-making process.  Under the assessment system, the relevant bureaux are
required to conduct sustainability assessment of each of their strategic initiatives and major
programmes and explain the findings to the decision-making bodies.  In accordance with these
requirements, the Commerce, Industry and Technology Bureau in consultation with relevant policy
bureaux, has been looking into the environmental implications of major trade policy and negotiations.Direction and guidance will be provided to relevant bureaux and departments responsible for
implementing trade policy and measures.
III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) MEASURES DIRECTLY AFFECTING IMPORTS
(iii) Other charges affecting importsQuestion 7
(para 12) The excise duty on wine was raised from 60% to 80% (i.e. an increase of 33%) in
March 2002. Hong Kong, China justified this measure by stressing that it would help offsetting the
fiscal deficit. Could Hong Kong, China explain wh y this increase, which has a very negative impact
on imports, specifically targets wine (while the excise duty on liquors other than wine with analcoholic strength below 30% remained unchanged at 40%)?
Answer
We regularly review all our tax items and duty rates to  see if there is any scope for adjustment in the
context of the overall economic and fiscal situation.
On duty on alcoholic beverages, for instance, we adjusted the duty on liquors, other than wine, with
an alcoholic strength of not more than 30% (for example, beer) from 30% of ex-factory price to 40%
in March 2001.  We raised the duty on wine from 60% of ex-factory price to 80% in the 2002-03
Budget.  The increase in duty was in fact very mild, as our duty on wine is levied on an ad valorem
basis on the wine’s ex-factory price, not on its far higher retail price.  Although the tax rate is 80%,
because of its low basis and that we do not have any GST or other types of taxes on wine, additional
duty on an average bottle of wine as a result of  the duty increase was only about HK$6 or US$0.77,
which translated into a single digit percentage increase in the retail price of wine.
(vii) Standards and other technical requirements
Question 8
(para 43) Could Hong Kong, China please indicate the state of affairs of the consultation process to
put in place labelling requirements for genetically modified food?WT/TPR/M/109/Add.1
Page 50
Answer
We issued the “Genetically Modified Food Labelling” consultation paper in February 2001.  The
paper proposed a labelling approach that required the presence of GM content above a threshold in
any ingredient of a food product to be labelled.  Three proposed options for implementation were:
voluntary labelling, mandatory labelling, and voluntary labelling to be followed by mandatorylabelling at a later date.
Different views towards the labelling approach and options were collected.  The food trade had
expressed concern that the compliance with the mandatory labelling requirement would incur
additional costs to the trade and might in turn affect the food supply in Hong Kong, China.
We have further commissioned a consultant to conduct a regulatory impact study to assess the impact
of GM food labelling system on the food trade and on food prices before deciding on the way
forward.  The study will be completed soon and is ex pected to be reported to the Legislative Council
in early 2003.
(viii) Government procurement
Question 9
(para 48) Do any of the procuring entities at central level hold permanent lists of qualified suppliers
for the evaluation of bids for tenders? If so, could Hong Kong, China please provide us with moreinformation on such lists, in particular:
How are the lists used in practice and how long are they kept for?
- Are there any common qualification criteria for suppliers?
- Is there one unique list or does each entity have and update its own?
Answer
The Environment, Transport and Works Bureau maintains two permanent lists, namely, the List of
Approved Contractors for Public Works and the List of Approved Suppliers of Materials and
Specialist Contractors for Public Works.  The two lists are further divided into a number of categories
of works and for each category, there are common qualification criteria for admission. The lists are
used in selective tendering where the same qualification criteria appear repeatedly for the samecategory of works.  The lists are maintained by the Bureau on a permanent basis.  Interested
contractors may apply for admission to the lists any time and they may remain on the lists as long as
they meet the qualification criteria.
Other than these two lists, we do not hold permanent lists of qualified suppliers for evaluation of bids
for tenders at central level.
Question 10
(para 49) How do authorities determine what is the optimal scale for splitting contracts such as for
works and services and could Hong Kong, China please provide practical examples? Does the scale
change from case to case or from sector to sector  and, if so, what criteria affect its level? Moreover
does this scale fall under the thresholds for GPA coverage?
AnswerWT/TPR/M/109/Add.1
Page 51
In determining the optimal scale for splitting works a nd services contracts, we take into consideration
a number of factors, such as the size of the contract, the nature and geographical location of the
works, risk management, and work programme.  As an example, for a project on replacement and
rehabilitation of water mains, the Water Supplies Department split the contract into a number of
smaller contracts, on the basis on the nature and geographical location of the works and the size of thecontracts.  These considerations apply in all cases.  The application of these considerations may result
in certain contracts falling below the threshold of the Agreement on Government Procurement, but
this is not for the purpose of circumventing the requirements of the Agreement.
Question 11
(para 50) Does Hong Kong, China consider that it might be possible in the future to provide statistics
distinguishing between local and foreign contractors who have won calls for tender?
Answer
We do not distinguish between local and foreign contractors.  They are treated on an equal basis.
Hence we do not have statistics distinguishing between local and foreign contractors who have won
calls for tender.
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(v) Intellectual property rightsQuestion 12
The report states the efforts by the side of Hong Kong, China to modernise its laws for protecting
intellectual property and to establish a framework of legislation in line with international standards.
However, we believe that there is a continued need for additional enforcement efforts by the
Government of Hong Kong, China. Would Hong Kong, China agree that the legislative framework for
the enforcement of IPR should be further strengthened, and this in particular as regards the
importation, exportation and transit of counterfeited and pirated goods?
Answer
Our legislation already provides criminal liability for import and export of pirated and counterfeit
goods.  Under section 118 of the Copyright Ordinanc e (Chapter 528, Laws of Hong Kong), it is an
offence to import or export other than one's private and domestic use an infringing copy of a
copyright work.  The maximum penalty is HK$50,000 (US$6,410) per infringing copy and
imprisonment of 4 years.  Under section 12 of th e Trade Descriptions Ordinance (Chater 362, Laws of
Hong Kong), it is an offence to import or export goods to which a false trade description or forged
trade mark is applied.  The maximum penalty is HK$500,000 (US$64,100) and imprisonment of
5 years.
We also strictly control import and re-export of plant and equipment required for the manufacture of
optical disks, including master disks. Under Schedule 2 of the Import and Export (General)
Regulations (Chapter 60A, Laws of Hong Kong), th e import and export of optical disc mastering and
replication equipment require a licence.  The maximum penalty for contravening the regulation is a
fine of HK$2 million (US$256,410) and imprisonment of 7 years.
We have implemented the special requirements for border measures concerning importation of
infringing articles under Article 51 of TRIPS, by sections 30A- 30K of the Trade Descriptions
Ordinance and sections 135-144 of the Copyright Ordinance.WT/TPR/M/109/Add.1
Page 52
Goods in transit under the Trade Descriptions Ordinance and articles in transit3 under the Copyright
Ordinance are excluded from the provisions controlling export and import of counterfeit/pirated
goods.  It is noted that TRIPS does not require the control of goods in transit.  Furthermore, it does not
appear to be the international norm that goods in transit should be subject to the same control as for
import and export. Article 9(4) of the Paris Conven tion (which is incorporated in TRIPS) provides
expressly that the authorities shall not be bound to effect seizure of goods in transit.
We have one of the strictest intellectual property regimes in Asia. Nevertheless, there can always be
room for improvement.  We will keep our intellectual property regime under constant review in view
of the changing environment.
Question 13
The EC is particularly worried by a relatively new trend of counterfeited pharmaceutical drugs. In
addition to lost revenue for genuine industry, this issue has very serious implications in the area ofpublic health and safety. We would be grateful to receive Hong Kong, China’s view on this.
Answer
We note the concern on counterfeit pharmaceutical products.  Counterfeit pharmaceutical products,
like other counterfeit goods, are subject to vigorous enforcement under the relevant criminal
provisions of the Trade Descriptions Ordinance.  There are also stringent safety requirements forpharmaceutical products under the Pharmacy and Poisons Ordinance (Chapter 138, Laws of Hong
Kong) to protect public health and safety.  Our enforcement agency has been keeping dialogue with
the pharmaceutical industry on efforts to combat such counterfeits.
Where pharmaceutical products are protected by a patent in Hong Kong, the patent owner has also the
right to take civil action to prevent unauthorized import of products that infringe the patent.
IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
Question 14
(para 2) The report indicates that professional services, a sector where Hong Kong, China has
undertaken very few commitments, is an area of  particular importance to that WTO Member. The
Government report refers to the removal of barriers for the practice of Chinese medicine and of legal
services, to the facilitation of recognition criteria  and to the active participation of Hong Kong, China
in the discussions on domestic regulation. On the basis of the above considerations, we would like to
know:
- What steps have been/are being taken for the removal of trade barriers to the
exercise of other professional services?
- What is the likely date for the amendment to the Legal Practitioners Ordinance that
would subject commonwealth and non-co mmonwealth countries to the same
admission criteria?
                                                     
3 Goods in transit and articles in transit basically refer to goods or articles which are bro ught into
Hong Kong solely for the purpose of being taken out of Hong Kong and remain at all times in or on the
incoming vessel or aircraft throughout their passage through Hong Kong.WT/TPR/M/109/Add.1
Page 53
- What is Hong Kong, China’s policy in the area of professional services terms of
recognition of diplomas and qualifications, other than commonwealth’s?
Answer
Hong Kong, China maintains a fairly liberal regulatory regime on professional services.  Our present
regime is already very open to foreign service providers, while maintaining those prudentialregulations necessary for upholding public confidence in the quality of service.  In future, we will
continue to review our regime from time to time to keep it abreast of the latest development in
international standards, regulatory needs, and any disciplines to be developed by the WTO on
domestic regulation in services area.
The relevant provisions relating to admission criteria  for barristers contained in the amendment to the
Legal Practitioners Ordinance are expected to be put into effect in 2003.
In terms of recognition of diplomas and qualifications, Hong Kong, China has all along adhered to the
principles of transparency and non-discrimination.  Qualification requirements are purported to ensure
the quality of service and upholding professional integrity and enhancing consumer confidence.  We
have followed where appropriate the relevant international standards in various professional fields.
Specific local requirements are usually only required as evidence of local knowledge essential for the
provision of quality service.
(4) SERVICES
(ii) Telecommunications
Question 15
(para 35) According to the Telecommunications Authority Hong Kong, China (TA) the
telecommunications market will be fully liberalised as of January 2003. In this respect, it remainsunclear how the TA and the Office of the Telecomm unication Authority (OFTA), which is supposed to
be an independent body, interact. Does the TA act like a Ministry and the OFTA as an (independent)
regulatory authority? We would be grateful for some clarification.
Answer
The Telecommunications Authority (TA) is the independent authority appointed by the Chief
Executive and is empowered by the Telecommunications Ordinance to carry out many regulatory
functions.  He is underpinned by OFTA in carrying out his functions.  Since the establishment of
OFTA in 1995, the public officer holding the office of the Director General of Telecommunications
has been appointed as the TA and heads OFTA.
Commerce, Industry and Technology Bureau is the Ministry overseeing policy on
telecommunications matters.
Question 16
(para 34 and para 37) Furthermore, could Hong Kong, China please indicate what institution is in
charge of approving tariffs for dominant operators?
Answer
The Telecommunications Authority is responsible for approving the tariffs for dominant operators.WT/TPR/M/109/Add.1
Page 54
Questions from India
Question 1
Could the Hong Kong authorities explain the reasons for maintaining a requirement of licences for
rice imports?  Is the Government of Hong Kong S AR contemplating phasing out of import licenses for
rice?
Answer
The licensing requirement for rice is to keep track of the import quantity to ensure a stable supply of
rice and to keep a reserve stock to cater for emergencies or any short term shortage of supply.  The
reserve stock is shared among all registered importers proportional to their import quantities or sales
volume.  At present there is no plan to phase out the licensing requirement.
Question 2
Since January 1999, the period of visa free entry has been reduced from three months to 14 days.  Do
the authorities in Hong Kong propose to restore th e visa free entry for Indian nationals to three
months?
Answer
We are committed to promoting travel convenience and therefore maintain a liberal regime overall.
However, it is subject to constant review to ensure that it remains effective at all times in facilitating
genuine visitors and yet without compromising the integrity of our immigration control.
The average length of stay of Indian visitors in Hong Kong, China is about four nights.  A visa-free
period of 14 days should not pose inconvenience to most of the visitors.
Genuine visitors or businessmen who intend to stay  in Hong Kong for more than 14 days may apply
for visas with an extended period of stay at their nearest Chinese Diplomatic and Consular Missionbefore coming to Hong Kong, China.  Alternatively, they may also apply for extension of stay at the
Immigration Department after arrival where circum stances so justify.  (In 2001, 96% of applications
for extension of stay from Indian visitors were approved. In the first half of 2002, the approval rate
was 98%.)  Furthermore, eligible frequent business travellers may apply for a Travel Pass which is
valid for three years for multiple entry and allows the holder to stay for two months for each trip.
Questions from Japan
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(4) TRADE POLICY OBJECTIVES AND ARRANGEMENTS
(ii) Regional cooperation initiatives
Closer Economic Partnership Arrangement (CEPA)
Secretariat Report:  p.17, paragraph 18 / Government Report:  pp.11-12, paragraph 45
Question 1WT/TPR/M/109/Add.1
Page 55
Is the CEPA, on which Hong Kong, China has started discussions with the mainland of China, to
become the FTA which will be consistent with Article XXIV of the GATT as well as Article V of the
GATS?  Japan is especially interested in knowing the following points: (1) if liberalization will be
realized in substantially all the sectors; (2) if trade barriers will not be raised in relation to the third
countries.
Answer
Consultations on the Mainland/Hong Kong Closer  Economic Partnership Arrangement (CEPA),
formally commenced in January 2002, are in progress.  Being Members of the WTO, China and Hong
Kong, China have agreed before the consultations that CEPA should be fully consistent with WTO
rules.
Question 2
It has been reported that Chinese telecommunication operators announced a raise in the
interconnection rate with foreign telecommunication operators on international long-distance
telephony.  As far as Japan knows, it was also reported that this measure was not applied to the
telecommunication operators of Hong Kong, China by the request of the Government of Hong Kong,
China.  Is this correct?  If it is correct, it can be said that the attitude of China is contradictory to the
MFN principle.  Please provide the view of Hong Kong, China on this.
Answer
This is not correct.  Chinese operators also raised the termination rates on IDD calls on Hong Kong
operators.
(v) Intellectual property rights
Secretariat Report:  p.43, Table III.9
Question 3
Please provide us with a detailed explanation on the right of making available, the legal remedies
concerning technological measures and rights management information as stipulated in your
Copyright Law.
Answer
By sections 23 and 26 of the Copyright Ordinance, th e making available of copies of a copyright work
to the public is a restricted act.  A person infringes copyright in a work, if he does or authorizes
another to do any of the acts restricted by the copyright.  In this context, making available copies of
the work to the public means making available copies of the work by wire or wireless means, in such
a way that members of the public in Hong Kong or elsewhere may access the work from a place and
at a time individually chosen by them (such as through the Internet).  However, the making of a
transient and incidental copy which is technically re quired for the viewing or listening of the work by
a member of the public is not regarded as an act of infringement (section 65 of the Copyright
Ordinance).
Apart from civil liabilities, there is also criminal liability for distribution of infringing copies of a
copyright work for the purpose of any trade or business, or where the distribution is to such an extent
as to affect prejudicially the owner of the copyright (see section 118(1)(e)(iv) and 118(1)(f) of theCopyright Ordinance).WT/TPR/M/109/Add.1
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On technological measures, section 273 of the Copyright Ordinance provides that a person issuing or
making available copies of a copyright work or unfixed performance to the public in any form which
is copy-protected has the same rights and remedies as a copyright owner has in respect of an
infringement of copyright, against a person who (a) makes, imports, exports, sells or lets for hire,
offers or exposes for sale or hire, advertises for sale or hire, or possesses for the purpose of trade orbusiness, any device or means specifically designed or adapted to circumvent the form of copy-
protection employed or (b) publishes information intended to enable or assist persons to circumvent
that form of copy-protection; knowing or having reason to believe that it will be used to make
infringing copies or infringing fixations.  For this purpose, copy-protection includes any device or
means specifically intended to prevent or restrict copying of a work or fixation of a performance or to
impair the quality of copies or fixations made.
On rights management information, section 274 of the Copyright Ordinance provides that a person
who provides rights management information has the same rights and remedies as a copyright owner
has in respect of an infringement of copyright, against a person who (a) removes or alters any
electronic rights management information provided by him without his authority; or (b) issues or
makes available to the public, sells or lets for hire, imports into or exports from Hong Kong, China,
broadcasts or includes in a cable programme service, without his authority, works or copies of works,performances, fixations of performances to which the electronic rights management information is
attached knowing that the electronic rights management information has been removed or altered
without his authority.  For this purpose, rights management information means (a) information which
identifies the work, the author of the work, the owner of any right in the work, the performer, or the
performance of the performer; (b) information about the terms and conditions of use of the work, theperson having fixation rights in relation to the performance, or the performance; or (c) any numbers or
codes that represent such information, where any of (a) to (c) is attached to a copy of a work or a
fixed performance or appears in connection with the making available of a work or a fixed
performance to the public.
(c) CopyrightSecretariat Report:  p.46, paragraph 118
Question 4
The last sentence of paragraph 118 states that "[w]orks of authors from anywhere in the world, or
works first published anywhere in the world, also  qualify for copyright protection in Hong Kong,
China".  Does this mean that Hong Kong, China protects all works regardless of the authors’
nationalities or the places where the works are firstly published?
Answer
Yes.  Under sections 177 and 178 of the Copyright Ordinance, a work qualifies for copyright
protection if, among others, the author was at the material time an individual domiciled or resident or
having a right of abode in Hong Kong or elsewhere, or the work is published in Hong Kong, China, or
elsewhere.
Secretariat Report:  p.46, footnote 109
Question 5
The Report states that government copyright is protected for 125 years.  In this regard, does your
Copyright Law also protect official texts such as the Constitution, laws and regulations?WT/TPR/M/109/Add.1
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Answer
Yes.  Official documents are protected under the Copyright Ordinance.  Sections 183 and 185 of the
Ordinance specifically provide that Government is entitled to copyright in every Ordinance and bills
i.e. draft legislation, except bills of Legislative Council Members the copyright of which belongs to
the Legislative Council.  These include all main legislation as well as subsidiary legislation enactedby the Legislative Council in Hong Kong, China.
Secretariat Report:  p.47, paragraph 121 / Government Report: p.18, paragraph 184
Question 6
Concerning the amendment introduced in 2000 to the Co pyright Ordinance, please give us a detailed
explanation concerning why the scope of the suspension arrangements is limited to computer
programmes, films, TV programmes, and phonograms.
Answer
To combat rampant piracy in computer software and audio-visual products, we amended the
Copyright Ordinance with effect from 1 April 2001 to introduce criminal liability for business end-
users of copyright infringing products.  In gist, a person will commit an offence if he knowingly
possesses an infringing copy of a copyright work in business.  While the original aim of these
amendments was to deter corporate piracy in computer software and audio-visual products, the newlaw applied also to photocopying of printed works as well as downloading of information from the
Internet.  The public generally felt that the scope of the new criminal law was too wide.  To address
the concerns of the public, the Copyright (Suspension of Amendments) Ordinance 2001 was enacted
in July 2001 to restrict application of the amended criminal provisions to copyright works involving
computer programs, movies, television dramas and musical recordings in line with our intention tofocus on combatting rampant piracy activities associated with those works.
(e) Enforcement
Secretariat Report:  p.48, paragraph 127-128 / Government Report:  p.17, paragraph 85-87
Question 7
Japan understands that Hong Kong, China actively promotes anti-piracy measures.  Please give us a
detailed explanation on civil, criminal and adminis trative procedures that are available for rights
holders to exercise their rights.
Answer
A comprehensive answer can be found in the Checklist of Issues on Enforcement which we prepared
for TRIPS review in June 2000.  It is available on WTO’s website at
http://docsonline.wto.org/members/formslogin.asp.
Question 8
Please explain the scale of the legitimate market of phonograms, game software and audio visualsoftware, as well as of their pirated market in Hong Kong, China.
AnswerWT/TPR/M/109/Add.1
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The Government of Hong Kong China does not have such industry-specific statistics.  We understand
that individual industries conduct relevant surveys and estimates from time to time to facilitate their
own effort and co-operation with us to combat piracy problems.
Question 9
Please explain the situation of copyright infringing on the internet, such as file-exchange software.
What measures is Hong Kong, China taking against such infringement?
Answer
The Copyright Ordinance already contains the necessary provisions to protect copyright works
transmitted on the Internet (see answer above to question 3 from Japan).  Hong Kong Customs set up
a dedicated Anti-Internet Piracy Team to tackle Internet piracy problems.
The Team has so far detected 13 cases involving copyright infringing materials on the Internet.  They
are relating to the offering of downloading of pi rated songs and computer software and the using of
the web as an auction site for sale of pirated optical discs, including a case concerning a peer-to-peer
website (not hosted in HK) soliciting membership by offering free download of such software.  A
total of 26 persons have been arrested and the seizure of computer equipment and pirated works
amounts HK$865,300 (US$111,000).
We have also encouraged copyright owners to take civil action against infringing acts on the Internet.
Customs also cooperates closely with other countries to facilitate law enforcement and to keep abreast
of the latest technological developments.
Secretariat Report:  p.48-49, paragraph 128 and Table III.10
Question 10
While the seizures of pirated optical discs have declined since 1998, the number of seizures of
counterfeit goods has increased. Please provide the reason for this.  Furthermore, please discuss
what measures Hong Kong, China has been taking/w ill take in order to decrease counterfeit goods.
Answer
The counterfeit seizure figures provided in Table III.10 of WTO Secretariat's Report show value
rather than quantity of the relevant seizures.  While quantity and value depend on nature of individualcase, they do not truly reflect the overall counterfeit situation.  In fact, the numbers of cases recorded
are 811 for the year of 1998, 989 for the year of 1999, 770 for the year of 2000, 556 for the year of
2001 and 444 up-to-date for the year 2002 – which indeed shows a downward trend. Customs
enforcement at local retail and storage has all the times been stringent while relentless effort is also
emphasized on intercepting counterfeits at the entry points to curb its inflow.
Question 11
Regarding copyright and trade marks, it is mentioned that the number of prosecutions and sentences
peaked in 2000, reflecting Customs' efforts.  In this regard, please provide a detailed explanation of
what "efforts" Customs has made.
AnswerWT/TPR/M/109/Add.1
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The peak of prosecution and sentence in 2000 was attributed to the resources Customs had injected
through the creation in June 1999 a 185-man Special Task Force.  The Task Force had effected a large
number of cases with arrest at retail on pirated optical discs.
IV. SECTORAL DEVELOPMENTS
C. Protection of Intellectual Property Rights in Hong Kong(c) Sustainable Public Education
Government Report:  p.18, paragraph 88
Question 12
Please give us a detailed explanation of the public education programme that promotes the public
awareness of IPRs.
Answer
The Intellectual Property Department (IPD) budgeted HK$7 million (US$900,000) in 2002-2003 for
public promotion of awareness of intellectual property rights to individuals and a respect for the rights
of others.
The department runs a continuing secondary school visits program (now in its sixth year) aimed at
fostering the awareness of intellectual property rights and to instilling a law-abiding and creative
attitude among the young generation.  In order to introduce basic knowledge of intellectual propertyand promoting anti-piracy and anti-counterfeiting among young people, IPD is producing a comic
series and a three-dimensional role-play computer game.
Since 1999, IPD has commissioned an annual benchm arking survey to measure changes in people's
awareness of intellectual property and to assess the effectiveness of our promotion and public
education program.  The latest survey showed that more and more people are aware of IP rights andthere are less and less people buying and using pirated and counterfeit products.
IPD also promotes the intellectual property rights through television.  In August 2002, the department
sponsored a local television station to produce an eight-episode TV series which examined issues of
intellectual property from different perspectives.
Apart from these activities, the Department hosts conferences, publishes materials for small and
medium enterprises and is developing web-based teaching materials on intellectual property
protection for use in Hong Kong schools.
IV. TRADE POLICIES BY SECTOR
(4) SERVICES
(iii) Transport
(b) Maritime transport
Secretariat Report: p.8, paragraph 59
Question 13WT/TPR/M/109/Add.1
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The Report states that there are no competition or antitrust laws governing the operation of maritime
transport. In this regard, Japan would like to know whether maritime auxiliary services, such as
maritime cargo handling services, maritime agency services, and container station and depot
services, also have no competition or antitrust laws.
Answer
Hong Kong, China confirms that there are no competition or antitrust laws governing maritime
auxiliary services including those mentioned in the question.
For more detailed information on Hong Kong, Chin a's competition regime, please refer to the answer
at Annex.
(iv) Tourism
Secretariat Report:  p.70, paragraph 65
Question 14
The Report states that the Legislative Council passed the Travel Agents (Amendment) Ordinance,
which will enter into effect on 1 November 2002.  E ven after this amendment,  is the establishment of
branch offices still necessary for conducting travel agency services?
Answers
Section 4A of the Travel Agents (Amendment) Ordinance requires any person carrying on the
business of an inbound travel agent in Hong Kong to obtain a travel agents licence. There are a
number of requirements that an applicant must satisfy to be eligible for a licence.  These include
membership of the Travel Industry Council of Hong Kong and the fact that the proprietor is
considered to be ‘fit and proper’, having regard to his criminal convictions, undischarged bankruptcy
situation and other circumstances which may render him not fit and proper. As the licensing scheme isfor travel agents, they are required to operate from suitable office accommodation.
Question 15
The Report states that there are plans to introduce a certification scheme.  In this connection, Japan
would like to know whether a national requirement is imposed in the current system.  If not, does
Hong Kong, China have any intention to impos e such a requirement in the future?
Answer
There is no nationality requirement imposed on tour guides at the moment.  We have no intention to
impose such a requirement in future.
Questions from the Republic of Korea
II. TRADE POLICY REGIME
(4) TRADE POLICY OBJECTIVES AND ARRANGEMENTS
(ii) Regional cooperation initiatives
WT/TPR/S/109, p.17, paragraph 18WT/TPR/M/109/Add.1
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Question 1
As mentioned in the Secretariat and Government Reports, in late 2001 Hong Kong started discussions
with mainland China on a Closer Economic Partnership Arrangement (CEPA).
It is reported that there was an agreement on the application of rules of origin in trade in goods, and
detailed discussions on trade in services, and trade/investment facilitation.
Please explain the current situation of the CEPA discussions, including the details on the above
areas.
Answer
The proposed Mainland/Hong Kong Closer Economic Partnership Arrangement (CEPA) will cover
three areas – trade in goods, trade in services, and trade and investment facilitation. Consultations,
formally commenced in January 2002, are in progress.
On trade in goods, work is now being focused on devising an appropriate set of origin rules.  On trade
in services, initial experts discussions have been launched.  As regards trade and investment
facilitation, both sides are finalising a framework agreement covering the areas of cooperation.
III. TRADE POLICIES AND PRACTICES BY MEASURE
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(v) Intellectual property rights
WT/TPR/S/109, p.44-48, Paragraph 107-128
Question 2
Article 13 of the Patent Law Treaty and article 26 of the Patent Cooperation Treaty provides the
opportunity for addition or correction of a priority claim, and reflecting theses, many countries,
including Korea, have provided the same opportunity in their national laws.
Do the patent related laws of Hong Kong provide th e same opportunity? If not the case, are there any
plans to incorporate article 13 of the PLT and articl e 26 of the PCT into the relevant domestic laws of
Hong Kong in the near future?
Answer
Our patent law already provides for the addition or correction of priority claims (section 146 of the
Patents Ordinance (Chapter 514, Laws of Hong K ong)).  In addition, if there are discrepancies
between priority documents and an applicant's claim, the applicant will be invited to correct the
priority claim as a deficiency (sections 19, 26 and 115 of the Patents Ordinance).
Question 3
In spite of the strenuous efforts by Hong Kong authorities to enhance the protection of IPRs, it is still
reported that many counterfeit goods of internationally well-known brands are produced in China
and then imported into Hong Kong for sale in areas such as Kowloon.  This situation appears to
seriously damage the efforts by the Hong Kong government.WT/TPR/M/109/Add.1
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Please inform of Hong Kong's plans to address this situation.
Answer
We are aware of the situation mentioned. The existing criminal provisions in the Trade Descriptions
Ordinance are actively enforced by the Hong Kong Customs.  These criminal provisions, including
those relating to importation and sale of counterfeit goods (both with maximum penalty ofHK$500,000 (US$64,100) and imprisonment of 5 years), afford strong protection against trademark
counterfeiting.  Apart from our continual stringent enforcement against the sale of counterfeits at local
outlets, we have, through the process of risk-profiling, closely monitored passengers, cargoes &
conveyance from the Mainland of China with a view to interdicting counterfeits from entering Hong
Kong, China.  While bilateral cooperation has increased on intelligence exchange with our
counterparts in the Mainland, parallel operations against counterfeit goods at both sides of the
boundary are also conducted from time to time.
Our new trademark law will come into force in early 2003.  The new law will give enhanced
protection to well-known marks.  The owner of a well-known mark will be able to restrain by
injunction the use of an identical or similar mark for identical or similar goods where confusion is
likely to be caused to the public.
Questions from Macao, China
Government Report (WT/TPR/G/109)
II. ECONOMIC AND TRADE ENVIRONMENT
C. Benefits of China's WTO Accession to the HKSAR
Paragraphs 19 & 20
Question 1
The Government Report emphasizes the importance of economic ties within the Pearl River Delta
region, particularly, in the field of manpower, breadth and depth of economic activities, productioncapacity, market size, expertise, technology, infrastructure, telecommunications and transport. Could
Hong Kong, China provide additional information regardi ng any specific measure to facilitate further
economic cooperation within the Pearl River Delta region, in particular, measures with regard to
market size, expertise, infrastructure, telecommunications and transport?
Answer
Economic co-operation
Guangdong is home to 68,500 registered companies with Hong Kong capital at end 2001.4  The total
realised foreign direct investment from Hong Kong stood at US$78.9 billion, accounting for 70% of
the province’s total.  Between 1978 and 2001, the Province’s GDP has grown at an annual rate of
13.4%, reaching US$126 billion in 2001.  The economic growth created an increasingly affluent
population.  The Pearl River Delta (PRD), which is the most popular investment destination for Hong
Kong investors, boasts a per capita income of US$3,900 in 2001, four times the national level.  It is
not only an investment base, but an area with remarkable market potential.
                                                     
4 Source:  Department of Foreign Trade and Economic Cooperation in Guangdong.WT/TPR/M/109/Add.1
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In order to forge closer economic partnership with Guangdong and PRD in particular, the HKSAR
Government has taken, among others, the following measures -
(a) In April 2002, we established the Guangdong Economic and Trade Office (ETO) of
the HKSAR Government in Guangzhou.  The Guangdong ETO, our first ETO in the
Mainland, is tasked with strengthening the economic links between the GuangdongProvince and the HKSAR at government level.  In addition, it will further promote
investment between the two places and provide better support for Hong Kong
businessmen in the province.
(b) Efforts have been made to co-promote th e strengths of Hong Kong and the Greater
PRD region.  For instance, Invest Hong Kong (the department in the HKSAR
Government responsible for inward investme nt promotion), together with the Bureau
of Foreign Trade and Economic Co-operation of the Guangzhou Municipality,organised a “Hong Kong - Guangzhou Investment Environment Seminar” in Tokyo
on 25 September 2002 to attract Japanese enterprises to make use of Hong Kong as
their regional business base and Guangzhou as their production centre.
(c) The above government efforts are complemented by the work of the Hong Kong
Trade Development Council and Hong Ko ng Productivity Council, both in Hong
Kong and through their offices in Guangzhou and Shenzhen, to promote the goods
and services of Hong Kong there.
Sectoral measures are outlined below.
Infrastructure and transport
To strengthen the cooperation with the mainland of China ("the Mainland") on infrastructure
development, the HKSAR Government and the St ate Development Planning Commission of the
People’s Republic of China have jointly set up the Mainland/HKSAR Conference on the Coordination
of Major Infrastructural Projects (“the Coordination Conference”) in early 2002 to institutionalize
high level discussions on the coordination of infrastructure development plans in HKSAR and
Guangdong, including the PRD region.  The Coordination Conference has embarked on the followinginitiatives --
(a) Guangzhou-Shenzhen-Hong Kong express rail link (ERL)
This rail link seeks to reduce the commuting time between Guangzhou and Hong
Kong from the current 100 minutes to 60 minutes.  It will link up with the Mainland's
national rail network and regional transit network.  A Joint Expert Group co-led by
the Environment, Transport and Works Bureau of HKSAR and the Ministry of
Railways of the Mainland has been formed to analyse the functions of the ERL,assess the regional transport demand and patronage forecast, and compare various
alignment options and crossing points.  We have confirmed the strategic importance
of the rail and subsequent analyses will focus on the two more viable alignments
identified.
(b) Co-operation on logistics development with the Mainland
Our policy objective is to make Hong Kong the preferred international transportation
and logistics hub in Asia.  We are undertaking a joint study with the State
Development Planning Commission to explore the room for cooperation between
HKSAR and the Mainland in logistics development.WT/TPR/M/109/Add.1
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(c) Joint study on an express transport link connecting Hong Kong and the west bank of
the PRD
Both the HKSAR Government and the Mainland authorities are keenly aware of the
strategic importance of enhancing the connectivity between Hong Kong and the PRD.
We believe that a land transport link with Western PRD will be an importantsupplement to existing links with Eastern PRD and will further enhance our physical
connectivity with the hinterland.  It will promote exchanges between Hong Kong and
Western PRD, and help accelerate economic development and cooperation between
the two sides.  We are working with the State Development Planning Commission on
how to proceed with a study on a possible land transport link between HKSAR and
Pearl River West.
(d) Airport Co-operation
The Hong Kong Airport Authority (AA) ha s pioneered the organisation of the PRD
A5 Forum jointly with the other four airpor ts in the PRD (i.e. airports in Guangzhou,
Shenzhen, Zhuhai and Macao).  The Forum has agreed to enhance emergency support
coordination and joint promotion of services, and to conduct joint studies on issues of
common concern such as enhancing the smooth flow of passengers and cargo.  Inaddition, the AA is exploring cooperation opportunities with individual airports in the
PRD and developing inter-modal transportation links connecting Hong Kong
International Airport with PRD ports.
In addition to the above, the Government is upg rading and expanding existing boundary crossings and
at the same time planning and building new ones.
(a) Improvement measures have been or will be implemented at the three road boundary
crossings and their approach roads.  These include, inter alia, “co-location” of
immigration and customs facilities on the Shenzhen side, improvement works at Lok
Ma Chau Control Point, extension of operating hours at the control points, and
introduction of new technology.
(b) The Shenzhen Western Corridor (SWC), which links Shekou in Shenzhen and
Northwest New Territories in Hong Kong, is targetted for completion in 2005.  The
SWC will have a capacity of 44 000 vehicles a day.  The Lok Ma Chau to Sheung
Shui Spur Line is targeted for completion in 2007.  It will be the second rail crossing
between Hong Kong and the Mainland.  The Lo k Ma Chau Spur Line terminal will be
able to handle 150 000 passengers a day upon its opening.  The two new crossings
will greatly enhance the physical connectivity between Hong Kong and other parts ofthe PRD.
Telecommunications
We maintain an open, fair and transparent policy and regulatory regime for telecommunications
operators, mainland's or overseas, to invest in te lecom infrastructure between Hong Kong and the
mainland.
On liaison with the Mainland government, we work closely with Shenzhen and Guangdong to
coordinate the use of radio frequencies to facilitate development of radiocommunications services.
The respective regulators (Office of the Telecommunications Authority in Hong Kong and the
Ministry of Information Industry in the Mainland) also keep in close contact on otherWT/TPR/M/109/Add.1
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telecommunication issues of mutual interest to f acilitate the development of telecommunications in
both places.
III. TRADE POLICY DEVELOPMENT
C. Regional Trade Agreements
(a) Hong Kong/New Zealand CEP
Paragraph 44
Question 2
It notes that Hong Kong, China has been engaging in CEP bilateral talks with New Zealand. Against
this background, could Hong Kong, China provide further information regarding the substance of
liberalization of trade in services and investment?
Answer
Hong Kong, China is now engaged with New Z ealand in consultations on the Hong Kong/New
Zealand Closer Economic Partnership (CEP) Agreement.
On services, negotiations would seek to agree on a framework for liberalisation of trade between the
two economies, consistent with the APEC goal of  free and open trade and investment by 2010.  As
part of this process, the two economies would progre ssively liberalise their trade in services, building
on their GATS commitments and agree to consider a framework under which the competent bodies ofHong Kong and New Zealand can consider issues relating to the recognition of qualifications and
accreditation.
As for investment, negotiations would aim to enhance the liberalisation and promotion of investment
between the two economies, building on existing multilateral, regional and bilateral frameworks.
IV. SECTORAL DEVELOPMENTS
A. Developments in Trade in Goods
(d) Other Licensing Control
Paragraph 57
Question 3
Would Hong Kong, China, in the future, plan to exempt more categories of air-to-air transshipment
cargos from licensing control? If it would be the case, what kind of cargos would be? Does it exist
any similar exemption regime to deal with ma ritime or terrestrial transshipment cargos?
Answer
We maintain licensing requirements for certain categories of air-to-air transhipment cargo for public
health, safety, internal security or other legitimate reasons.  Examples of such controlled cargoes are
hazardous wastes, narcotic drugs, infectious materials such as germs and human remains.  Licensing
control is often necessary to track such cargo worldwide for prevention of proliferation and whererelevant our controlling measures are drawn up in line with the international obligations that areWT/TPR/M/109/Add.1
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applicable to Hong Kong, China.  We have no pl ans to provide further exemptions for air-to-air
transshipment cargoes at this stage.
On transhipment involving other modes of transp ort, pursuant to the Import and Export (General)
Regulations and the Reserved Commodities (Control of Import, Exports and Reserve Stocks)
Regulations, the Director-General of Trade and Indus try is given the power to exempt transhipment of
certain specified commodities from the import and export licensing requirements.  By virtue of the
relevant provisions, the Trade and Industry Department currently operates the Transhipment Cargo
Exemption Scheme, under which transhipment of ph armaceutical products and medicines, rice, and
frozen or chilled meat and poultry are exempted from the licensing requirements.  Transhipment of
textiles is exempted pursuant to the Textiles Traders Registration Scheme.  We are now conducting a
review to examine the possibility of streamlin ing the licensing requirements for inter-modal
transshipment cargoes, balancing the need for trade facilitation and the need for maintaining effectivecontrol over movements of such cargoes.  We will introduce legislative amendments in 2003 to
implement the results of the review.
V. DOHA DEVELOPMENT AGENDA
B. Hong Kong, China’s Priority Areas in the New Round
(c) Review of Trade Rules
Paragraph 105 of the Government Report
Question 4
Could Hong Kong, China provide its explanatory view on the scenario under which Anti-Dumping
action has been deemed as an outdated trade defence instrument that is incompatible with the
globalised economy nowadays?
Answer
Hong Kong, China considers that anti-dumping action is no longer an appropriate trade policy
instrument in the globalised economy nowadays.  The existing provisions in Article VI of the General
Agreement on Tariffs and Trade 1994 (GATT 1994) and the WTO Anti-dumping Agreement have
focused on the cross-border trade between countries.  However, phenomenal growth of globalisation
in terms of multi-national investments, sourcing of inputs, manufacturing processes and marketing of
products have considerably reduced the significance of national borders.  At the same time, many
trade barriers between nations have been greatly brought down as a result of the GATT.  Competition
is now inter-firm instead of inter-national.  All these have encroached on the simplistic premises on
which anti-dumping is based.  In view of this and the fact that there is an increasing use of anti-
dumping action as a protectionist tool, we see the need to update and tighten the anti-dumping
disciplines in order to better reflect the modern business reality and to avoid the erosion of benefitsresulting from trade liberalisation.
Questions from Malaysia
Question 1
The Secretariat report noted that the slowdown in economic growth was caused by falling exports and
weak domestic demand.  What measures have been taken to promote greater reliance on domesticdemand for economic recovery and reduce dependence on the external sector?WT/TPR/M/109/Add.1
Page 67
Answer
It should be noted that Hong Kong, China, due to it s high degree of external orientation with external
trade representing more than 200% of GDP, cannot be immune from external shocks like the global
economic downturn in 2001.  But along with the global and regional economic recovery, the economy
of Hong Kong, China is now on the track of recove ry. GDP growth picked up to 3.3% year-on-year in
the third quarter of this year.  Growth in exports of both goods and services are now  in the double-
digit region, buoyed by the resurgence in intra-regional trade and by robust demand in the Mainland.
In regard to the policy response, the Government believes in free market and in free trade, and that the
key to a speedy recovery lies in enhancing competitiveness and productivity upgrading.  On this, the
Government is stepping up efforts to improve a nd enhance the business environment of Hong Kong,
China, and to provide a conducive environment through facilitating policies and initiatives.
Moreover, we will strive to take a firm hold of the opportunities brought by Mainland's rapideconomic growth, on-going reforms and opening up.  The Government has recently put out a package
of measures for stabilising the property market and achieving a balanced development, the stability
and healthy development of which is beneficial to the community, business and the overall economy.
Question 2
The maintenance of a currency peg has the advantages of currency stability and predictability.  Is
HKSAR of the view that this has an adverse impact on the competitiveness of its exports and are there
measures to reduce the impact?
Answer
The linked exchange rate system provides Hong Kong, China with a nominal anchor, which is
conducive to external trade and contributes to boosting confidence in Hong Kong, China as a financialcentre. Also, the fundamentals of the Hong Kong, China's economy and financial system are
supportive of the link as a stability anchor.
On the question as to whether the link would have  an adverse impact on export competitiveness, the
high flexibility of local costs and prices should help ensure an efficient adjustment in the real
exchange rate to recoup any loss in competitiv eness stemming from the nominal exchange rate
movements. That Hong Kong, China’s exports of goods and services were able to rebound swiftly in
1999 after the severe setback in 1998, and similarly, also in 2002 after the global downturn in 2001, is
a clear illustration of an effective adjustment mechanism at work in the Hong Kong, China's
economy.  The fact that the current account was persistently in sizeable surplus since 1998 is another
illustration of Hong Kong, China’s external competit iveness. Both the considerable decline in the real
effective exchange rate and the improvement in the external trade position in recent years suggest a
significant improvement in competitiveness. Our studies suggest that the Hong Kong dollar at presentis more likely to be undervalued than overvalued.
Moreover, the trading links with the Mainland have provided an additional support to the
competitiveness of Hong Kong, China’s exports. A sali ent feature of Hong Kong’s external trade is its
role of an entrepot for the Mainland. A large part of our exports is re-exports of products produced by
Hong Kong firms located in the Mainland, where production costs are much lower and productivityhas increased markedly.  In addition, the recent trend of rising offshore trade, which is a part of
exports of services, reflected that Hong Kong, China is benefiting from the business opportunities
rendered by the strong growth in the Mainland’s direct trade with the rest of the world.
In sum, the linked exchange rate system and the high degree of price flexibility will continue to be
supportive of our external trade, given that Hong Kong has established itself as an international tradeWT/TPR/M/109/Add.1
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centre with its strategic location, well-developed trade services industry, and sophisticated financial
system.
Question 3
It is noted that the 2002-2003 Budget is aiming for fiscal balance. In your opinion, given current
deflationary conditions, what would be the effect on economic growth?
Answer
We have set in the 2002-03 budget the target for restoring fiscal balance in 2006-07. The 2002-03
budget forecast that deficits would continue to occur in 2002-03 to 2004-05. To restore fiscal balance
from a deficit situation can be expected to have a contractionary effect on the economy.  But given the
relatively small size of the public sector, China in Hong Kong, and that part of the impact would be
siphoned off through a reduction in import intake, the negative effect on economic growth should not
be very significant, particularly if the redress measures are brought about on a gradual basis.
Question 4
Hong Kong, China is one of the few economies that have very low rates of external duties on goods.
However, the level of bindings remains low at only 42%.  Would it be the intention of HKSAR to
improve this situation in the market access negotiations?
Answer
Members should look at the scope of our tariff binding in context.  As tariff concessions are
exchanged predominantly on the basis of reciprocity, Hong Kong, China being one of the freest
traders in the world is left with no other concession for exchange than scope of binding.  This is
acknowledged by Members as our present scope of binding is the outcome of previous negotiations
plus additional autonomous binding we have ma de since the conclusion of the Uruguay Round.
The scope of binding aside, we have all along maintained a zero-tariff regime; the status of free port
and the pursuit for free trade policy are enshrined in the Basic Law; and we have made unilateral
efforts to increase binding over the years.
We look forward to substantial reduction and elimin ation of tariffs by WTO Members under the Doha
Development Agenda (DDA) negotiations.  We have proposed a two-stage approach to achieve this.In the first stage, Members will follow a formula approach to reduce or eliminate tariffs immediately
upon the conclusion of the DDA negotiations.  Developing Members will be subject to a smaller
reduction.  In the second stage, developed Members will eliminate all tariffs within a reasonably short
period of time (say 5 years), whereas developing Members will continue to reduce tariffs over a
longer timeframe.  Hong Kong, China always stands ready to match the concessions by other
Members.
Question 5
The Secretariat’s report stated that government purchases have declined since 1998 to 3.8% of GDP.
What are the factors contributing to this decline?WT/TPR/M/109/Add.1
Page 69
Answer
The volume of purchase depends on the level of activities based on demand.  The decline does not
reflect any change in the Government’s procurement policies.
Questions from Mexico
III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) MEASURES DIRECTLY AFFECTING IMPORTS
(vii) Standards and other technical requirements
(a) Sanitary and phytosanitary
Question 1
With regard to sanitary and phytosanitary measures, Chapter III(2)(vii)(a), paragraph 27, of the
Report of the Secretariat states that "The authorities consult with traders and consumers on issues
regarding the control of food safety".  Mexico wo uld like to know the procedure and legal framework
for these consultations in Hong Kong, China and whether nationals of other WTO Members may take
part in this procedure.
Answer
Consultation procedure varies from case to case depending on the nature of the issue concerned.  It
may involve consultation with the major domestic stakeholders (including food trades, professionalbodies, government advisory and statutory bodies , other non-governmental organizations and the
legislators), consultation with regional and international trading partners via the network of consulates
in Hong Kong, China, notification to the relevant and authoritative international organizations (e.g.
WTO Committee on Sanitary and Phytosanitary Measures) and posting of consultation documents on
Government's website for public access.  WTO members may access the proposals through ourwebsite or the WTO notification mechanism and pass on their views to us.
Question 2
Mexico would like to ask the following questions with regard to voluntary standards and technical
regulations (including sanitary and phytosanitary ones):
(i) What is the legal framework in H ong Kong, China governing the development,
amendment, cancellation or abrogation of sanitary and phytosanitary measures and
standards and technical regulations?
(ii) What is the procedure for developing, amending and cancelling such standards and
technical regulations?
(iii) Are there annual or other periodic schedules which list issues subject to regulation
and/or standardization by Hong Kong, China and where are they published?
(iv) Is a regulatory impact analysis a prerequisite for the development of a technical
regulation and, if so, can this document be  consulted by nationals of WTO Members?WT/TPR/M/109/Add.1
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(v) Is there a legal provision which compels the government and/or standardization
bodies to conduct periodic reviews of the contents of technical regulations and
standards?
(vi) Can nationals of WTO Members take part in the developmen t, amendment and
cancellation of technical regulations and voluntary standards?  Please describe theprocedure for being granted this right or, if the answer is no, state the reasons for
which such participation is not permitted.
(vii) Have the national standardization bodies accepted the Code of Good Practice in
Annex 3 to the Agreement on Technical Barriers to Trade?
(viii) What percentage of all tariff items in the Harmonized System is governed by
standards or technical regulations?
Answer
Hong Kong, China does not have a central standards body developing and issuing domestic standards.
Our regulatory authorities use standards as and when necessary, and avoid the position where the
setting of standards dictates market development or becomes a means of protecting certain sectors of
the industry.  In making technical regulations, the regulatory agencies adopt international and/or
regional standards if they are deemed applicable and relevant to the objectives of the regulatorymeasures per se and local circumstances.
Our regulatory authorities are empowered under re levant regulations to specify standards and
requirements under their own purview.  For exam ple, under the Telecommunications Ordinance, the
Telecommunications Authority is empowered to prescribe standards and specifications for
telecommunications network and equipment including those related to radio transmission.  Othertechnical regulations on technical requirements include the Toys and Children’s Products Safety
Ordinance.  For sanitary and phytosanitary measures, the Public Health and Municipal Services
Ordinance, the Public Health (Animals and Birds) Ordinance, the Plant (Importation and Pest Control)
Ordinance and the Rabies Ordinance are relevant.
To ensure that the adopted standards are up-to-date, our regulatory authorities keep a close watch on
new or revised standards issued by the standards bodies concerned and effect updates to the
regulations concerned through legislative amendments.  In line with the WTO transparency
requirements, Hong Kong, China submits notifications for other WTO Members’ comments of new or
revised technical regulations which may have trade impact on them or do not follow international
standards.  For ‘voluntary standards’ developed by renowned international standardisation bodies e.g.
ISO and IEC, most WTO Members are already members and can participate in the development
process under the mechanisms of such bodies.
Our regulatory authorities also undergo regular revi ews of our local legislation from time to time in
the light of international developments and our local situation.  In preparing legislative proposals, the
relevant regulatory authorities will conduct consultation with various stakeholders (including the
trade, advisory bodies, professional bodies, non- governmental organisations, etc.) and parties as
appropriate and will take into account their views in preparing the proposals.  All interested partiesincluding WTO members could access consultation documents on legislative proposals by
downloading from our government web site and pass their comments to us.
There are currently five regulatory agencies (namely Environmental, Transport and Works Bureau;
Electrical and Mechanical Services Department; Highways Department; Transport Department; and,
Office of the Telecommunications Authority) having adopted the Code of Good Practice annexed toWT/TPR/M/109/Add.1
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the WTO Agreement of Technical Barriers to Trade.   On publication of standardisation programmes,
for example, the Telecommunications Authority publishes the list of standards under consultation on
its website (http://www.ofta.gov.hk) under the Section Telecom Standards.  It also publishes under the
same Section the list of telecommunications standards adopted or under preparation in accordance
with the TBT Code of Good Practice.
Hong Kong, China does not have an estimate on the percentage of total custom tariffs included in the
Harmonized System which are regulated through standards and technical regulations.
Question 3
Chapter III(2)(vii)(a), paragraph 31, of the Report of the Secretariat states that "imports of perishable
products […] have to be accompanied by official health certificates issued by recognized overseas
authorities".  Would Hong Kong, China please de scribe the procedure for recognizing these
authorities and the form and content of such certificates.
Answer
Please refer to Hong Kong, China's response to Question 1 from Colombia.
(b) Standards
Question 4
Chapter III(2)(vii)(b), paragraph 36, of the Report of the Secretariat states that standards in Hong
Kong, China "are essentially based on internationa l standards and/or prevailing overseas standards".
Would Hong Kong, China please indicate which body  takes the decision to harmonize its standards
on international standards or prevailing overseas standards and on the basis of what criteria the
decision is taken.  Would Hong Kong, China please also indicate what it understands by "prevailing
overseas standards".
Answer
Hong Kong, China adopts international standards and prevailing overseas standards according to their
applicability and relevance to the local circumstances and specific regulatory needs.  As Hong Kong,
China does not have its standardisation body, we use international/overseas standards direct without
harmonisation or adaptation.
"Prevailing overseas standards" refer to standards in current use developed by international standards
organisations or major importers/manufacturers of the products concerned.  Examples of regulations
having used international standards and prevaili ng overseas standard are Consumer Goods Safety
Ordinance (on flammability of pillows: ISO 12952 – 1&2: 1998, BS 7175: 1989, BS EN ISO12952-
1&2: 1999) and Toys and Children’s Products Safety Ordinance (on safety of children’s products:
ISO, BS, AS, EN, NZS, ASTM standards).WT/TPR/M/109/Add.1
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(c) Testing and certification
Question 5
With regard to conformity assessment procedur es (testing and certification), would Hong Kong,
China:
(a) State whether such procedures are general or whether they are established for each
individual regulation;
(b) state how many conformity assessment procedures are in force in its territory, how
many products they cover and in which legal provision(s) they are established;
(c) state whether such procedures are subject to public consultation;
(d) indicate whether nationals of WTO Members may take part in the development of
conformity assessment procedures;
(e) describe the procedure for recognizing the equivalence of a foreign standard,
technical regulation or conformity assessment procedure and, where appropriate,
state how many standards, regulations or conformity assessment procedures have
been thus recognized;
(f) describe the procedure for accrediting bodies which conduct conformity assessment
for standards and technical regulations;
(g) state in which cases assessment of conformity with technical regulations may be
conducted by accredited bodies and, where appropriate, whether additional
authorization is required from the governme nt body in charge of implementing the
said regulations;  and
(h) state whether it is possible for a conformity assessment body (laboratory,
certification body, inspection unit, etc.) which is accredited in a WTO Member to
conduct conformity assessment for the technical regulations or standards of Hong
Kong, China.
Answer
The accreditation programmes offered by the Hong Kong Accreditation Service (HKAS) are
voluntary programmes.  However, some regulators e.g. Office of the Telecommunications Authority,
Building Ordinance Office, Environmental Protection Department may stipulate that laboratory tests
for demonstrating compliance to regulations must be conducted by laboratories accredited by HKAS
or mutual recognition agreement partners of HKAS.   HKAS accreditation criteria are based on
ISO/CASCO standards.
(b) Standards
Question 6
Chapter III(2)(vii)(b), paragraph 37, of the Report of the Secretariat states that there are two
certification schemes, one voluntary and one co mpulsory.  Would Hong Kong please explain in
greater detail what the two schemes consist of and when each applies.WT/TPR/M/109/Add.1
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Answer
Under the Hong Kong Telecommunications Equi pment Evaluation and Certification Scheme,
certification and evaluation of telecommunications equipment is classified under two schemes,
namely "Voluntary Certification Scheme" (VCS) and "Compulsory Certification Scheme" (CCS).
Under the VCS, certification of telecommunications equipment is voluntary and equipment can bemarketed or used in Hong Kong even it has not been certified. Examples of the equipment that fall
under the VCS are single-line equipment (e.g. simple telephone, fax machine and dial-up modem) and
low power radio devices. Under the CCS, telecommuni cations equipment must be certified before it
can be marketed or used. Telecommunications equipment such as base station transceiver and high
power transmitter are required to have certification under the CCS. The Scheme also stipulates the
requirement of labelling for certain categories of equipment as consumer guidance.
(c) Testing and certification
Question 7
Chapter III(2)(vii)(c), paragraph 38, of the Report of the Secretariat states that Hong Kong, China
has "concluded 42 mutual recognition agreements/arr angements with accreditation bodies in other
countries".  With regard to this kind of mu tual recognition agreement/arrangement, would Hong
Kong please state:
(i) The requirements for concluding a mutual recognition agreement/arrangement;
(ii) the levels of mutual recognition agreements/arrangements which exist, that is to say,
whether they can be concluded by the government, accreditation bodies or entities
accredited by such bodies (e.g., certification bodies, testing laboratories, etc.), and
the legal framework governing them;
(iii) how many mutual recognition agreements/arrangements have been concluded by the
certification bodies and laboratories in its territory.
Answer
The mutual recognition agreements concluded by HKAS are scheme-to-scheme multilateral
arrangements and not government-to-government agreements.  They are the ILAC MRA and APLACMRA through which HKAS has established MRA with 44 laboratory accreditation bodies.
Questions from New Zealand
III. TRADE POLICIES AND PRACTICES BY MEASURE
Question 1         Government Intervention
According to the Secretariat Report, the Government of Hong Kong, China may become more
“proactive” in an effort to promote high-value-added activities, notably financial services, logistics,
tourism, and the producer and professional services and to secure projects beneficial to the economyas a whole when the private sector is not yet re ady to invest in them (WT/TPR/S/109, Part III,
para.152).
(a) Would Hong Kong, China please explain whether this “proactive” approach
represents a shift from the traditionally minimal-interventionist role of theWT/TPR/M/109/Add.1
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Government in the operation of the market and whether specific sectors will be
materially advantaged over others?
(b) What kind of measures does Hong Kong, China have in mind to promote these
activities?
Answer
The description of Government's role as a proactive market enabler did not signify a change in the
Government economic role per se.  Nor does it signify a new policy of picking winners.  The message
is that the Government will re-double its efforts to strengthen its role in enhancing our business-
friendly institutional framework and infrastructural support for enterprises to flourish and encouraging
more investments.
The major aspects of this role are –
(a) Maintaining a business-friendly institutional framework(b) Providing necessary support infrastructure
(c) Raising the quality of our human capital
(d) Securing access for our enterprises to external markets
(e) Facilitating beneficial projects
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(iii) Competition policy and regulatory issues
Question 2         Competition
We note from the Secretariat’s Report (WT/TPR/S/109, Part III, section 5(iii)) that the absence of an
overarching competition framework in Hong Kong, China means the approach to competition is quite
varied across different sectors.
Would Hong Kong, China comment on whether it would consider general legislation against anti-
competitive practices and, if not, how it intends to further improve the environment for competition?
Answer
Please refer to the answer at Annex.
IV. TRADE POLICIES BY SECTOR
(4) SERVICES
Question 3         Postal Services
We commend the considerable measures taken by Hong Kong, China to liberalise particular services
sectors since the last Review (WT/TPR/S/109, Part III, section 5 and WT/TPR/G/109, Part IV,
section B), including those relating to telecommunications and financial services.WT/TPR/M/109/Add.1
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Does Hong Kong, China intend to introduce any liberalising measures in respect of postal services in
the future?
Answer
There is no limitation on market access and national treatment in terms of courier services by
commercial operators.  The Government is reviewing the delivery of postal services in the light ofdevelopments in the postal services sector both locally and overseas.  We will take into account both
domestic regulatory considerations and any multilateral liberalisation initiatives in the review.
Question 4         Wine duty
New Zealand is disappointed that Hong Kong, China raised the excise tax for wine in March of this
year by 33 percent, from 60 to 80 percent (WT/TPR/S/109 Table III.3).  As there is little or no
domestic production of liquor products in Hong Kong,  China (WT/TPR/S/109, part III, para 34), this
duty falls disproportionately on imports.  New Zealand therefore questions the need for such a highduty, especially in light of the openness of Hong  Kong, China’s economy.  As a wine exporter to Hong
Kong, New Zealand is concerned about the potentially negative impact that this increase in duty
could have on consumer demand.
Can Hong Kong, China please explain its reasons be hind the increase in the excise tax for wine?
Answer
The recent increase in the excise duty for wine was only a modest fiscal measure.  The duty is levied
on an ad valorem basis on the wine’s ex-factory price, not on its far higher retail price.  The additional
duty for an average bottle of wine is only US$0.8, and it translates to an increase of only about 4% in
retail price.  In fact, the quantity of wine consumed from April to October this year only slightly
dropped by 4.4% over the same period last year.
Questions from Norway
Question 1
Financial services: We note that Hong Kong, China in  its schedule under the 5. Protocol limits any
commitments under Mode 1 and 2 in such manner th at soliciting or to conduct marketing of the
relevant services are not allowed. Norway holds that Mode 1 - the supply of a service from theterritory of one Member into the territory of any other Member - necessarily would entail some form
of soliciting or approaching of actual or potentia l customers. We would be pleased to know how Hong
Kong, China defines the difference with rega rds to their commitments of Mode 1 and 2.
Answer
The caveat which applies to Mode 1 (cross border supply) and Mode 2 (consumption abroad) supply
of financial services only aims to ensure that foreign service suppliers soliciting business or
conducting marketing in Hong Kong, China would be  subject to certain prudential or regulatory
requirements; otherwise, they would fall outside the scope of regulation of our regulatory authorities.
The caveat itself does not seek to restrict the delivery of such services to customers in Hong Kong,
China.WT/TPR/M/109/Add.1
Page 76
Questions from the United States
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
(1) INTRODUCTION
Question 1
Several times in the report, the remark is made that Hong Kong's Financial Secretary, in his 2002-03
budget speech indicated that the Government should play the role of a "proactive market enabler".
Can Hong Kong please further elaborate as to what exactly this means?
What additional steps will the Government take to "enable" the market?
Does this mark a change of Hong Kong Government's traditional, mostly non-interventionist market
attitude?
If a more proactive approach is taken, especially in those instances when the private sector is not
ready to invest in them, as indicated in the re port, how will the Hong Kong Government ensure that
financing for such projects is made on term s consistent with commercial considerations?
Answer
The description of Government's role as a proactive market enabler did not signify a change in the
Government economic role per se.  Nor does it signify a new policy of picking winners.  The message
is that the Government will re-double its efforts to strengthen its role in enhancing our business-friendly institutional framework and infrastructural support for enterprises to flourish and encouraging
more investments.
The major aspects of this role are –
(a) Maintaining a business-friendly institutional framework
(b) Providing necessary support infrastructure(c) Raising the quality of our human capital
(d) Securing access for our enterprises to external markets
(e) Facilitating beneficial projects
As an illustration and pursuant to the abov ementioned role, the Government would allocate
substantial resources to improve its land-crossing facilities to remove the constraints on the flows ofpeople and trade between the Mainland and Hong Kong, China.WT/TPR/M/109/Add.1
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III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) MEASURES DIRECTLY AFFECTING IMPORTS
(vi) Contingency Measures
Question 2
Per part II para.26 of the Secretariat's report, does Hong Kong ever intend to legislate provisions for
the use of contingency measures with respect to injuriously dumped or subsidized imports?
Since Hong Kong has no such provisions, how would it  react to its domestic industry alleging dumped
or subsidized imports?
Does Hong Kong intend to create legislati on for the imposition of safeguard measures?
Answer
Being a free, open and externally-oriented economy, Hong Kong, China does not see the need to
legislate for the use of anti-dumping measures, countervailing measures against subsidized imports orsafeguard measures.
On anti-dumping, Hong Kong, China has never been a user.  Nor have we received any compliant
alleging dumped imports.  Unlike a closed market which may create the necessary environment for
monopolisation to take place through predatory dumping, Hong Kong, China maintains a completely
open market and competitive environment which encourage free competition.
On subsidies, Hong Kong, China does not provide any prohibited and specific subsidies within the
meaning of the Agreement on Subsidies and Countervailing Measures. Following the policies of free
enterprise and free trade, we believe the government's major role is to provide a suitable and stable
framework for commerce and industry to function efficiently and effectively with minimum
interference.  Given the externally-oriented and open nature of our economy, our manufacturingsector has been able to respond swiftly to changes in the global market.  This explains why there has
been no complaint from our domestic industry on alleged subsidized imports and why we do not see
the need to legislate for the relevant contingency measures.
On safeguard, there has been no request from our domestic industry for applying safeguard measures
against imports.  Similar to the case of subsidized imports, any increase in quantities of a particularproduct is unlikely to cause or threaten to cause serious injury to Hong Kong, China's manufacturing
industry that is principally export-oriented.
(viii) Government procurement
Question 3
The Secretariat's report (para.50) states that, "in 2001, some 47% of all contracts were awarded
through selective, restricted, or single tenders (Table III.6)."  The Table indicates that for the period
1998-2001, a significant percentage of contracts were awarded using other than open tenderingprocedures.   What are the reasons for the large percentage of use of such procedures?WT/TPR/M/109/Add.1
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Answer
Selective tendering is normally adopted for works contracts for which contractors on the relevant
categories of the List of Approved Contractors for Public Works and the List of Approved Suppliers
of Materials and Specialist Contractors for Public Works are considered.  This approach is justified on
the basis of the professional, management and financial capability required for the particular type andvalue of works.  Interested contractors may apply for admission to the lists any time and they may
remain on the lists as long as they meet the qualification criteria.  Restricted and single tendering are
tightly controlled as procuring departments have to seek the approval of the Financial Services and the
Treasury Bureau in each case.  In each case, there are justifications in compliance with the
requirements in respect of the provisions for limited tendering in Agreement on Government
Procurement.
(vii) Standards and other Technical Requirements
Question 4
The United States is interested in possible new work by Hong Kong authorities on strengthening
labeling requirements.  Footnote 23 of this secti on states that new labeling work would include food
additives and strengthening labeling for alcoholic drinks.  Can Hong Kong describe what it may be
considering?
What does Hong Kong expect will be required on new labels for alcoholic drinks?
Can Hong Kong provide Members with information on the consultation process to establish labeling
requirements for biotech foods?  Has this process begun?  What Ministry is responsible for drafting
the regulation? Is the consultation process open to all interested parties?
Answer
As part of the Government's ongoing efforts to enhance food safety assurance for the protection of
public health and consumer interests, we conduct regular reviews on legal requirements for food
labelling. From the recent round of legislative reviews, we have identified that labelling of food
additives and alcoholic, among other things, should be improved.
The existing food labelling law in Hong Kong, China requires food labels to declare either the exact
name of additives used or just the general categories to which the addictives belong. To provide
consumers with more information, we propose that both the category and the exact name of the
additives should be declared on food labels. For example, instead of stating "preservative", detailed
information such as "preservative (sodium nitrate) " should be declared. We know that there may be
practical difficulties for food manufacturers to list the full names of all the food additives used
because of limited food label space. We therefore propose that the identification number of additives
under the International Numbering System for Food Additives adopted by the Codex can be used as
alternatives to full names.
The existing law exempts alcoholic drinks of more than 1.2% alcoholic strength by volume from all
marking and labelling requirements. We have reviewed the existing pan exemption of 1.2% alcoholic
drinks from all marking and labelling requirements. Views from the beer industry will that beers
should not be exempted from the requirement of labelling durability period as the quality of beerwould deteriorate over time. Taking into account views of the industries and recommendations of
Codex, we intend to amend the law to require all drinks of more than 1.2% alcoholic strength by
volume to fulfil all statutory labelling requirements except the labelling of ingredients. We also intendWT/TPR/M/109/Add.1
Page 79
to exempt drinks of 10% or more alcoholic strength by volume from the labelling requirement of
durability period.
What does Hong Kong expect will be required on new labels for alcoholic drinks?
We intend that drinks of alcoholic strength by volume of more than 1.2% should fulfill the statutory
food labelling requirements which includes (a) name or designation of the food product; (b) durability(except drinks with alcoholic strength by volume of  more than 10%); (c) special condition for storage
or instruction for use; (d) name and address of manufacturer or packer; and (e) count, weight or
volume. Labelling of the list of ingredients of drinks with an alcoholic strength by volume of more
than 1.2% is exempted due to practical difficulty in enforcement.
Can Hong Kong provide Members with information on the consultation process to establish labeling
requirements for biotech foods?  Has this process begun?  What Ministry is responsible for drafting
the regulation? Is the consultation process open to all interested parties?
Please refer to Hong Kong, China' s answer to Question 8 from EU.
(3) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(i) Incentives
(b) R&D and technology
Question 5
Per paragraph 82, can Hong Kong indicate what types of industries/tenants have been approved for
admission to the Science Park?  Are all enterprises/industries eligible to apply for admission into the
Science Park?
Answer
The types of industries/tenants which have been approved for admission into Science Park are in the
fields of information technology and telecommunications, electronics, precision engineering and
biotechnology.  These are the initial focused areas in which the Science Park will be developed, but
all enterprises/industries are eligible to apply for admission so long as they are engaged in technology-
intensive business, have environmentally friendly work practices, and be committed to contributing to
the long-term economic growth of Hong Kong.
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(iv) Export support
Question 6
Per part III para. 70 of the Secretariat's report, for what specific purposes would the Commissioner
of Customs and Excise grant excise duty exemptions and/or refunds on exports?  Are these exemptions
limited in scope to a particular enterprise or industry?   Is there an enterprise or industry that is the
primary beneficiary of such exemptions or refunds?  If so, what industry tends to be the primarybeneficiary of such exemptions or refunds?
AnswerWT/TPR/M/109/Add.1
Page 80
The granting of excise duty exemptions and/or re funds on exports by the Commissioner of Customs &
Excise are generally for the following purposes:
(a) Alignment with international practice/obligation (exemption for diplomats and
international organizations);
(b) Dutiable goods not for consumption in Hong Kong, China will not be taxed;(c) Light diesel oil not for use as motor fuel (e.g. for industrial and marine use) will not
be taxed;
(d) Samples not intended for re-sale will not be taxed;
(e) Offering of allowances/concession for ship stores and fuel for international carriers;
(f) Offering of allowances/concession for incoming travellers, disabled drivers and
charitable organizations.
The exemption or refunds are not limited to any particular enterprise or industry.
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(v) Intellectual property rights
Question 7
The United States appreciates the hard work by  the S.A.R. of Hong Kong in improving its IPR
environment over the past several years, both wi thin its own market and at the border, and including
efforts to control optical media piracy, organized crime involvement in intellectual property crimes,
anti-bootlegging and other measures.  We also look forward to continued efforts in this regard
(WT/TPR/G109, Para. 84, WT/TPR/S/109, Paras. 122, 127).
Could Hong Kong advise of any proposed legislati ve or enforcement initiatives regarding IPR
protection in Hong Kong other than those already detailed, such as the effort to make the suspensionarrangements of 2001 permanent (Copyright Suspension of Amendments Ordinance 2001,
WT/TPR/S/109, Para. 121)?
In addition to information provided regarding criminal prosecution and sentencing (WT/TPR/S/109,
Table III.10) could Hong Kong provide any additiona l information regarding its efforts to control
trans-border piratical or counterfeiting activities, including prosecutions and sentencing of importersor exporters of piratical or counterfeit goods and cases involving trans-border intellectual property
crimes?
The United States understands that cross-border issues with other regions of China bringing goods
into Hong Kong continue to be a significant issue for U.S. rights holders.  In particular, the USG is
concerned about optical media piracy imported from the Chinese border, included couriered pirate
media from Shenzhen or other regions conti guous to Hong Kong Customs control.  We would
appreciate hearing Hong Kong's strategies for dealing with this and other imports of piratical andcounterfeit goods, apart from strategies already mentioned, such as use of organized crime laws
(WT/TPR/S109, Para. 116).
The United States would also appreciate being advised how commercial scale copyright infringement
over the internet is handled by criminal authorities in Hong Kong.WT/TPR/M/109/Add.1
Page 81
We understand that there may be new regulations requiring Customs to seize goods on a court order
obtained by a proprietor of copyright or a registered trade mark.  Please advise if this is the case,
how these rules are being implem ented, and if they replace or affect the implementation of or
resources committed to any other procedures.
Can Hong Kong advise of any specia l criminal and border measures are available to protect well-
known trademarks in Hong Kong?
Answer
(1) We are committed to protecting IPR as it is important to the growth of our own economy as
well as our international trade.  We will continue to enhance our legislation as well as to
sustain our vigorous enforcement actions to protect IPR.  We are continuing our public
education efforts which have a budget of about US$1 million in the current financial year.
(2) On proposed legislative initiatives, apart from those already mentioned in WTO Secretariat's
Report, we are preparing for the following -
(a) Commencement of the new Trade Marks Ordinance in early 2003 – it will modernize
Hong Kong, China's trade mark law, simplify registration of marks, increase the
range of signs that can be registered as trade marks and  provide a higher standard of
trade mark protection.
(b) Prescription of copyright registers under section 121(16) of the Copyright Ordinance
– this will help overseas and local copyright owners who need to provide prima-facie
affidavit evidence of copyright subsistence and ownership in legal proceedings
against copyright infringement under Section 121(2) of the Ordinance.  We aim to
bring the prescription into effect in early 2003.
(c) Amendments to the Copyright Ordinance – it will, among other things, provide a
specific offence of unlawful reproduction of printed books by copy-shops so as to
combat such piracy activities more effectively.
On enforcement side, the main initiatives are-
(a) Hong Kong Customs has established in July 2002 a 200-man Intelligence Bureau
counting on which offences enforced by Customs jurisdiction (including IPR related
offences) could be targeted more efficiently and effectively.
(b) Customs started enforcing the compulsory registration system for stampers
manufacturers and a mandatory requirement for all locally manufactured stampers to
bear a unique identification code.  The new legal tool also empowers Customs to
inspect all licensed stampers manufacturing plants to further combat copyright piracy.
So far, 16 licences have been issued.
(c) Customs signed in August 2002 a Cooperative Agreement with the National
Copyright Administration of China (NCAC).  In the event that Customs have doubt
over a particular authorization involving Mainland copyright owners or organizations
as produced by a optical discs manufacturer in Hong Kong, China, NCAC will,
according to the terms of the Cooperative Agr eement, assist the Customs in verifying
the authenticity of the authorization.WT/TPR/M/109/Add.1
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(d) Regarding enforcement against illicit photocopying of books by copy-shops, Customs
have focused actions to intensively investigate syndicates touting orders for copying
service on textbooks from students in the precinct of universities. Successful results
were quoted recently.
(3) Basing on a system of risk-profiling and oper ating on an intelligence-led enforcement mode,
Customs remain vigilant all the time in curbing pirated articles/counterfeits if they are
imported, exported or transshipped through Hong Kong, China. For cross-boundary controls
in particular, we have strengthened our intelligence exchange with our counterparts in the
Mainland of China while parallel operations are also conducted with them from time to time
at both sides of the boundary.  In 2001, Customs detected 182 cases involving
import/export/transshipment and arrested 152 person with a total seizure valued at
HK$87,252,454 (US$11,186,212).  For 2002 up to November, 356 cases were made with 70persons arrested and a total seizure valued at HK$181,129,161 (US$23,221,687) was made.
Detailed breakdown as follows.
Trans-border Pirated Articles/Counterfeit by Nature
(Import, Export or Transshipment), 2001 - 2002 (November)
Year MonthOrdinance
(Cap.)Nature Cases ArrestSeizure Value
(HK$)
2001 Jan-Dec 362 Export 14 11 5,479,760
2001 Jan-Dec 362 Import 89 107 9,072,714
2001 Jan-Dec 362 Transshipment 46 0 58,979,160
2001 Jan-Dec 528 Export 4 8 10,454,000
2001 Jan-Dec 528 Import 25 26 2,796,870
2001 Jan-Dec 528 Transshipment 4 0 469,950
2002 Jan-Nov 362 Import 199 1 55,745,016
2002 Jan-Nov 362 Transshipment 75 0 117,178,728
2002 Jan-Nov 362 Export 13 0 1,325,835
2002 Jan-Nov 528 Import 65 66 1,695,317
2002 Jan-Nov 528 Export 4 3 5,184,265
Prosecutions and sentencing statistics for Jan-Nov 2002 are as follows.
Prosecution and Sentencing Statistics on Piracy and Counterfeiting Cases
Involving Import, Export or Transshipment, January - November 2002
Sentence
Prosecution Conviction
Imprisonment Suspended Fine Nature
Case Person Case Person Person Month Person Month Person HK$ (US$)
Counterfeiting Import 81 87 69 73 1 0.23 13 216 65 626,400 (80,308)
Counterfeiting Transshipment 4 5 4 4 0 0 0 0 4 225,000 (28,846)
Counterfeiting Export 2 2 2 2 0 0 0 0 2 86,000 (11,026)
Piracy Import 42 44 37 39 2 6 10 132 31 55,300 (7,090)
Other than our ongoing efforts in relation to cross-boundary cargoes and conveyances,
Customs also curb the inflow of pirated articles/counterfeits carried in from the Mainland by
individuals for the purpose of any trade or business.  We focus on those organized itinerant
travellers while we also seize every opportunity to prosecute anyone found in possession of a
considerable quantity that might reasonably convince a court that the same is for the purpose
of trade or business.WT/TPR/M/109/Add.1
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(4) Our legislation already imposes criminal liability in people who import pirated and
counterfeit goods.  Under section 118 of the Copyright Ordinance (Chapter 528, Laws of
Hong Kong), it is an offence to import other than for one's private and domestic use an
infringing copy of a copyright work.  The maximum penalty is HK$50,000 (US$6,410) per
infringing copy and imprisonment of up to four years. Under section 12 of the TradeDescriptions Ordinance (Chapter 362, Laws of Hong Kong), it is an offence to import goods
to which a false trade description or forged trade mark has been applied.  The maximum
penalty is HK$500,000 (US$64,100) and imprisonment of up to 5 years.
We also strictly control import of plant and equipment required for the manufacture of optical
disks, including master disks.  Under Schedule 2 of the Import and Export (General)
Regulations (Chapter 60A, Laws of Hong Kong ), the import of optical disc mastering and
replication equipment require a licence.  The maximum penalty for contravening theregulation is a fine of HK$2 million (US$256,410) and imprisonment of 7 years.
We have also implemented the special requirements for border measures concerning
importation of infringing articles under Article 51 of TRIPS, by sections 30A-30K of the
Trade Descriptions Ordinance and sections 135-144 of the Copyright Ordinance.
On enforcement side, Customs have been taken vigorous actions against the in-flow of pirated
articles, including those of optical media from across the boundary.  Liaison and parallel
enforcement actions have been maintained and conducted as appropriate.  There is also
exchange of views on IPR protection with Gu angdong province, Macau and other regions of
the Mainland China from time to time.  The latest one being an Intellectual Property
Symposium held in Guangzhou on 9-10 December 2002.
(5) Serious copyright infringement of a commercial scale over the Internet has yet to emerge as a
serious problem in Hong Kong, China.  We have nonetheless legislative and enforcement
framework to tackle the problem and we shall continue to be vigilant
The Copyright Ordinance contains the necessary provisions to protect copyright works
transmitted on the Internet.  By sections 23 and 26 of the Copyright Ordinance, the makingavailable of copies of a copyright work to the public is a restricted act.  A person infringes
copyright in a work if he does or authorizes another to do any of the acts restricted by the
copyright.  In this context, making available copies of the work to the public means making
available copies of the work by wire or wireless means, in such a way that members of the
public in Hong Kong, China or elsewhere may access the work from a place and at a time
individually chosen by them (such as through the Internet).  However, the making of a
transient and incidental copy which is technically  required for the viewing or listening of the
work by a member of the public is not regarded as an act of infringement (section 65 of the
Copyright Ordinance).
Apart from civil liability, it is a criminal offense to distribute infringing copies of a copyright
work (other than in the context of any trade or business) to such an extent as to affect
prejudicially the owner of the copyright (see section 118(1)(f) of the Copyright Ordinance).
Under the existing s118(1)(e)(iv) of the Copyri ght Ordinance, it is an offence to distribute
infringing copies of a copyright work for the purpose of any trade or business.
On enforcement, Hong Kong Customs has set up a dedicated Anti-Internet Piracy Team to
tackle Internet piracy problems.  The Team has so far detected 13 cases involving copyright-
infringing materials on the Internet.  They relate to the offering of downloading of piratedsongs and computer software and the use of the Internet as an auction site for the sale ofWT/TPR/M/109/Add.1
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pirated optical discs, including a case concerni ng a peer-to-peer website (not hosted in Hong
Kong, China) soliciting membership by offering free download of such software.  A total of
26 persons have been arrested and the seizure of computer equipment and pirated works
amounts HK$865,300 (US$111,000).
We have encouraged copyright owners to take civil action against infringing acts on the
Internet.  Our Customs authorities cooperate closely with other economies to facilitate law
enforcement and to keep abreast of the latest technological developments.
(6) The Copyright Ordinance already contains the relevant provisions (sections 122 and 131, and
border measures in sections 135 to 144 refer) for making seizures of infringing copies,
including seizures of goods on a court order obtained by a copyright owner. These provisions
are adequate in practice and we are not planning new provisions or regulations in this aspect.
For the position regarding trade mark goods, please see reply to part 7) of the answer  below.
(7) Effective measures are available in our trade marks legislation to protect all registered trade
marks.  Under sections 30B of the Trade Desc riptions Ordinance (Chapter 362, Laws of Hong
Kong), trade mark owners can apply to court for detention orders for the Customs to detain
suspected imports of goods that infringe regist ered trade marks.  Under section 30D of the
Ordinance, seized goods may be held for ten days to allow the trade mark owner to bring anaction for infringement.  If such an action is initiated within the ten-day period, the goods will
continue to be under Customs' custody.   In addition, under section 12 of that Ordinance, it is
an offence to import goods to which a false trade description or forged trade mark is applied.
The maximum penalty is HK$500,000 (US$64,100) and imprisonment of 5 years.  The new
trademark law, which will come into force in early 2003, will allow the owner of a well-
known mark to prevent, by injunction, the infringing use of the mark on identical or similar
goods where the use is likely to cause confusion.
IV. TRADE POLICIES BY SECTOR
(2) AGRICULTURE
Question 8
Concerning the Agricultural credit funds discussed in para. 3 of Part IV of the Secretariat's report,
with what non-governmental resources are the agr iculture funds funded?  Under what conditions
would a farmer be able to apply for a loan?  What  conditions would qualify a farmer for emergency
relief grants?  Are all farmers eligible for these grants?
Answer
What agriculture funds are funded by non-governmental resources?
Resources of funding are set out in the following table
Fund Resources of Funding
Kadoorie Agricultural Aid Loan
FundThe Fund was established in 1955 under the Kadoorie Agricultural Aid Loan Fund Ordinance with a
capital of $500,000.  Half of this sum was contributed by the Hong Kong Government and the otherhalf by Lord KADOORIE, L.L.D., J.P. and Sir Horace KADOORIE, J.P..  Government further
injected $750,000 in 1957, $500,000 in 1960 and $500,000 in 1971.  The Kadoorie brothers also
generously donated another $500,000 in 1971, bringing the capital of the Fund to $2,750,000.
Income is derived from interest on loans and on bank deposits.
J.E. Joseph Trust Fund The Fund has a capital of $4,261,107 with $459,554 being the original amount paid to the Trustee inWT/TPR/M/109/Add.1
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Fund Resources of Funding
1954, $1,553 being a further payment made by the Hong Kong and Shanghai Banking (Trustee) Ltd.
in 1961, $750,000 contributed by the Hong Kong Government in July, 1957 as a special relief fund
following the disastrous floods in May that year, $3,000,000 donated by a private individual in 1991
and $50,000 donated by the agricultural industry in 1996/1997.
Income is derived from interest on loans and on bank deposits.
Vegetable Marketing
Organization Loan FundThe Fund was established in 1953 with a capital of $2,608,000 donated by the Vegetable Marketing
Organization.
Income is derived from interest on loans and on bank deposits.
Under what conditions would a farmer be able to apply for a loan?
Conditions:
(1) The purposes of his loan application must match the purposes of the respective loan fund
given in the table below.
Fund Purposes of the Fund
Kadoorie Agricultural Aid Loan
FundLoans from this Fund are granted to farmers and mariculturists to meet their development and
working capital needs.  The loans are used to purchase the necessary inputs such as breeding stocks,
feed or fertilizers to maintain production; to improve farm and fish culture productivity and to meetenvironmental requirements.
J.E. Joseph Trust Fund The Fund is established for the purposes of encouraging and improving agriculture in the New
Territories by making loans to farmers' co-operative societies for use either as development or
working capital.
Vegetable MarketingOrganization Loan FundThe Fund is established for the purposes in assisting farmers in crop production.
(2) The applicant should possess sufficient repayment ability.
What conditions would qualify a farmer for emergency relief grants?
Qualifying conditions:
(1) Only full-time farmers at subsistence level would be considered except in unusual
circumstances of extreme hardship.
(2) If less than one-third of the whole farm is damaged, no grant should be given unless
there are exceptional circumstances of extreme hardship.
(3) If a farmer has received or will receive a grant as a result of a previous natural
disaster which happened less than 7 days ago and no significant new damage
occurred in the farm, no grant would be given except in unusual circumstances of
extreme hardship.
Are all farmers eligible for these grants?
Any farmer suffering from farm damage as a result of tropical cyclones or other natural disasters may
apply for relief grants from the Emergency Relief Fund.
(4) SERVICESWT/TPR/M/109/Add.1
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The United States commends Hong Kong on the service sector liberalizations that it has accomplished
since its last review in 1998, particularly in the banking and telecommunications segments.  The
United States welcomes Hong Kong's continuing participation in the current services negotiations and
encourages the Hong Kong to schedule commitments th at reflect recent policy changes, in the interest
of increased transparency.
(i) Financial Services
Question 9
The United States commends Hong Kong on the liberalization of its banking sector, including the
recent relaxation of minimum asset requirements for foreign banks.  What market access and national
treatment restrictions does Hong Kong still maintain on the foreign provision of banking and other
financial services?
The United States encourages Hong Kong to schedul e GATS commitment that reflect its liberalized
banking policies.
Answer
Banking
After the recent relaxation of the market entry criteria for the banking sector, a foreign bank which
has total assets of not less than HK$4 billion and total customer deposits of not less than HK$3 billioncan apply to set up a branch in Hong Kong, China (HKC) (these size criteria also apply to a local
applicant).  The branch can conduct the full range of banking business and is not subject to any
branching restriction.  On the other hand, the foreign bank can also apply to establish a banking
subsidiary in HKC provided that the subsidiary has been a restricted licence bank or deposit-taking
company (or any combination thereof) for not less th an 3 continuous years.  Either way, the foreign
bank should, in respect of its Hong Kong offices, appoint a chief executive and an alternate chief
executive, who should ordinarily be resident in HKC.
Securities
For the provisions of trading in securities services, only a corporation incorporated in HKC, or a
natural person born in HKC or resident in HKC for five of the preceding seven years, or partnershipcomposed of such persons may become an exchange participant of the Stock Exchange of Hong Kong
Limited.
For the provision of trading in futures, only an individual ordinarily resident in HKC or a company
incorporated in HKC may become an exchange participant of the Hong Kong Futures Exchange
which trades for its own account and acts as agent for transactions of other futures exchange
participants.  Only a corporation incorporated in  HKC may become an exchange participant of the
Hong Kong Futures Exchange which trades for its own account and for clients, and acts as agent for
transactions of other futures exchange participants.
Insurance
HKC has an open insurance market.  There is level-playing field in the treatment of foreign and local
insurance companies.  In terms of market access, there are no limitations on the number of service
suppliers, market share, service operations or service output, and the number of persons that may beemployed.  Having said so, for prudential regulatory reasons, a requirement is set out in the law on the
type of legal entity in the case of commercial presence, i.e. only a company or an association ofWT/TPR/M/109/Add.1
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underwriters is permitted to carry on insurance business.  Also, the chief executive of authorized
insurers should normally be resident in HKC.  Th ese requirements apply to all authorized insurers.
(ii) Telecommunications
Question 10
As noted in the Secretariat's report, Hong Kong plans to fully liberalize its local fixed
telecommunications market by January 1, 2003.  Will this liberalization occur as scheduled?  Has
Hong Kong enacted the policy measures needed to accomplish this liberalization?  What measures, if
any, remain?
How will new entrants interact with incumbent providers after January 1, 2003, and will the Hong
Kong Government put out new rules governing this interaction?
The United States encourages Hong Kong to sche dule GATS commitment that reflect this and other
recent policy changes.
Answer
The liberalisation of the local fixed telecommunications market is on schedule, and the market will be
fully liberalised by 1 January 2003.  The Telecommunications Ordinance allows 'carrier' licences to
be issued to new participants and there is no need to enact any new law or introduce new policy. In
fact guidelines for applying the 'carrier' licence were issued on 11 January 2002.  New entrants areawarded the same 'carrier' licence as the incumbent and enjoy the same rights and obligations. There
is no need to publish new rules.  Hong Kong, China notes the US's requests and recognises the
multiple benefits brought about by the liberalisation of infrastructural sectors like
telecommunications. We will continue to participate actively in the services negotiations in a bid to
achieve meaningful liberalisation of the sector among Members.
(iv) Tourism
Question 11
The Secretariat's report notes Hong Kong's high level of interest in developing its tourism market.
Does Hong Kong intend to undertake commitments on Mo de 2 inasmuch as this would help to assure
business for travel agents and tour operators in Hong Kong, and to build world tourism?
Answer
The Government of Hong Kong, China is committed to promote our inbound tourism industry and
maintains very free market conditions for the outbound travel market.  We are also committed to
promote liberalisation of the global tourism industry.  We stand ready to work with other interested
WTO Members in the upcoming services negotiations in order to achieve progressive liberalisation in
this sector.
(v) Legal Services
Question 12
We understand that foreign law firms are barred from  hiring local lawyers to advise clients on Hong
Kong law, even though Hong Kong firms can hire fore ign lawyers to advise clients on foreign law. We
also understand that foreign law firms can become  "local law firms" and hire Hong Kong attorneys,WT/TPR/M/109/Add.1
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but they must do so on a 1:1 ratio with foreign lawyers.  Thus, the number of registered foreign
lawyers may not exceed the number of HK solicitors in an associated or local firm; only HK solicitors
may be partners of a local firm, and at least one partner of a local firm must be a partner in the
foreign firm.  Is this information accurate?  If so: (1) what are the requirements for a "foreign law
firm" to become a "local law firm? (2) what is the reason for the 1:1 ratio and the partnershiprequirements? (3) What are the obstacles to progressive liberalization for this service sector in Hong
Kong?
Answer
The understanding about the 1:1 ratio is inaccurate.  The 1:1 ratio is applicable to an Association
between a local law firm and a foreign law firm.  Both the principal of the Hong Kong firm and the
foreign law firm within the Association are obliged to  ensure compliance with this requirement.  If the
foreign law firm becomes a local law firm, it is allowed to hire Hong Kong lawyers in the same wayas other local law firms.
(1) The following website contains details of how a foreign lawyer can be qualified to
become a local lawyer and how foreign law firm can become a local law firm:
http://www.justice.gov.hk/blis.nsf/Cur AllEngDoc?OpenView&Start=159&Count=25
&Expand=159#159
(2) The 1:1 ratio is specified in the subsidiary legislation made by the Law Society
Council (a self-regulatory professional body).  Since it is likely that clients requiring
legal service from an Association will require a mixture of expertise on both foreign
and local laws, the 1:1 ratio will help to achieve a balanced mix of foreign lawyers
and Hong Kong lawyers in an Association in order to provide comprehensive serviceto its clients.  This requirement is applicable to both the local law firm and the foreign
law firm within the Association.  Both br anches of the legal profession provide a
channel based on objective criteria for foreign lawyers to qualify as local barristers or
solicitors.
(3) The legal services sector is very liberalised and accessible by foreign lawyers and we
would consider commitments in this sector in the context of the on-going services
negotiations.WT/TPR/M/109/Add.1
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Annex
Competition Policy of Hong Kong, China (HKC)
What was the Government’s response to the C onsumer Council's recommendations on competition
policy?
1. As commissioned by the Government, the Consumer Council ("the Council") conducted a
series of studies and recommended that the Government should adopt a comprehensive competition
policy, enact a competition law, and establish a Competition Authority.
2. The Government published a response to the Council’s report in November 1997.  It believes
that the appropriate competition policy for Hong Kong should have the objective of promoting
economic efficiency, principally in terms of fostering competition, economic strength and
competitiveness.  A test of whether competition exists is whether the market is accessible and
contestable.
3. Having regard to the Council’s suggestions, the Government has adopted a comprehensive
competition policy for Hong Kong which involves –
(a) issuing a Statement on Competition Policy ("the Policy Statement"), which provides a
comprehensive, transparent and over-arching competition policy framework and
clearly defines Hong Kong, China’s pro-competition principles as well as sets outbusiness practices that may be considered restrictive and detrimental to economic
efficiency;
(b) requiring all bureaux to give due regard to the competition angle in setting or
reviewing policies;
(c) requesting all bureaux and departments to submit new initiatives for promoting
competition;
(d) establishing a high-level Competition Policy Advisory Group (COMPAG) chaired by
the Financial Secretary with non-official participation to take a proactive role in
critically vetting existing government policie s and practices to ensure that they are
not anti-competitive; or, if they have to remain so, there are solid defensible reasonsfor such.  COMPAG may also review other competition policy matters as
appropriate;
(e) requesting the Trade Practices Division of the Council to continue to monitor and
review trade practices in sectors prone to “unfair” trading activities; and
(f) urging the Council to direct more effo rts to help businesses draw up codes of
practices that are pro-competition.
What is HKC's view on the effectiveness of the sector-specific approach to competition policy?Any plan to revisit this approach?
4. The Government has carefully reviewed the arguments for and against the enactment of a
competition law for Hong Kong and believes that a non-interventionist comprehensive competition
policy, moderated with need-based sector-specific regulations, best suits the needs of Hong Kong at
its current stage of economic development.WT/TPR/M/109/Add.1
Page 90
5. The Government calls upon all businesses to cease existing, and refrain from introducing,
restrictive practices that impair economic efficiency or free trade on a voluntary basis.  Where
justified, the Government will take administrative or legal steps as appropriate to remove such
practices if necessary.  The Government considers Hong Kong, China’s sector-specific approach
effective in maintaining an environment conduciv e to open and fair competition.  Under this
approach, the special concerns, circumstances and needs of individual sectors are addressed through
legislative and/or non-legislative measures.  The Government believes that this approach best suits a
small, externally-oriented and open economy like Hong Kong, China.  In fact, even the IMF paper
cited in paragraph 98 of the WTO Secretariat Re port notes empirically that “Hong Kong SAR is
neither significantly more nor significantly less competitive than the average OECD country”.  In
view of the above, the Government has no plan at present to revisit the sector-specific approach to
competition.  However, the promotion of competitio n is a continuous process: we will continue to
monitor the market situation and explore further measures to enhance competition as and when
required.
Any public procedures in place to ensure that competition concerns are not relegated to a secondary
status?
How could one challenge or make a complaint about anti-competitive practices?  How a business
may apply for relief?
6. Under the Government’s comprehensive sector-specific competition policy, COMPAG
performs a central role to oversee and review competition issues.  It has established a mechanism to
monitor and follow-up on competition-related complain ts and initiatives to ensure that competition
concerns are not relegated to a secondary status.  A business may apply for relief in the event of unfaircompetition under applicable laws.  Anyone making a complaint about anti-competitive practices may
file it with the relevant bureau or department or the Secretariat of COMPAG.  Bureaux and
departments are required to submit reports on the complaints received to COMPAG for review.
COMPAG has also adopted a more proactive approach in order to perform its role effectively.  In
future, working groups might be formed as and when necessary to enhance COMPAG’s expertise andto study competition issues which have implications across different sectors.  COMPAG will also
seek to boost the support and training available to policy bureaux and departments.
How to ensure that separate sectoral authorities follow the same standards?  Any guidelines for
competition policy implementation?
7. The Government is going to put in place guid elines with pointers to complement the broad
competition policy framework promulgated in the Policy Statement.  The guidelines set out objective
benchmarks and principles which –
(a) assess Hong Kong’s overall competitive environment;
(b) define and tackle anti-competitive practices; and
(c) ensure consistent application of our competition policy across sectors.
8. Bureaux and departments will need to adhere to the guidelines in going through the
intellectual process of defining and tackling anti-competitive practices.  The Government will alsopromote the guidelines in the private sector to enhance understanding of the relevant benchmarks and
disciplines.
Does HKC agree with the comment of the IMF paper on HK's competitiveness?  Competition indeed
less intense in certain sectors?WT/TPR/M/109/Add.1
Page 91
9. The IMF paper cited in paragraph 98 of the WTO Secretariat Report uses the extent of the
company’s profit margins (price less average cost) to ascertain the intensity of competition in
particular sectors.  This approach is arguable conceptually.  The application of different measures of
profit margins in the paper shows results which are not entirely consistent.  We therefore do not agree
with the suggestion that competition in Hong Kong, China has become slightly less intense as a result
of the shift towards services during the past decade.  That said, it is interesting to note that even the
paper (paragraph 14 of the paper) concludes that Hong Kong, China is neither significantly more nor
significantly less competitive than the average OECD countries.
10. The IMF paper further notes that competition appears to be relatively less intense in real
estate and transportation.  Facts however indicate that competition is active in these sectors.
(i) The real estate sector
11. The property market in Hong Kong, China is not anti-competitive.  There are neither
ostensible restrictions nor barriers to entry to the property development sector in Hong Kong.  What
are in place are measures to protect the interest of property purchasers, including imposition of
conditions on sale before completion, financial requirement on developers for completion of the
project, approval from the Building Authority to commence works on superstructure, regulation on
transaction procedures, mandatory provision of sales information and maintenance of order for publicsale.
12. Although business is concentrated in a number of developers, there is no lack of competition.
Small developers have been fairly active in the market.  In fact, competition has been vigorous and
fierce, particularly so when the local property market has experienced a downturn over the past few
years.  Moreover, there has been an active secondary residential property market in Hong Kong whichprovides further choice for home buyers.  Secondary residential market transactions account for 74%
of total transaction in 2001.
13. There is a regulatory/licensing system for estate agents in Hong Kong, China.  Since the
establishment of the licensing system on 1 January 1999, persons or companies are required to obtain
a licence from the Estate Agents Authority if they wish to practise in estate agency trade in HongKong, China.  The licensing system is not anti-competitive.  There is no specific restriction on the
establishment and operation of foreign estate agency  firms in Hong Kong, China.  There is also no
specific restriction on foreign natural persons providing estate agency services.  No preferential
treatment is given to service suppliers from certain countries exclusively.  The licensing requirements
(educational qualifications, passage of qualifying examinations, fit and proper criteria, etc.) are
objective and transparent, and are the minimal necessary to ensure a standard of service and better
protection of consumers’ interest in property transactions.
(ii) The transportation sector
14. Regulation of public transport services is guided by the policy to maintain a balanced and
coordinated public transport system.  Healthy competition among different modes and within each
mode is encouraged so as to provide commuters with different choices whilst ensuring efficient use of
resources and limited road space.  The Government endeavours to maintain market competition toensure the provision of quality service at reasonable fares by public transport operators.  At the same
time, in order to safeguard the overall interest of  Hong Kong, China, the Government needs to avoid
activities that would affect business investment and service quality with adverse impact on public
transport services.  Overall, the Government’s pro-competition efforts have brought about fair and
effective competition in the transport services sector.
Does the lack of regulation on competition polic y permit a system of entrenched cartels?WT/TPR/M/109/Add.1
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15. The Government does not think that the absence of an all-embracing competition law in Hong
Kong, China permits a system of entrenched cartels which might have a negative impact in terms of
efficiency and impede the entrance of foreign comp etitors.  There is no consensus in the community
on the continuing existence of extensive cartels in important areas of Hong Kong, China’s domestic
economy.  Nor is there concrete evidence showing such a situation.  In fact, Hong Kong, China has
been ranked as the freest economy in the world by the Heritage Foundation in the US for the 9th year
in a row (November 2002); and by Canada’s Fraser Institute in conjunction with the Cato Institute in
the US (April 2001 and June 2002).
16. Not all business practices that limit market accessibility and contestability impair economic
efficiency or free trade.  The scale of operation or share of the market per se also does not determine
whether a business is anti-competitive or not.  Under the sector-specific approach, those business
practices that impair economic efficiency and are not in the overall interest of Hong Kong, China willbe attended to.  Each case will be examined in the light of the actual situation.
17. While there is no generalization of which business practice to ban or otherwise, the
Government recognises that price fixing, bid rigging, market allocation, sales and production quota
(which are commonly regarded as falling within the ambit of hard core cartels) are practices which
warrant thorough examination.  Where there is clear evidence of such cartelistic behaviour to thedetriment of Hong Kong, China’s overall economic efficiency, the Government will take appropriate
measures to restore the proper functioning of markets.
Would HKC not consider the multilateral framework for competition policy as a good solution to
promote free trade in a fair and transparent manner?
18. Hong Kong, China fully supports the Doha Mi nisterial Declaration (“the Doha MD”), which
recognises the case for a multilateral framework to enhance the contribution of competition policy to
international trade and development.  Yet, according to the Doha MD, the launch of negotiations at
the fifth Ministerial Conference ("MC") would not be automatic but conditional on whether an
explicit consensus could emerge at that MC on modalities of negotiations.  To build up a consensus
among the wide WTO membership, the Government believes that whatever multilateral outcomes tobe achievable should fully respect the national policies/concerns of Members.  Hong Kong, China is
prepared to work closely with Members to identify practical options which meet the needs of
proponents of a multilateral framework whilst retain ing sufficient flexibility for those with unique
domestic circumstances.
19. While a multilateral framework for competition policy has yet to be established, Hong Kong,
China has all along been promoting free trade and maintaining a level-playing field in a fair and
transparent manner.  As stated above in paragraph 15, Hong Kong, China has been consistentlyranked as one of the freest markets in the world by a number of international renowned institutions
(such as the Heritage Foundation and Fraser Institute).
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