Note: Advance written questions by WTO Members and replies provided by the Government of
Hong Kong, China are reproduced in document WT/TPR/M/109/Add.1 and will be available online
at:  http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.WORLD TRADE
ORGANIZATIONWT/TPR/M/109
17 February 2003
(03-0979)
Trade Policy Review Body
16 & 18 December 2002
TRADE POLICY REVIEW
HONG KONG, CHINA
Minutes of Meeting
Chairperson:  H.E. Ms. Amina Chawahir Mohamed (Kenya)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3II. OPENING STATEMENT BY THE REPRESENTATIVE OF HONG KONG, CHINA 4III. STATEMENT BY THE DISCUSSANT 8
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 10
V. REPLIES BY THE REPRESENTATIVE OF HONG KONG, CHINA AND ADDITIONAL
COMMENTS 20
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 24WT/TPR/M/109
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The fourth Trade Policy Review of Hong Kong, China was held on 16 and
18 December 2002.  The Chairperson welcomed the delegation from Hong Kong, China, headed by
Mr. Raymond Young, Deputy Secretary for Comm erce, Industry and Technology, Commerce,
Industry and Technology Bureau, as well as the othe r members of the delegation, and the discussant,
H.E. Mr. A. Jara (Chile).  As usual, the discussant would speak in his personal capacity and, in
accordance with the established procedures, he had made available in advance an outline of the main
issues he intended to raise (document WT/TPR/D/88).
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting.  The report by the Government of Hong Kong, China was contained in
document WT/TPR/G/109 and that of the WTO Secr etariat in document WT/TPR/S/109.  Copies of
advance written questions, submitted by:  Macao, China;  Chinese Taipei;  Canada;  Korea;Argentina;  Japan;  the European Union;  New Zealand;  Australia;  Malaysia;  India;  Norway;
Colombia;  Mexico;  and the United States had been transmitted to the delegation of Hong Kong,
China.  These questions, and responses provided by the representative of Hong, Kong, China, are
reproduced in WT/TPR/M/109/Add.1.
3. The Chairperson noted that since Hong Kong, China's reversion to the People's Republic of
China in 1997, the Territory had had to face tough challenges, notably the Asian financial crisis, the
global economic slowdown in 2001, and the considerable structural adjustment associated with the
Territory's growing integration into the rest of China, particularly the Pearl River Delta region.
Hong Kong, China's reversion to China had not altered the Territory's trade and investment regime,
which, in accordance with the "One Country, Two Systems", remained open.  The Government'sapproach of letting free and open markets be the main determinant of the allocation of resources
within the Territory remained, by and large, in place and was the bedrock of Hong Kong, China's
success.  However, she also noted that more recently, partly as a result of the economic downturn, the
Government appeared to have become somewhat more "proactive" in an effort to promote high value-
added activities.  Members would be interested in learning whether this development was indicativeof a shift away from the Government's traditional laissez-faire  approach.  Members would also be
intrigued by the authorities' sector-specific approach to competition policy.WT/TPR/M/109
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF HONG KONG, CHINA
4. The representative of Hong Kong, China stated that  the Trade Policy Review process was an
essential element in the World Trade Organization's effort to enhance transparency, and an excellent
opportunity to foster a better understanding of Members' trade and economic policies.
5. This was Hong Kong, China's fourth review, a nd the second one after the establishment of the
Hong Kong Special Administrative Region of China in 1997.  The Secretariat Report was positive
about Hong Kong, China's trade regime.  As stated in the Report, Hong Kong, China continued to
maintain an open trade and foreign investment regime.  There had been no change in the Territory's
trade policy objectives, which were:  to promote a free, open and stable multilateral trading system; to
safeguard Hong Kong, China's rights and fulfil obligations under multilateral, regional, and bilateral
trade related agreements and arrangements; and to secure, maintain, and improve access for
Hong Kong, China's exports to global markets.  As  in all previous reviews, the authorities looked
forward to the insightful questions and comments of Members on the basis of which
Hong Kong, China would strive to further refine its policies and practices.  He thanked
Ambassador Jara for agreeing to lead the subsequent discussion, and the WTO Secretariat for the
preparatory work which had been most thorough and professional.
The macro picture6. The past five years had been challenging for Hong Kong, China and its people.  The
challenge came not so much from the reversion of sovereignty, which had taken place remarkably
smoothly, but because Hong Kong, China was hard hit by the Asian financial crisis and the
subsequent global economic slowdown, as could be expected of an open and highly externally-
oriented economy.  To recover from these external shocks, Hong Kong, China had taken thenecessary steps to build upon its comparative strengths.  Throughout this recovery process,
Hong Kong, China's fundamentals had remained solid.  These included a stable political environment,
the rule of law, a non-interventionist Government, and a free and open trade policy.
Hong Kong, China's conviction in pursuing free and open economic policies had been reinforced by
various international organizations such as the Heritage Foundation, which had rankedHong Kong, China as the world's freest economy consistently since 1995, and the United Nations
Conference on Trade and Development, which had named Hong Kong, China as the best-performing
host economy for foreign direct investment in Asia in its World Investment Report 2002.
7. Early in the year when Hong Kong, China's reports had been compiled, the various economic
indicators had not been too encouraging.  However, of  late, there were visible signs of a pick-up in the
economy.  The GDP had grown by 0.8% and 3.3% in the second and third quarters of 2002, after
three previous quarters of decline.  For a trade official, it was particularly encouraging to note that thegrowth impetus came mostly from trade, as exports  had surged by 11.4% in the third quarter of 2002
in real terms over a year earlier.  This not only served to illustrate the importance of trade to
Hong Kong, China’s economy, but also demonstrated resoundingly that its policy of free trade and
open market worked both in good times and on rainy days.  However, Hong Kong, China's
contribution to global trade would always be limite d without a stable and open world market.  The
importance of the multilateral trading system in promoting a liberal trading environment and
safeguarding backslides into protectionism could not be over-emphasized, and he affirmed, once
again, Hong Kong, China's staunch support and commitment to the multilateral system.
8. There were grounds to be optimistic about Hong Kong, China’s economy.  The continuous
and phenomenal economic growth of the mainland of China, its biggest trading partner and economichinterland, was an important engine for further growth of Hong Kong, China's economy, and the
tremendous opportunities for Hong Kong, China's businesses that arose from China's accession to the
WTO were already beginning to be seen.  It had been estimated that these opportunities could
potentially raise Hong Kong, China's real GDP by an additional 5.5% by 2010.WT/TPR/M/109
Page 5
9. However, Hong Kong, China faced a host of challenges.  For instance, there was a stubborn
fiscal deficit.  The Government's debt-free balance sheet and its US$48 billion fiscal reserve were
reassuring.  The Government was fully committed to its announced target to restore fiscal balance in
2006-07, through reviving the economy and new revenue sources, and by reining in government
expenditure to no more than 20% of GDP.  Unemploy ment still hovered at high levels, but with the
modest up-turn in the economy, the labour market condition had improved lately, and the
unemployment rate had dropped from a peak of 7.8% to 7.2% for August - October.
Role of the Government in the economy
10. Hong Kong, China's Government would continue to uphold its long-standing free-market
philosophy.  It were firmly committed to pursuing policies and an institutional framework that
allowed the full play of market forces, including the rule of law, low taxes and a simple tax regime,
and a level playing field.  This was the key to the industrial support policy, which business peopletrusted.  The Government did not pick winners or rescue losers at taxpayers' expense; nor did  it
protect or subsidize particular industries.
Staunch supporter of the multilateral trading system
11. Hong Kong, China had been one of the strongest advocates of the primacy of multilateralism.
As a small economy that thrived on free trade, Hong Kong, China believed that a multilateralapproach to trade liberalization was the best option.  Hong Kong, China's focus for the Doha
Development Agenda fell on market access issues, as well as on improvements of multilateral trading
rules.  On goods, it sought to significantly improve market-access opportunities through substantial
and early reduction or elimination of tariffs and non-tariff measures.  Hong Kong, China favoured a
formula approach with comprehensive coverage, as outlined in a proposal recently submitted to theNegotiating Group on NAMA.
12. On services, Hong Kong, China was keen on progressive liberalization in a wide range of
sectors, with particular emphasis on logistic services, telecommunications and financial services, and
the strengthening of multilateral rules.  This was especially important given that services now made
up over 85% of its GDP.  Hong Kong, China had tendered requests for further liberalization to anumber of WTO Members and had engaged in useful bilateral discussions.  It also participated
actively in the negotiations on rules, particularly on anti-dumping and regional trade agreements, so as
to ensure that they remained conducive to freer trade and investment and met the challenges of an
increasingly globalized and knowledge-driven world economy.
13. Notwithstanding its commitment to multilateralism, Hong Kong, China had  adopted a more
open-minded approach in pursuing high-standard, WTO-consistent FTAs with its trading partners, in
recognition of the potential of such agreements to reinforce global trade liberalization.  Hence thekeen interest that they maintained in the on-go ing discussion on the relationship between FTAs and
the multilateral trade liberalization under the WTO.  Hong Kong, China had commenced discussions
with New Zealand on a Closer Economic Partnershi p Agreement, and with the mainland of China on
a Closer Economic Partnership Arrangement;  these discussions were still on-going.
Sectoral liberalization initiatives14. Though its regime was already a very open one, during the reporting period,
Hong Kong, China had made efforts towards further liberalization.  To enhance the strength of the
banking sector, which was a pillar of Hong Kong, Ch ina’s status as an international financial centre,
steps were taken to further liberalize the market entry criteria in May 2002 by, for instance lowering
the asset size criterion for new entrants of foreign banks.  As a result, more foreign banks could nowenter the market as full licensed banks.  In addition, following the deregulation of the interest rateWT/TPR/M/109
Page 6
rules in 2000 and 2001, banks could now compete for deposits freely on a price basis.  This had
helped to encourage more innovation and competition in the banking industry.
15. Hong Kong, China had one of the world’s most liberalized telecommunications markets.  The
Government had continued to promote fair and effective competition in this market;  all
telecommunications services would be fully liberalized by January 2003.  To further enhancecompetition, the Government had introduced a bill in May 2002, with a view to providing a
transparent and efficient regulatory regime governing merger and acquisition activities in the
telecommunications market, and providing the regulato ry authority with the necessary tool to address
regulatory concerns over competition in such activities.   
16. Following the 1998 Review of Television Policy, the Government had decided to open up the
television market for competition.  There was no lim it on the licences to be issued, subject to physical
constraints.  The Government had granted eight new non-domestic television programme servicelicences since the Broadcasting Ordinance came into effect two years ago.  Furthermore, the
Government was planning to develop a regulatory framework for digital broadcasting within 2003.
With higher spectrum efficiency, digital broadcasting would allow more operators to be licensed to
provide services, enhancing competition in the market.
17. Rice imports had also been liberalized.  Since the last Trade Policy Review in 1998,
significant liberalization measures had been implemented to provide more flexibility for stockholders
of rice and to facilitate new entrants.  The rice trade would be fully liberalized in January 2003.
Import quota would be removed and importers would be free to decide the level of rice to import.
Any interested parties could register as rice importer.
Enhancing competition18. The Government had undertaken some 60 new initiatives to enhance competition in various
sectors since the last Trade Policy Review.  The concept of maintaining openness and enhancing
competition was deeply ingrained in Hong Kong, China’s corporate and social values, and constituted
a cornerstone of the Government’s trade and economic policy.  Its competition regime was aimed at
enhancing economic efficiency and free flow of trade, thereby benefiting consumers.Hong Kong, China believed that competition was best nurtured and sustained by allowing the free
play of market forces and keeping intervention to the minimum.  To this end, there was an over-
arching competition policy framework, supplemented where appropriate by legislative and non-
legislative measures that were conducive to promoting competition.
19. Hong Kong, China  had adopted a sector-specific approach to competition, which it believed
was more appropriate for a free and open economy.  Hong Kong, China maintained a competitive
overall environment and ensured a level-playing field in individual sectors having regard to theirspecific circumstances.  The Statement on Competition Policy defined the pro-competition principles
and set out business practices that may be considered restrictive and detrimental to economic
efficiency or free trade.  In addition, guidelines were to be put in place with objective benchmarks and
principles to assess Hong Kong, China’s overall competitive environment, define and tackle anti-
competitive practices, and ensure consistent application of the competition policy across sectors.  TheGovernment would promote such guidelines in the public and private sectors to enhance
understanding of the relevant benchmarks and disciplines.
Intellectual property rights
20. As regards to intellectual property protection, the representative noted that
Hong Kong, China's IPR laws complied fully with the international standards laid down in theAgreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”).  Their laws were
under constant review to ensure that they met the ne eds of the changing environment.  In the past fewWT/TPR/M/109
Page 7
years, they had introduced legislative measures to further strengthen the protection of IPR.
Hong Kong, China's legislation was complemented by vigorous enforcement actions at both the
production and retail levels.  Their stepped up enforcement actions had effectively contained the
problem of copyright piracy, and had earned much appreciation from their major trading partners.
Concluding remarks21. To conclude he said that as a small territor y devoid of natural resources, trade was indeed
Hong Kong, China’s lifeline.  They believed that the multilateral trading system as embodied in the
WTO was crucial to the continued growth of all eco nomies.  He assured that they would continue to
play an active and leading role to fulfil their obligations, and to strengthen WTO.  He looked forward
to Members' enlightening remarks on Hong Kong, Ch ina's trade regime and two days of stimulating
discussion.WT/TPR/M/109
Page 8
III. STATEMENT BY THE DISCUSSANT
22. The discussant  (H.E. Mr. A. Jara) welcomed the delegation of Hong Kong, China.  He also
welcomed the opportunity of being a discussant;  this was an honour but it entailed work.  The
purpose of the TPRM was to enhance multilateral surveillance, to be critical of the trade policy of a
country;  however, in this case the hard work was trying to find something to criticize ofHong Kong, China.
23. He noted that the Secretariat Report was thorough, brief, and to the point.  It, too, had been
unable to be critical of Hong Kong, China.
24. From the political point of view, after the hand-over in 1997, there had been elements of
uncertainty around the world regarding what would happen with Hong Kong, China, despite all the
assurances by the parties involved and all the agreements.  Nevertheless, Hong Kong, China had
maintained the central features of its economy;  it maintained an independent system.  The system hadgiven the Territory stability to operate and to develop its economy, which was all about trade, both in
goods and services.  Hong Kong, China was, by definition, a globalized economy and therefore very
important in terms of its impact in its region and around the world.  Any event in Hong Kong, China's
economy or in its political system would have an immediate impact in some of the most important
stock-exchanges.  Foreign direct investment into Hong Kong, China had not been affected as result ofthe hand-over;  in fact, foreign direct investment had increased.
25. From an economic point of view, Hong Kong, China had been through some rough times;
first the Asian crisis and then the world-wide slump.  These had had a negative effect on
Hong Kong, China's economy and the rate of unemployment.  There had been a process of deflation.
Nevertheless, Hong Kong, China remained the most open economy in the world.  In addition over the
last four years Hong Kong, China had implemented fundamental changes in some key sectors of its
economy.  For example, Hong Kong, China further opened its banking system and there had been
some very important changes in telecommunications.  He considered other changes such as the
elimination of quantitative restrictions on rice to be less important.  Hong Kong, China applied
quantitative restrictions on exports of textiles to fulfil international commitments.
26. In the future Hong Kong, China would have increased social expenditures because of an
aging population and consequent increases in the cost of health-care, pensions, etc.  This should be
kept in mind for the management of public finances.  As a result of the structural adjustment due to
integration with the mainland, the Territory had moved away from manufacturing and had become a
more service oriented economy.  To sustain this pr ocess of structural adjustment, Hong Kong, China
had provided its population with top quality education and provided financial support when required.
27. Hong Kong, China had been very active in  APEC.  Following a change in policies,
Hong Kong, China had started negotiations on bilateral free-trade agreements with New Zealand and
with the People's Republic of China.  He was c onfident that Hong Kong, China would respect its
WTO commitments when negotiating these free-trade agreements.  He also noted that
Hong Kong, China had signed numerous agreements to avoid double taxation and also some air
transportation agreements.  In this regard he asked why Hong Kong, China had never negotiated anopen-skies agreement.
28. Referring to the Secretariat's report, which implied that the absence of a competition law may
have some negative effects in Hong Kong, China's economy, he did not see any evidence of that
happening.  He was aware of Hong Kong, China's position regarding negotiations on trade and
competition;  it did not like the idea of being obligated to have a competition law.  The absence of anall-embracing competition law, covering all sectors, etc., did not mean that it did not have a
competition policy.  Hong Kong, China had been de aling with competition situations on a case-by-
case basis and perhaps, in some cases, through appropriate regulations.  The Hong Kong, ChinaWT/TPR/M/109
Page 9
market was regarded as open and very competitive.  Perhaps, instead of forcing Hong Kong, China to
follow the rest of the world in terms of competition policy, the rest of the world should copy
Hong Kong, China.
29. Hong Kong, China had recently became more pro-active in promoting certain activities but,
unlike some Members, in a very transparent and non-discriminatory manner.  It facilitated activities inwhich Hong Kong, China should excel and which it could provide at higher value-added, such as
financial matters, logistics, tourism, and professional services.  The Government provided a good tax
system, the logistics and other support for this to take place;  it was pro-active but without picking
winners.
30. He noted that, at close to 80%, the internal charges on wine were very high.  There was a
wide spread between liquors above and below 30% alcoholic content:  below 30% the internal charge
was 40% and above the charge was 100%;  wine paid 80%.
31. He commended the active role of Hong Kong, China in Geneva, particularly the role of
Mr. Harbinson in conducting the WTO to Doha.  Hong Kong, China always tried to promote
consensus, but at the same time, had very firm views and protected its interests very effectively.  He
noted its position and proposals in the negotiations on non-agricultural market access, and its active
and positive participation in the negotiations on services.WT/TPR/M/109
Page 10
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
32. Members commended the Government of the Hong Kong SAR and the WTO Secretariat for
their reports, which had provided a comprehensive and a detailed picture of the trade and economic
environment in Hong Kong, China.  Members commended Hong Kong, China for maintaining an
open trade and investment regime and expressed their appreciation for Hong Kong, China's, strongcommitment to further strengthening the global tr ading regime.  They hoped that the TPRM would
contribute to enhancing Hong Kong, China's firm commitment to the multilateral trading system, and
to helping it improve its economic situation.
33. The representative of Macao, China noted that Hong Kong, China had an outstanding foreign
trade system with zero tariffs for imports of all goods regardless of origin, low taxes, simple licensing
requirements, and equal-footing conditions for investment.  In the context of regional trade
agreements, Macao, China welcomed the pragmatic approach of Hong Kong, China in pursuing itsregional trade policies, taking full account that WTO disciplines, rights, and obligations would be
duly respected, and to the extent possible, not be impaired or nullified.
34. Liberalization efforts by Hong Kong, China during the Review period included the abolition
of its rice reserve scheme, relaxation of market entry criteria by lowering the asset size criterion for
foreign banks, the removal of one-building conditions for foreign banks, the deregulation of the bankinterest rate, the regulatory reform for securiti es and futures, and the full liberalization of the
telecommunication market.
35. He noted that Hong Kong, China had an open and competitive trading system even in the
absence of a comprehensive competition law.  This absence of a specific competition law was not
unique in the WTO;  some other Members had b een administering their trade regime without an
extensive specific competition instrument. Macao, China believed that the situation of those members
should be taken into account.  Moreover, Hong Kong, China was a good example of having highly
competitive elements for trade without a competition legal framework.  He believed that the WTO
should take time to explore the in-depth relations hip between a competitive trading environment and
the need to put in place a specific competition law.
36. The representative of Chinese Taipei said th at Hong Kong, China remained committed to the
multilateral trading system, and active participation in the WTO was the cornerstone of its trade
policy.  It was very reassuring that Hong Kong, Ch ina recognized that so many of its own trade policy
priorities were adequately addressed by the Doha Development Agenda.  Chinese Taipei shared
Hong Kong, China’s views that progress on market-access-related issues, and further liberalization in
services and in industrial tariffs would create more business opportunities for services and
manufacturing industries.
37. Hong Kong, China was currently one of Chinese Taipei's largest trading partners.  In addition,
Chinese Taipei had about 20,000 business firms offici ally registered in Hong Kong, China, many of
which provided finance-related services.  Hong Kong, China had become one of the most important
overseas financial management centres for Chinese Taipei's business community.
38. He noted two areas of particular interest.  Firstly Chinese Taipei had some concerns, about
the development of regional trade agreements be tween Hong Kong, China and other WTO Members.
Even though Hong Kong, China’s trade ties with China had become closer recently, it was proposing
to establish a free-trade area with China, namely, the Closer Economic Partnership Arrangement
(CEPA).  In this connection, he requested some clarification on the definition of "Hong Kong
companies", and the likely rules of origin under the CEPA framework.  Chinese Taipei had asked
Hong Kong, China to confirm that any future regulations under the CE PA framework would not
affect the rights of other WTO Members.WT/TPR/M/109
Page 11
39. The second concern was on the enactment of the Travel Agents (Amendment) Ordinance,
which introduced licensing requirements for persons or companies carrying on the business of an
inbound travel agent.  Chinese Taipei had asked for Hong Kong, China’s assurance that the licensing
requirements were in compliance with its obligations under GATS Article VI.  Moreover, it was
Chinese Taipei's understanding  that Hong Kong, China was planning to introduce a new licensingmechanism whereby all travel guides were required to take an examination and obtain a tour guide’s
licence before working as guides.  He enquired about the current status and general direction of these
plans.  He asked Hong Kong, China to assure the membership that they would conform to the GATS,
and to ensure that the measures relating to qualification requirements and procedures, technical
standards, and licensing requirements did not constitute unnecessary barriers to trade in services.
40. The representative of Canada noted that since the hand-over in 1997, Hong Kong, China had
faced the challenge of achieving a level of economic integration with mainland China sufficient to
benefit from the economic growth there, while maintaining the distinctiveness which made
Hong Kong, China attractive to the foreign business community.
41. Hong Kong, China retained considerable advantages as an international city.  These
advantages were characterized by a sound and stable fiscal and macroeconomic framework; a level
playing field for enterprises doing business with mainland China; an open trade and investmentclimate; the rule of law; and a high degree of personal freedom.  Canada believed that
Hong Kong, China's success in attracting international business, and thus its economic future, was
closely tied to the maintenance of these advantages.
42. He stressed that any closer economic links to mainland China, such as the Closer Economic
Partnership Arrangement (CEPA), needed to be constructed in a manner that was fully WTOconsistent.  He recognized that the overwhelming  importance of services in the Hong Kong, China
economy made trade in services with the Mainland of key importance.  A reduction in barriers to the
Mainland for service providers who were Chinese ci tizens with right of abode in Hong Kong, China
might benefit Hong Kong, China in the short-term.  However, discrimination on the basis of either
nationality or length of corporate presence in Hong Kong, China would significantly reduceHong Kong, China’s advantages as a base for regional operations of foreign-owned or -controlled
companies.  Meeting the requirement to legislate in the area of national security as laid out in the
Basic Law, which guaranteed a separate system of government for Hong Kong, China as a Special
Administrative Region of China, needed to be handled with care.  The liberties that individuals
currently enjoyed in Hong Kong, China were one of the cornerstones of its attractiveness as a centre
for international business and needed to be preserved.
43. Canada and Hong Kong, China both relied on forward-looking, barrier-free, trade policy
regimes.  Canada had benefited from close coop eration with Hong Kong, China in the areas of
communications and information technology, a nd environment, and had recently signed a
memorandum of cooperation on biotechnology.  Canada  and Hong Kong, China also cooperated and
worked closely together, in regional fora like APEC, and in the WTO itself, to advance common
interests in further liberalizing trade and advancin g an effective rules-based multilateral trading
system.  He commended Hong Kong, China’s commitment to open markets and its pursuit of trade
liberalization, and noted that, even during economic downturn, since the last WTO trade policy
review in 1998, the Hong Kong SAR had increased th e number of bound tariff lines, had initiated the
phasing out by 2003 of its rice control scheme, and had improved enforcement of intellectual property
rights.
44. The representative of Korea highlighted the importance of Hong Kong, China as an economic
partner.  It was Korea's fourth largest trading partner, and an important investor.  Hong Kong, China's
importance as an economic partner lay in its extensive freedom of business, well established social
infrastructure, easy access to international financial markets, and closeness to the market of mainland
China.WT/TPR/M/109
Page 12
45. Like Korea, Hong Kong, China had experienced the Asian financial crisis and had recovered
successfully through strenuous economic reform efforts.  Hong Kong, China was also successfully
overcoming some economic difficulties caused by the global economic downturn since 2001. To
continue its path of economic growth, Hong Kong , China should focus its economic reform efforts on
overcoming the current high rate of unemployment and the growing government deficit.
46. He commended Hong Kong, China's active participation in efforts to strengthen the WTO and
its commitment to an open multilateral trade regime, which Korea shared.  Korea and Hong Kong,
China had collaborated in many areas in the DDA negotiations and had al so cooperated closely in
APEC.  In this regard, Korea was interested in the current discussions on the Closer Economic
Partnership Arrangement (CEPA) between Hong K ong, China and mainland China.  Korea believed
that the CEPA discussions would proceed in a manner that would help to strengthen the WTO
multilateral trading system.
47. He noted the efforts by Hong Kong, China's authorities to enhance the protection of IPRs.
However, it was still reported that many counterfeit goods of internationally well-known brands were
produced in China and then imported into Hong Kong, China for sale in areas such as Kowloon.  He
asked whether there were any plans to address this situation.
48. The representative of Argentina noted the importance of trade in goods and services in
Hong Kong, China's economy, which had reached 277% of GDP.  Hong Kong, China was a net
exporter of service.  He commended Hong Kong, China's participation in the multilateral system
including in the present negotiations, and had confidence in its leadership role in the WTO
49. Argentina agreed with the Hong Kong, China's assessment that, in order to strengthen the
WTO and attain a greater and more egalitarian liberalization of trade in goods and services, it wasnecessary to clarify and improve the rules.  Argentina shared Hong Kong, China's worries regarding
the negotiations on trade in services and considered that the rules in trade in services should be
strengthened and that more rigorous national regulations should be adopted.
50. The representative of the European Union was pleased to note that Hong Kong, China was
still known  as one of the world's freest economy.   The free-market principles that had served
Hong Kong, China so well in the past had no dou bt been safeguarded in the "one country, two
systems" framework and it looked as if the business-friendly climate and open society had been
maintained.
51. Hong Kong, China was in the process of redefining itself so as to provide more sophisticated
services to both China and to the rest of the world.  The envisaged Close Economic Partnership
between Mainland China, Hong Kong, China, and Macao, China was an example of government
policy favouring the further integration of the economy with that of Mainland China, in particular the
Pearl River Delta.
52. Since the hand-over to China five years ago, bilateral relations between the EU and the
Hong Kong SAR had been put on a permanent footing and had focused largely on supporting the one
country, two systems formula.  The EU aimed to safeguard Hong Kong, China's role as an open
economy and gateway to China, and, of course, as an important partner in the WTO.
53. The EU intended to strengthen relations with Hong Kong, China in all areas where it had
retained its autonomy as provided for in the Basic Law of the SAR.  As a first step in May 1999, they
had signed a Customs Cooperation Agreement, providing for mutual administrative assistance
including exchange of information on possible breaches of customs law, and establishing a Joint
Committee to oversee its proper functioning.WT/TPR/M/109
Page 13
54. The trade figures were evidence of the close ties between the EU and Hong Kong, China.  In
2001, the EU was Hong Kong, China's third largest tr ading partner.  However, the economic ties went
beyond trade in goods; FDI was also important.  In the public works sector, EU companies had also
been quite active and had been awarded contracts worth a total of €165 million.
55. He referred to several issues of interest to the EU.  The EU would follow with interest the
ongoing discussions on the possible conclusion of  an FTA with New Zealand and one with the
Mainland of China.  In particular he asked how Hong Kong, China saw the economic and trade
implications of such agreements, and its views regarding the interface between regional efforts and
the WTO.
56. On developments in services he sought clar ification on the division of responsibilities among
the Hong Kong, China Government, the Securities and Futures Committee, and the Hong Kong
Exchanges and Clearing Limited (HKEx) company with in the three-tiered regulatory structure;  the
EU was particularly interested in the role of the HKEx as a market regulator.  He requested further
information on steps taken to remove trade barriers to the exercise of professional services;  the EU
was interested in the Government's policy regard ing the recognition of diplomas and qualifications
other than from the commonwealth.  He asked for clarification on the interaction of the
Telecommunications Authority (TA) and the Offi ce of the Telecommunication Authority (OFTA).
57. The EU was of the view that the lack of any regulation of competition in Hong Kong, China's
domestic market might hamper fair competition in Hong Kong, China.  The EU believed that the
establishment of a multilateral framework for competition policy could promote free trade in a fair
and transparent manner, including on Hong Kong, China's domestic market.
58. The representative of New Zealand applauded Hong Kong, China's continuing commitment to
maintaining an open trade and foreign investment regime, not least in view of the difficulties that
Hong Kong, China faced as a result of the current global down turn.
59. He underlined both the important trading relationship between Hong Kong, China and
New Zealand, and their common interest in further liberalization of world trade.  While both
economies were strong supporters of the multilateral trading system, New Zealand andHong Kong, China recognized the benefits that could also be gained through bilateral trade
liberalization.  To this end, New Zealand and Hong Kong, China were currently negotiating a wide-
ranging and high quality Closer Economic Partnership Agreement (CEP).
60. On the question of terminology, raised by the discussant, it was true that there was a degree of
politics in the choice of the term CEP rather than the more traditional free-trade agreement, but he
thought it should be recorded that this was more than just politics.  New Zealand's experience had
been that in the case of economies such as Hong Kong, China or indeed Singapore, its most recentFTA partner, there was much more to the process than goods and services liberalization, as Australia
and New Zealand had found over 20 years under th e CER relationship.  Modern RTAs went well
beyond liberalization and traditional border issues and the real challenges were often the more
complex behind-the-border issues, such as the compatability of regulatory approaches.  This was why
the term CEP was perhaps a more accurate description of the degree of ambition in what New Zealandwas seeking to achieve with Hong Kong, China.
61. Hong Kong, China remained an important market for New Zealand's agricultural exports.
Thus, New Zealand welcomed Hong Kong, China's move to fully liberalized rice imports through the
removal of the rice control scheme and import quota from January 2003.  This move was welcomed
by New Zealand not because it had ambitions to become a rice exporter but because the move was arecognition that the foundation of Hong Kong, China's food security was an efficiently functioning
world agricultural market.  This was an issue of broader interest to the membership, it was the
responsibility of all WTO Members to ensure that distortions to agricultural trade were eliminated toWT/TPR/M/109
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ensure that economies such as Hong Kong, China c ould continue to find security of food supply from
the world market.
62. New Zealand had been following closely Hong Kong, China's increasing economic
integration with China, and welcomed the many benefits that would flow to the region now that China
was a member of the WTO.  As the financial and se rvices hub of the Asia-Pacific region, Hong Kong,
China was uniquely positioned to take full advantage of China's accession to the WTO.
63. He asked about the steep increase in excise duty on wine, a rise from 60% to 80%.  He
shared, the discussant's concern that this may stand between Hong Kong, China's consumers and the
very fine wines coming out of the New Zealand wineries.
64. The representative of Australia noted that Hong Kong, China was an important voice for
liberalization unencumbered by the baggage of defensive interests that many other Members carried.
The Australian Government shared strongly HKC's commitment to an open multilateral tradingsystem.  Australia had enjoyed working closely with HKC in advocating a new round founded on an
agenda based on market-access liberalization.
65. Australia had extensive commercial interests in Hong Kong, China.  It was Australia's ninth
largest export market for goods and the sixth largest market for services exports.  In addition,
Hong Kong, China was Australia's fourth largest source of investment and sixth largest destination forAustralian investment overseas.
66. Australia noted with interest the new policy on free-trade agreements adopted by
Hong Kong, China and welcomed its assurances that the FTAs being discussed with New Zealand and
the mainland of China would be fully consistent with WTO rules and would contribute to global trade
liberalization.
67. Regarding its present economic difficulties, Hong Kong, China had responded to pressure on
its budget by tightening spending and raising revenue opportunities.  For the most part, this strict
budget discipline had been accomplished without resorting to trade restraints.  However,
Hong Kong, China's wine excise tax, which placed an 80% excise on wine, could only be directed at
imports as Hong Kong, China did not produce wine.  The trade impact of such a domestic tax wasclear, and Australia considered that it did not fi t with Hong Kong, China's record on maintaining a
free and open trade environment.  The level of Australian wine exports to Hong Kong, China had
fallen after the introduction of the wine tax and grow th in its wine exports to Hong Kong, China had
plummeted.  While an overall decrease in consumption in Hong Kong, China could be attributed to
the difficult economic situation, he considered that the reason for the very dramatic fall in wine
imports was the wine tax.
68. The representative of India noted that Hong Kong, China had one of the most liberal trade and
economic regimes.  The economy of Hong Kong, Chin a had showed extreme resilience in coping with
the Asian financial crisis of 1998.  However, the economic recovery had been severely constrained by
the global economic recession of 2001 leading to a sharp fall in the growth rate.  Despite these
experiences, Hong Kong, China's faith in a market-driven, open trade regime had not been shaken.
He noted that the Government had become more pro-active in promoting high - value - addedactivities,. mainly of trade in financial services , professional services, and tourism, which was
understandable.
69. Hong Kong, China played an active role at the WTO.  It maintained a highly open and
transparent multilateral trade regime.  With the exception of the quota system on rice, it did not apply
any non-tariff measures.  Hong Kong, China was an ardent believer in the multilateral approachtowards international trade.  This was evident be cause it was not a party to any regional trade
agreement.  However, there seemed to be a slight rethinking on this front.  India was hopeful that anyWT/TPR/M/109
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regional agreement entered into by Hong Kong, China would be within the WTO rules.  India had
submitted written questions on certain specific trade issues and hoped to receive replies during the
course of this Review.
70. He refered to the valuable bilateral relations between India and Hong Kong, China and hoped
that these would grow further in the coming years to the mutual benefit of both countries. Hecomplimented Hong Kong, China for its strong economic performance.
71. The representative of Norway commended Hong Kong, China's open and liberal trade regime.
This regime was without doubt one of the principal reasons for the impressive growth of the
Hong Kong, China economy over many years and its prosperity today, as well as for the economy's
resistance to severe external shocks in the last few years.
72. Hong Kong, China, also benefited from a predictable environment for trade and investment,
legal security and a transparent society with free flow of information.  These were assets that he
considered important to safeguard.  Norway appreciated Hong Kong, China's active and constructive
involvement in the WTO.
73. Norway’s trade with Hong Kong, China, was limited, but not insignificant.  Many Norwegian
companies had invested in Hong Kong, China.  Fe rtilizer for re-export and fish were among Norway's
most important exports.  Norway noted that Hong Kong, China applied zero duty on all fish and fish
products, as well as for all other goods.  Norway w ould, however, appreciate further binding of tariff
lines to the level of their applied rate;  this would increase predictability and stability.
74. He commended Hong Kong, China’s position in relation to the anti-dumping provisions of
the WTO;  Hong Kong, China did not use these provisions.  Hong Kong, China’s use of licences and
quantitative import restrictions was also very limited, and practice in relation to health, environment,and food safety was based on international standards.  All this was to the benefit of
Hong Kong, China's trade relations with other WTO members.
75. Hong Kong, China was very important in services trade, and the environment in this area was
also open, liberal and predictable. Significant steps had been made in the telecom sector in recent
years.  Hong Kong, China was active in trying to improve the international regime for maritimetransport services through binding commitments under GATS.  He noted that Hong Kong, China, had
taken partial commitments under the model schedule for maritime transport services.
76. Hong Kong, China, was an important supplier of financial services;  the progressive
liberalization in the sector, including reforms related to banking, was appreciated.  However, he noted
that in its Schedule under the 5th Protocol Hong Kong, China had limited any commitments under
modes 1 and 2 in such a manner that soliciting or marketing of the relevant services were not allowed.
Norway considered that mode 1 necessarily entailed some form of soliciting or approaching of actualor potential customers.  In this regard he asked how Hong Kong, China defined the difference with
regard to its mode 1 and 2 commitments;  what rights were offered to Members when
Hong Kong, China inscribed commitments under mode 1;  and why Members were not allowed to
solicit business under the relevant services in Hong Kong, China.
77. The representative of Colombia referred to the very specific characteristics and features of the
Hong Kong, China economy;  it embodied a special administrative region within one of the largest
countries in the world, it had  strong institutions, and its level of development was due to the healthy
political, economic, and commercial trading policies maintained.
78. Hong Kong, China had managed to become a major financial and service centre in Asia and
the Pacific, balancing some of the deficiencies in manufacturing and in trade in goods.  The sectoralpolicies applied in Hong Kong, China, aimed at improving the infrastructure and at promotingWT/TPR/M/109
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innovation and technological advance in the manufacturing and services sectors, were worth
emulating.  As a result of these policies, Hong Kong, China had been able to deal with the ongoing
process of structural adjustment, the negative effects of the Asian financial crisis, and the slowdown
in the world economy.
79. Hong Kong, China's strong commitment to the multilateral trading system and the new round
of negotiations were noteworthy.  The recent initiatives undertaken by Hong Kong, China in
negotiating regional agreements with New Zealand and the People's Republic of China showed that
regional agreements were a complement to the multilateral trading system.
80. Colombia's trade with Hong Kong, China was not high, but imports from Hong Kong, China
had been increasing over the last seven years.  Colombia imported mainly manufactured goods from
Hong Kong, China.  While raw materials, mainly emeralds, were Colombia's major exports to
Hong Kong, China.  She believed that some market segments had not yet been exploited.
81. The representative of Mexico said that his country had been following with great interest
Hong Kong, China's transition to the one country, two systems.  Hong Kong, China was undoubtedly
one of Mexico's strategic trading partners in the Far East, not only within the framework of the WTO
but also in other fora such as the OECD and APEC .  Mexico wished to further strengthen its links
with Hong Kong, China.
82. The representative of the United States said that Hong Kong, China had maintained a long
established policy of openness to both trade and investment and had demonstrated its continuing
commitment to the primacy of the WTO, to which Hong Kong, China contributed a significant
leadership.  The United States applauded Hong Kong, China’s commitment to free market principles
underlying its trade and investment policies and its respect for the rule of law.
83. The trade and economic relationship between the United States and Hong Kong, China was
growing, stable, and strong.  In 2001 Hong Kong, China was the United States’ 16th largest trading
partner in goods.
84. Hong Kong, China's macroeconomic policies as well as its open trade policies had
contributed to its resilient economic performance over the past decade.  It had emerged successfullyfrom the downturn in the Asian region during 1998- 99 and maintenance of similar policies would
suggest that Hong Kong, China was well positioned to emerge from its current downturn.
85. Hong Kong, China’s active participation in the WTO to promote open trade had acted as an
example of liberalization efforts regionally and around the world.  Hong Kong, China was a leading
member of APEC and had supported a number of in itiatives to promote close economic cooperation
in the Asia-Pacific region.  It had also been instrumental in helping to generate the necessary
momentum to launch a new trade round in Doha last year and it continued to play a role in leading thenegotiations toward a successful conclusion.
86. Despite this commendable record, there were some areas in which the United States
considered that Hong Kong, China could make further improvements.   The United States urged
Hong Kong, China to continue strengthening its  IPR regime.  Although Hong Kong, China had
reduced copyright and other types of piracy in the SAR, it could still be vulnerable to copyright piracyand counterfeiting that occurred elsewhere.  Hence Hong Kong, China was urged to sustain or
improve its enforcement efforts and to guard against imports of pirated or counterfeit products.
87. Services comprised the largest component of the Hong Kong, China economy and the
United States commended it on the service sector liberalization undertaken since its last Review in
1998.  In the telecommunications sector, the representative urged Hong Kong, China to continueliberalizing its market, and looked forward to full market opening on 1 January 2003, while urgingWT/TPR/M/109
Page 17
Hong Kong, China to reduce any burdensome requirements for entry.  The United States also
welcomed Hong Kong, China’s continuing participation in the current services negotiations and in the
interest of increased transparency encouraged Hong Kong, China to schedule commitments that
reflected recent policy changes.
88. The representative of Japan noted that since its previous review in 1998, Hong Kong, China
had faced two successive external shocks:  the Asian financial crisis in the early stages, and the global
economic slowdown in 2001.  After the Asian financial crisis, Hong Kong, China's economy had
recovered rapidly.  Japan hoped that Hong Kong, China would continue its efforts towards recovering
its economic situation following the 2001 economic downturn.
89. Japan considered that the global trading environment also had a substantial influence on
Hong Kong, China's economic recovery.  Japan appreciated the Hong Kong, China's contributions to
the multilateral trading system, in the overall WTO activities including those of the DohaDevelopment Agenda.  Japan believed that comprehensive negotiations, which included not only
market access, but also strengthening the rules such as on anti-dumping, and the Singapore issues like
investment and competition policy, would ultimately bring about maximum benefits to all WTO
Members.  In this light, Japan hoped that Hong Kong, China would play a more active role, as the
Round advanced, in ensuring a comprehensive agenda as well as parallel progress on all negotiatingfronts.  Since Hong Kong, China had developed greatly to become an advanced developing economy,
Japan believed and hoped that it could play a model role for other developing countries.
90. While Hong Kong, China had been a major beneficiary of the multilateral trading system, it
had initiated FTA negotiations with New Zealand and with the mainland of China.  Japan shared
Hong Kong, China's view that high standard FTAs , with a meaningful framework for liberalization
could help complement and spur global trade liberalization.  Concerning the Closer Economic
Partnership Agreement (CEPA) with the mainland of China, Japan sought confirmation that this
agreement would be consistent with Article XXIV of the GATT, as well as with Article V of the
GATS.  Japan was particularly interested in knowing whether substantial liberalization would take
place in all the sectors, and whether trade barriers would not be raised in relation to third countries.
91. Hong Kong, China had comprehensive legislation regarding the protection of intellectual
property rights.  However, since trade in Hong Kong, China was centered around transit trade, and
since it was located close to Japan, there had been consistent complaints over the years from the
Japanese industry concerning deficiencies in controlling goods infringing intellectual property rights,
such as pirated and counterfeit products.  In this respect, both the Government and Secretariat Reports
stated that Hong Kong, China had been taking steps to improve the enforcement of these laws, and
had also been implementing educational campaigns to strengthen the protection accorded tointellectual property.  Japan commended such efforts by Hong Kong, China, and hoped that these
efforts would be reinforced.  Japan had already submitted various technical questions on the matter
and looked forward to receiving detailed answers.
92. Hong Kong, China was primarily a service-based economy.  Japan commended
Hong Kong, China for its wide range of commitments, and for not having made any MFNexemptions.  Japan also appreciated Hong Kong, China's active participation in the current services
negotiations, and hoped to be able to cooperate closely in order to move the services negotiations
forward. Japan had raised several questions concerning specific services sectors.
93. Japan reiterated its appreciation of Hong Kong, China's efforts towards trade liberalization.
Japan saw Hong Kong, China as one of the most important pillars advocating the primacy of tradeliberalization.  He also appreciated the important effort made by Hong Kong, China to strengthen and
updating the rule-based multilateral trading system.WT/TPR/M/109
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94. The representative of Singapore stated that his country had always enjoyed strong bilateral
trade relations with Hong Kong, China.  In 2001, Hong Kong, China was Singapore’s 4th largest
trading partner with bilateral trade amounting to S$24.36 billion.
95. He welcomed the liberalization measures taken in the services sector since
Hong Kong, China's last Trade Policy Review in 1998.  Hong Kong, China  had also maintained its
duty-free policy for all merchandise imports despite the recent global economic downturn.  Despite its
fiscal deficits, Hong Kong, China did not resort to a "quick-fix" solution of imposing tariffs and
increasing revenues so as to achieve a balanced fiscal position.  Keeping firm to its duty-free policy
for all merchandise imports reaffirmed Hong Kong, China’s commitment to free trade.  He
commended Hong Kong, China for its market liberalization measures, in the communications and
financial services sectors.  Singapore, like other Members, looked forward to a fully liberalized
telecommunications market by 2004, and the relaxation of certain conditions pertaining to foreignbanks.
96. He noted the current problems of deflation, arising from the weak property market and high
unemployment rates.  However, these were but signs of an economy undergoing structural changes.
These changes would help Hong Kong, China meet the challenges in the long run.  Hong Kong, China
had weathered the global economic downturn relatively well.
97. The representative of Uruguay highlighted Hong Kong, China's efforts to overcome the
external shocks suffered during the period under review.  Despite the economic downturn
Hong Kong, China maintained an open trade and investment regime.  During the period it has
continued its transformation from a manufacturing to a services-based economy.
98. Uruguay and Hong Kong, China had important bilateral trade relations.  Trade was of vital
importance for this Special Administrative Region hence its active participation in the WTO.  He
noted that in many instances Uruguay was in agr eement with Hong Kong, China's positions regarding
various WTO topics.
99. The representative of Thailand noted that, despite successive external shocks since 1998,
Hong Kong, China’s economy had recovered in 1999 and 2000, though real GDP had contracted in
2001, due primarily to the global economic slowdown.  He was hopeful that, with its sound economic
base and high degree of openness and resiliency, Hong Kong, China would be able to overcome
economic difficulties and attain full recovery soon;  there were already visible signs of the economic
upturn.  He was glad to note that the Territory’s institutional and policy framework had remained
largely unchanged since its reversion to China in 1997.
100. It was encouraging that Hong Kong, China had made every effort to uphold its open and
transparent trade and foreign investment regime.  Trade was critical to the Hong Kong, Chinaeconomy.  On a bilateral note, Hong Kong, China and Thailand had enjoyed a long-standing trade and
economic partnership.  Thai exports, notably Thai fragrant rice, had secured good access to this
market.  Thailand welcomed the lifting of quotas on rice imports, in particular the ongoing
liberalization of the Rice Control Scheme, which would put an end to the Scheme in January 2003.
He believed that this would facilitate trade and provide better access for Thai rice exports to thatmarket.
101. Hong Kong, China and Thailand shared views on a number of systemic issues, such as the
need to bring the textiles and clothing sector under WTO rules.  In this regard, he commended
Hong Kong, China for its crucial role in the run-up to the full integration of the sector into GATT
1994 in January 2005.WT/TPR/M/109
Page 19
102. The representative of the Czech Republic appreciated the efforts by Hong Kong, China to
overcome he financial and economic crisis in Asia.  Hong Kong, China was able to overcome the
difficult situation thanks to its highly flexible and adaptable economy.
103. Hong Kong, China was an important trade partner of the Czech Republic although they had
not concluded a bilateral trade agreement and the exchange of goods was based on their commitmentsin the WTO.  Owing to its stability, the Hong Kong, China market had remained one of the gates for
Czech exports to East Asian and Far Eastern countries.  Bilateral trade between the Czech Republic
and Hong Kong, China was not subject to any obstacles.  Nevertheless, Czech companies hoped to
have more activities in Hong Kong, China in the future.
104. The mutual cooperation should not be limited only to the exchange of goods.  There were
other, hitherto unused possibilities, including industrial cooperation.  The signing of an air services
agreement between the Czech and Hong Kong, China governments was an achievement.  TheCzech Republic hoped to become a recipient of Hong Kong, China's outward foreign direct
investment.  He was convinced that Hong Kong, China investors would find a suitable investment
environment;  Czech investment incentives were regulated by the Act on Investment Incentives, in
effect since May 2000, and were in accordance with the EU regulations.
105. The representative of Malaysia noted that as a very open economy, Hong Kong, China had
not been totally immune to international fina ncial instability and the global economic slowdown.
Nevertheless, it had done very well to withstand the successive external shocks.  The strength of its
international reserves and the resiliency of its economy had assisted considerably in its adjustment to
these shocks.  This had allowed economic growth, and the current account remained substantially
positive.
106. Nevertheless, the economic slowdown had led to considerable deflationary conditions and
high unemployment.  There was, perhaps, room for measures that could stimulate both private
consumption and gross fixed investment so that domestic demand could take up the slack caused by a
decline in exports and put Hong Kong, China on a firmer footing for economic recovery.
107. Hong Kong, China's open economy with liberal trade policies could be emulated by many.  In
this context, he noted that Hong Kong, China had eschewed the use of contingency measures as
denoted by the absence of anti-dumping and countervailing legislation.  Nevertheless, one area of
improvement could be increasing its bound tariff commitments;  this could be undertaken in the
current negotiations.
108. He noted that difficulties could arise in the transition to a services-based economy, including
structural unemployment;  these would have to be offset by improved competiveness.
109. Trade and investment between Malaysia and H ong Kong, China remained substantial and he
hoped that it could be further enhanced in the fu ture, as Hong Kong, China was a major investor in
Malaysia.WT/TPR/M/109
Page 20
V. REPLIES BY THE REPRESENTATIVE OF HONG KONG, CHINA AND
ADDITIONAL COMMENTS
110. The Chairperson invited the representative of Hong Kong, China to focus his responses on
three main themes:  (i) economic environment;  (ii) trade policies and measures;  and (iii) sectoral
policies.
111. The representative of Hong Kong, China confirmed that, as proposed, his delegation had
grouped its responses under three themes.  In his oral response, he would address the more general
points underlying the written questions, and some of the concerns highlighted in Members'
interventions on the first day of the meeting;  detailed replies to all the written questions were being
tabled.
(i) Economic environment
112. The representative of Hong Kong, China no ted that it was most encouraging to hear
Members’ appreciation of Hong Kong, China's open economy, the level playing field for businesses
from all over the world, and its non-interventionist Government.  During the discussions on Monday
and in some of the written questions, there had been  some allusion to signs of a shift away from
laissez-faire policy.  He assured Members that the Financial Secretary’s remarks in his budget speech,
that the Government should be a "proactive mark et enabler" by no means meant a change in the
Government’s role in the economy, nor did they augur a new policy of picking winners or directly
subsidizing specific industries.  The message was that during these difficult times, the Government
would re-double its efforts to enhance Hong Kong , China's business-friendly institutional framework
and infrastructural support for enterprises to flourish and to encourage more investments.
113. Despite the fiscal deficit, the Government of Hong Kong, China did not resort to any non-
trade friendly measures.  It was true that protectionist measures went against the grain of
Hong Kong, China’s philosophy, and he hoped that the wine-exporting economies would understand
that the recent increase in the excise duty for wine was only a modest fiscal measure rather than a
means to discourage the importation of wine.  He considered it "modest" because the duty was 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 was only US$0.8, and translated into an increase of only about 4%
in retail price.  He noted that the quantity of wine consumed from April to October 2002 had dropped
only slightly, by 4.4%, over the same period last year.  Moreover, the drop in wine consumption
should be seen against the background of an econo mic downturn, when overall consumer demand had
contracted by 1.4%.
114. He noted that he had already introduced the philosophy underpinning Hong Kong, China's
competition policy, and the written answers offered a detailed reply to the written questions raised byMembers.  Nevertheless, he pointed out that competition was alive and well in all sectors of business
in Hong Kong, China, and the absence of an over arching competition legislation did not reduced the
level of competition in its markets, or act against its favour in the eyes of reputable organizations like
the Fraser Institute in terms of economic freedom.  He thanked members for their appreciation of
Hong Kong, China's competition regime, and the observation that it was a good example of aneconomy that had highly competitive elements for trade whilst not having an overarching competition
law.  He also noted with interest the suggestion of one Member that it was worthwhile for WTO to
take more time to explore the relationship between a competitive trading environment and the
necessity for a specific competition law.
115. He explained that under Hong Kong, China's sector-specific approach to promoting
competition, the special concerns, circumstances, and needs of individual sectors were addressed
through legislative and/or non-legislative measures.  Even the IMF paper cited in the Secretariat
Report noted that:  Hong Kong SAR is neither significantly more nor significantly less competitiveWT/TPR/M/109
Page 21
than the average OECD country.  Nevertheless, the promotion of competition was a continuous
process;  thus, Hong Kong, China would continue to monitor the market situation and explore further
measures to enhance competition as and when required.
116. Responding to Member's concern about Hong Kong, China’s proposal for national security
legislation, he stated that the laws Hong Kong, China had in mind were not in any way more stringentthan the national security laws in other major jurisdictions.  The proposed legislation would not affect
the way of life in Hong Kong, China, and would not affect the rights and freedoms enjoyed by
Hong Kong, China's citizens, or by investors or anyone who conducted business in
Hong Kong, China.
117. The discussant thanked Deputy Secretary Young for his remarks on the economic
environment.  He noted that Hong Kong, China's economy was a text-book case that could be used to
illustrate many points of a market economy at work.  It was satisfactory to hear that the economicpolicies of laissez-faire would be maintained.  On competition policy, again Hong Kong, China was a
text-book case, it was working.  Perhaps, in certain circumstances, a broad competition policy law
was not required.  He thought this should be taken into account in the working group analysing this
issue.  On the tax on wine, he was relieved to hear that it was very low, but was somewhat concerned
that consumption had been going down slightly.
(ii) Trade policies and measures
118. The representative of Hong Kong, China began with  the issue of tariff bindings.  He highlight
that Hong Kong, China was one of the few economies with applied tariffs at zero.  Over the years,
Hong Kong, China had made unilateral efforts to increase bindings.  As to the question of further
tariff bindings, tariff concessions were exchanged predominantly on the basis of reciprocity, and hehoped that Members would appreciate that Hong Kong , China, as one of the freest traders in the
world, really had no other concessions to offer except the scope for further binding.  The present
scope of binding was the outcome of previous negotiations plus additional autonomous binding since
the conclusion of the Uruguay Round.  Hong Kong, China had put forth an ambitious proposal to the
NAMA Negotiating Group, and stood ready to match any concessions by other Members in thecoming negotiations.
119. He had noted some Members' keen interest in the state of play of Hong Kong, China's FTA
discussions with New Zealand and the mainland of China, and their concerns about the need for the
provisions in these agreements to be consistent with WTO rules.  As the negotiations on the two FTA
agreements were still in progress, he could only state that the scope of the negotiations were wide-
ranging, covering trade in goods, trade in services, and trade and investment facilitation.  Nonetheless,
Members could be assured that the provisions in the agreements to be negotiated would be consistentwith WTO rules including Article XXIV of GATT and Article V of GATS.  The agreements would
not raise barriers to trade with third parties.
120. He thanked the delegates who made positive remarks on Hong Kong, China's efforts and
achievements in intellectual property protection.  Hong Kong, China attached great importance to this
area.  Hong Kong, China's TRIPS-compliant intellectual property legislation was complemented byvigorous enforcement actions, as evidenced by the enforcement figures quoted in the Secretariat
Report.  Hong Kong, China's efforts had been recognized by its major trading partners and was cited
as a model for the Asia-pacific region.
121. On preventing the inflow of pirated goods from other territories, he said that
Hong Kong, China closely monitored passengers, cargoes, and conveyance into its territory, andconducted regular risk profiling with a view to in terdicting the entry of counterfeits.  It also
maintained close cooperation with neighbouring tr ading partners.  For instance, the Hong Kong
Customs had stepped up cooperation with its Mainland counterparts in respect of intelligenceWT/TPR/M/109
Page 22
exchange, and they conducted parallel operations against counterfeit goods at both sides of the border
from time to time.
122. The discussant noted the rather low level of tariff bindings and how this was in sharp contrast
with Hong Kong, China's zero tariffs.  He underst ood that Hong Kong, China had made an interesting
proposal:  unfortunately, in the absence of tariffs in Hong Kong, China, Members had little incentiveto negotiate with Hong Kong, China.  Nevertheless, he encouraged Hong Kong, China to bind all
tariffs at zero, whether through negotiations at bilateral, plurilateral, multilateral level, or unilaterally.
123. The representative of Chinese Taipei praised the tremendous efforts of the Hong Kong, China
delegation in preparing its extensive responses.  Howe ver, he still considered it necessary to raise the
specific issue of the CEPA arrangement between Hong Kong, China and China, and looked forward
to Hong Kong, China's update of developments in the days ahead.
(iii) Sectoral policies124. The representative of Hong Kong, China appreciated the positive remarks by the Members on
the liberalization of the telecommunications sector and noted Members’ interest for binding
liberalization commitments.  Hong Kong, China expected that Members would broaden and deepen
their commitments made in the previous negotiations in the telecommunications sector.
Telecommunications would be a priority sector for Hong Kong, China in the ongoing servicesnegotiations.
125. On financial services, he stated that the caveat that applied to Mode 1 and Mode 2 of supply
of financial services would 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 Hong Kong, China's regulatory authorities.  The caveat
itself did not seek to restrict the delivery of such services to customers in Hong Kong, China.
126. Hong Kong, China was actively pursuing modern logistics services in the services
negotiations.  Hong Kong, China considered maritime transport as an important component of
logistics.  Given Hong Kong, China's strength in transportation services and port facilities the
Territory aspired to be the regional logistics hub a nd had great interest in the liberalization of the
whole range of maritime and logistics-related services.
127. Some Members had referred to qualifications and licensing requirements in different sectors,
such as professional services and tourism services.  In this regard, Hong Kong, China was a strong
advocate of developing regulatory disciplines under Article VI, paragraph 4 of the GATS, not least in
professional services, to ensure that domestic regulations would not become unnecessary barriers to
trade in services.  Hong Kong, China had been making various efforts in recent years to facilitate the
recognition of professional qualifications obtained outside the Territory.  For instance, since theenactment of the Legal Practitioners (Amendment) Ordinance in 2003, legal practitioners from
Commonwealth and non-Commonwealth countries woul d be subject to the same admission criteria.
128. A question was raised on open skies agreements.  He considered that with an extensive air
services network, the sky of Hong Kong, China was already open.  Hong Kong, China believed that
the so-called open skies proposal from some of its aviation partners may not provide a level playingfield for fair and equitable opportunities for the airl ines of both sides to compete.  Hong Kong, China
sought to liberalize the air services regime progressively in a proactive manner, with a view to
expanding its air services network and frequencies as well as enhancing its position as an aviation and
logistics hub.
129. The discussant took note of Hong Kong, China's definition of the so-called "open skies"
proposal.  He asked Hong Kong, China under what  circumstances a level playing field could beWT/TPR/M/109
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achieved in order to achieve a real open-skies arrangement, and encouraged Hong Kong, China to
work with other Members to bring air transportation under the GATS rules.
130. The representative of Norway thanked Hong Kong, China for its response on financial
services.  He noted that Norway and Hong Kong, China were working together in several services
sectors;  he appreciated, in particular, Hong Kong, China's comments on maritime services.
131. The representative of Macao, China thanked the HKSAR for its responses and particularly for
the reply to the question regarding the economic ties with the Pearl River Delta region
132. The representative of Hong Kong, China referr ed to the discussant's question on air services
and agreed with his observation that the negotiations on air services were not part of GATS
negotiations.  However, the GATS Annex did provide for a periodic review by the Council for Trade
in Services of the developments in the air transpor t sector, with the view to considering the possible
application of the agreement to the air transport sector.  The current review was ongoing andHong Kong, China would be participating actively in the negotiations.
Concluding remarks
133. Mr. Raymond Young said that the Trade Policy  Review had given Hong Kong, China the
opportunity to foster a better understanding among Members of its trade policies and practices, as
well as of the rapid developments in various sectors.  More importantly, it had demonstratedHong Kong, China's commitment to the practice of free trade.  Hong Kong, China had been and
would continue to be a staunch supporter of the multilateral trading system, as embodied in the WTO,
and would continue to participate constructively and actively in the ongoing negotiations.WT/TPR/M/109
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VI. CONCLUDING REMARKS BY THE CHAIRPERSON
134. This Review has provided an excellent opportunity for Members to better understand the
trade and economic policies of Hong Kong, China.  Our meeting has involved a very informative
exchange of views, stimulated by the full and open engagement of the delegation of
Hong Kong, China, broad-ranged and insightful comments by the discussant, and Members' activeinvolvement in the discussion.  Members' evaluation of the trade and trade-related policies of
Hong Kong, China has, by and large, been positive;  Members commended Hong Kong, China for
maintaining one of the most open economies in the world, one that many Members should seek to
emulate.  The outcome, I believe, has been a highly successful fourth Review of Hong Kong, China's
trade policies, practices and measures.
135. Since its reversion to China, Hong Kong, China's institutional and policy framework has
remained largely unchanged, in accordance with the principle of "One Country, Two Systems".Despite the difficulties it has faced as a result of the Asian financial crisis, current global economic
downturn, and increasing integration with the rest of the country, Hong Kong, China has maintained
its traditional openness to both trade and investment; indeed, it has taken further liberalization
measures during the period under review.
136. Members congratulated Hong Kong, China on its active role in the WTO, including its strong
support for the Doha Development Agenda. Members noted Hong Kong, China's increasing
involvement with regional and bilateral trade agreements.  Hong Kong, China provided information
regarding the development of regional trade agreements between it and other Members, and noted that
these agreements would be fully consistent with the principles underlying the WTO.
137. Members commended Hong Kong, China for its continued trade-liberalization efforts and for
the transparency and openness of its trade and investment regime.  While the authorities of
Hong Kong, China indicated that they are now foll owing a more "proactive" approach to industrial
policy in an effort to promote high value-added activities, this policy involved support for general
infrastructure to facilitate development.  The au thorities re-affirmed that the policy does not involve
picking winners or rescuing losers at taxpayers' expense; nor does it involve protecting or subsidizingparticular industries.
138. In the interests of predictability and stability, Members encouraged Hong Kong, China to bind
more of its tariffs.  Some Members also encouraged it to reduce excise tax rates on wine.  Some
Members urged Hong Kong, China to continue to stre ngthen its regime to protect intellectual property
rights, particularly enforcement.  Members generally appreciated Hong Kong, China's efforts to
maintain a competitive market.
139. On sectoral issues, Members noted the predominance of services in Hong Kong, China's
economy.  Members commended Hong Kong, China on its wide range of commitments under the
GATS together with the lack of MFN exemptions, as well as on its liberalization measures,
particularly in telecommunications and financial services, undertaken since its previous Trade Policy
Review in 1998.
140. Members also sought clarification on several specific issues including:
- macroeconomic policy and the broad economic environment;
- WTO accession of China and its benefits to Hong Kong, China;
- rules of origin under the proposed FTA with China;
- import licensing;WT/TPR/M/109
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- contingency measures;
- standards, sanitary and phytosanitary measures;
- government procurement;
- assistance to certain activities and small and medium-sized enterprises;
- rice stocks;- rules of origin concerning textiles and clothing;
- division of regulatory responsibilities concerning securities;
- air and maritime transport;
- recognition of diplomas and qualifications;
- postal service liberalization, broadcasting licences, legal services, licensing
requirements for inbound travel agents; and
- movement of natural persons (visas);
141. Members expressed their appreciation of the oral and written responses and explanations
provided by the delegation of Hong Kong, China.
142. This brings us to the conclusion of our fourth Trade Policy Review of Hong Kong, China.
The large number of advance questions, numerous interventions and the high level of attendance
indicate the importance Members attach to Hong Kong, China's leadership at the WTO.  In thiscontext, I would encourage Hong Kong, China to co ntinue its traditionally strong support for the
multilateral trading system.
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