Communication from the Commission to the Council and the European Parliament - The European Union, Hong Kong and Macao: possibilities for cooperation 2007-2013
Date: 2006-10-26
Institutions: European Commission
Subjects: EU relations, Hong Kong, Macao, cooperation policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 26.10.2006 
COM(2006) 648 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

The European Union, Hong Kong and Macao: 
possibilities for cooperation 2007-2013  

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Executive summary 

The  European  Union’s  relations  with  the  Hong  Kong  and  Macao  Special  Administrative 
Regions (SARs) have continued to develop since they returned to Chinese sovereignty. 

The  EU  has  a  strong  interest  in  the  continued  autonomy  and  freedoms  enjoyed  by  the  two 
SARs,  and  supports  early  and  substantial  progress  towards  universal  suffrage.  The 
Commission  has  issued  annual  reports  on  the  constitutional,  political,  trade,  economic  and 
bilateral developments in the two SARs and will continue to do so. 

Relations  are  above  all  practical  and  based  on  mutual  interest.  There  is  substantial  and 
growing cooperation, both direct and indirect, as Hong Kong and Macao continue to provide a 
platform for deepening cooperation with mainland China.  

The  EU  should  continue  to  build  on  the  strong  base  of  existing  cooperation  and  dialogue. 
There should be a regular structured dialogue between the Commission and the Hong Kong 
SAR on matters under its competence, and the annual Joint Committee meetings between the 
Commission and the Macao SAR should continue. 

Following agreement of a new financing instrument for industrialised countries, there should 
be a review and new agenda for cooperation between the two sides. This Communication sets 
a number of challenging objectives for moving forward cooperation in seven key areas: trade 
and  customs;  finance;  people-to-people 
the 
environment; health; and food safety. 

links  (including  academia); 

transport; 

THE EUROPEAN UNION, HONG KONG AND MACAO: 
POSSIBILITIES FOR COOPERATION 2007-2013 

The Commission’s policy towards the Hong Kong Special Administrative Region (SAR) was 
set out in a 1997 Communication to the European Council. That Communication, which was 
issued  in  the  context  of  Hong  Kong’s  handover  to  Chinese  sovereignty,  underlined  the 
importance of smooth implementation of the ‘one country, two systems’ principle and set out 
ways in which the EU could contribute to Hong Kong’s political and economic development. 
The  Commission  has  since  issued  annual  reports  on  developments  in  the  Hong  Kong  SAR, 
most recently  with  the  eighth annual report on  developments in  2005. The Commission has 
also  engaged  with  the  SAR  Government  on  a  number  of  policy  dialogues,  notably  on  trade 
and  economic  policy,  signed  important  bilateral  agreements  in  areas  such  as  customs 
cooperation and the readmission of illegal immigrants, and, when the need has arisen, made 
declarations on political developments in Hong Kong. 

Policy towards the Macao Special Administrative Region was set out in a Communication to 
the European Council in 1999. The Commission has issued annual reports on developments in 
the Macao SAR and held annual meetings of the Joint Committee with the SAR authorities.  

The  European  Union’s  relations  with  both  Hong  Kong  and  Macao  have  developed 
considerably since they returned to Chinese sovereignty. During his visit to Macao and Hong 
Kong  on  18  July  2005,  President  Barroso  agreed  with  the  Chief  Executives  of  both  SAR 
Governments  that  “the  European  Commission  should  develop,  broaden  and  deepen 
cooperation”  with  the  two  Special  Administrative  Regions  in  areas  of  mutual  interest. 
Accordingly, this Communication evaluates the current relationships and makes a number of 
recommendations for improving and deepening the EU’s cooperation with the two SARs. 

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1. 

POLITICAL AND CONSTITUTIONAL DEVELOPMENTS  

Since  the  transfer  of  Hong  Kong  and  Macao  to  Chinese  sovereignty,  both  Special 
Administrative Regions have been governed according to the principle of ‘one country, two 
systems’, set out in detail in a separate Basic Law for each.  

In general the ‘one country, two systems’ principle has been respected and is working well for 
the  people  of  Hong  Kong  and  Macao.  The  EU  supports  this  principle,  and  in  particular  the 
respect for human rights and individual freedoms enshrined in the Basic Laws, which should 
be  enjoyed  by  the  citizens  of  both  SARs.  Both  SAR  governments  continue  to  enjoy  a  high 
degree  of  autonomy  in  economic,  trade,  fiscal,  financial  and  regulatory  matters,  and  the 
people of Hong Kong and Macao benefit from their own legal systems, an independent rule of 
law, individual property rights, freedom of speech, and market economic systems.  

In  both  SARs,  the  specific  constitutional  development  measures  envisaged  in  their  Basic 
Laws have been implemented fully and on schedule.  

However, the Basic Law of Hong Kong also states: “The ultimate aim is the selection of the 
Chief  Executive  by  universal  suffrage  upon  nomination  by  a  broadly  representative 
nominating committee in accordance with democratic procedures”1
 . (There is no analogous 
article  in  Macao’s  Basic  Law2.)  Neither  Hong  Kong  nor  Macao  has  yet  achieved  universal 
suffrage nor defined a road map towards full democracy. 

The European Union supports democracy throughout the world as the best means of creating 
legitimate,  stable,  accountable  and  transparent  government,  protecting  rights  and  freedoms, 
and  upholding  the  rule  of  law.  The  EU  supports  early  and  substantial  progress  towards  the 
ultimate  goal  of  universal  suffrage  in  Hong  Kong  as  set  out  in  the  Basic  Law,  and  also  in 
Macao, in line with the wishes of the people of Hong Kong and Macao. 

The  Commission  has  commented  at  length  on  Hong  Kong's  constitutional  development  and 
interpretations  by  the  National  People's  Congress  of  the  SAR's  Basic  Law  in  its  previous 
annual reports (see the 2004 and 2005 annual reports in particular)3
 . It has also commented 
on developments in Macao in its previous annual reports on the Macao SAR4. 

On the international stage, both the Hong Kong and Macao SAR Governments have quickly 
become  accepted  as,  and  remain,  autonomous  international  partners  on  economic,  trade, 
fiscal,  financial,  sports,  research,  educational,  cultural,  and  people-to-people  matters,  for 
which  they  retain  legal  competence  under  their  Basic  Laws.  They  continue  to  be  active 
members of international organisations such as the World Trade Organisation (WTO) and the 
World Customs Organisation and are parties to a number of international treaties. As recently 
as December 2005, Hong Kong successfully hosted the Sixth WTO Ministerial meeting, and 
in the same month Macao hosted the 2005 East Asian Games. 

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Article 45. 
For  Macao,  the  Basic  Law  stipulates  that  "if  there  is  a  need  to  change  the  method  for  forming  the 
Legislative Assembly of the Macao SAR in and after 2009, such amendments must be made with the 
endorsement of two-thirds majority of all the members of the Assembly and the consent of the Chief 
Executive”, and there is no reference to universal suffrage. 
The  Commission’s  annual  reports  on  Hong  Kong  are  available  on 
http://www.delhkg.cec.eu.int/en/index.htm and are listed in annex to this Communication. 
The  Commission’s  annual 
http://www.delhkg.cec.eu.int/en/index.htm and are listed in annex to this Communication. 

reports  on  Macao  are  available  on 

internet  website: 

internet  website: 

the 

the 

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2. 

ECONOMIC DEVELOPMENTS  

Mainland  China’s  rapid  growth  and  increasing  economic  prosperity  has  created  new 
opportunities  for  Hong  Kong  and  Macao.  The  SARs’  close  relationships  with  south  China, 
and  Guangdong  province  in  particular,  have  become  key  to  their  economic  success.  Hong 
Kong  and  Macao  are  benefiting  as  liberal,  open  gateways  to  and  from  China.  The  Closer 
Economic Partnership Arrangements with mainland China and the Individual Visit Schemes, 
which  relax  travelling  restrictions  for  mainland  residents  wishing  to  visit,  have  made 
significant contributions to economic growth.  

Hong Kong 

In the period immediately following handover, the Hong Kong SAR Government was faced 
with  unprecedented  challenges  in  financial,  economic  and  fiscal  management.  It  is  to  the 
credit  of  the  SAR  Government  that  Hong  Kong  has  now  recovered  from  the  recession  that 
followed  the  negative  economic  impacts  of  the  Asian  financial  crisis  in  1997-98  and  the 
outbreak of SARS (Severe Acute Respiratory Syndrome) in 2003.  

Hong Kong’s 2005 economic and financial figures have now regained their 1997 levels. GDP 
grew  in  2005  at  7.3  %  (and  the  government’s  forecast  for  2006  is  for  4  to  5%  growth). 
Unemployment in December 2005 was at a four-year low of 5.2%. Fiscal balance was finally 
restored for 2005-06, the first time in eight years after the handover, as the economy picked 
up and public expenditure was restrained.  

Helped by the financing needs of mainland China, Hong Kong is consolidating its position as 
the international financial centre for East Asia. Mainland Chinese enterprises are using Hong 
Kong  as  a  fund-raising  and  investing  centre,  creating  a  growing  demand  for  Hong  Kong’s 
financial, legal and business services. China-related companies accounted for over 80% of the 
IPO  (initial  public  offering)  funds  raised  in  Hong  Kong,  helping  to  make  Hong  Kong  the 
fourth largest equity fund raising centre in the world in 2005 and a globally important funds 
trading  and  asset  management  centre.  Hong  Kong’s  success  as  an  international  financial 
centre hinges on its ability to play an increasing role in intermediating Mainland China's large 
domestic  savings.  Given  the  competition  from  other  regional  financial  centres,  Hong  Kong 
will need to continue to increase competitiveness by maintaining flexible labour and product 
markets, strong institutions and sound macroeconomic policies. 

Hong Kong’s businesses and people have also demonstrated a remarkable capacity to adjust 
to  competitive  and  external  challenges.  They  have  been  able  to  move  up  the  value-added 
chain  to  higher-price  and  higher-margin  activities  in  financial  services,  business  services, 
trade, high-value manufacturing, tourism, retail and other services. But Hong Kong still faces 
the challenges of increasing cost and supply-side constraints resulting from the challenges of 
congestion  and  environmental  pollution.  Its  ambition  to  remain  “Asia’s  World  City”  will 
depend on meeting these challenges. 

Macao 

The explosive growth of Macao’s small, open economy since 2000 has been due primarily to 
the gaming and tourism sectors. In 2002 the gaming sector was liberalised, and the 40-year-
old  casino  monopoly  abolished.  Coupled  with  the  Individual  Visit  Scheme  from  mainland 
China,  this  has  attracted  a  growth  in  visitors,  which  in  turn  has  provided  impetus  for  wider 
economic growth. With rising  demand, Macao should continue to grow rapidly, though this 

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could  be  affected  if  there  were  problems  with  or  a  challenge  to  its  gaming  monopoly  for 
China.  

Macao  is  a  small  but  dynamic  urban  centre,  which  is  seeking  to  build  itself  as  a  strategic 
services hub for the Pearl River Delta. With gaming and tourism as its basic economic pillars, 
the SAR Government aims to diversify Macao into a regional entertainment, exhibition and 
conference service centre. But it will face stiff competition, squeezed between Hong Kong’s 
highly developed services economy and the low wages of the mainland. The key challenges 
for  Macao  will  be  to:  reinforce  its  legal  and  financial  systems  to  support  future  growth  and 
avoid  erosion  of  the  integrity  of  its  financial  and  social  systems;  and  effective  training  of  a 
local labour market (or importing and integration of qualified labour). 

3. 

CASE FOR GREATER ENGAGEMENT 

Hong Kong 

EU interests in Hong Kong are substantial: Hong Kong is the EU’s sixteenth bilateral trading 
partner by volume, and if the huge transit trade via Hong Kong to China is taken into account, 
ranks  as  high  as  sixth.  Two-way  trade,  although  declining  slightly  in  recent  years  (due 
primarily to a number of Hong Kong industries moving to the mainland) remains close to €30 
billion.  Hong  Kong  continues  to  play  a  ‘gateway’  function  for  a  number  of  EU  newcomers 
looking  for  access  to  the  mainland  Chinese  market.  Increasingly,  mainland  Chinese 
companies  are  using  Hong  Kong  as  a  base  and  a  source  of  knowledge  —  a  gateway  for 
business  opportunities  in  Europe.  The  EU  is  Hong  Kong’s  third  largest  supplier  after  the 
mainland and Japan, and the third largest investor. 

Thousands  of  EU  companies  maintain  regional  HQs  or  offices  in  the  SAR  and  over  45 000 
EU  citizens  are  resident  there.  EU  financial  services  institutions  continue  to  have  a  leading 
stake in Hong Kong. In 2005, 34 of the 132 licensed banks in Hong Kong were incorporated 
in the EU; and of the 175 insurance companies authorised in Hong Kong 30 are incorporated 
in the EU, putting them top of the list in terms of the number of overseas insurers operating in 
Hong Kong. 

European  business  activity  within  Hong  Kong  accounts  for  the  largest  foreign  non-Chinese 
presence.  EU  companies  constitute  the  largest  number  of  foreign  companies  with  regional 
headquarters and regional offices based in Hong Kong (1083 or 28% of the total, as at June 
2005).  In  addition  to  a  European  Chamber  of  Commerce,  there  are  14  EU  Member  State 
bilateral Chambers of Commerce in Hong Kong. The EU/Hong Kong Business Council also 
meets  annually  to  provide  a  forum  for  a  strategic  dialogue  between  Hong  Kong  and  EU 
business leaders. 

Hong  Kong  is  a  key  East  Asian  transportation  hub  for  European  Union  traders,  service 
providers  and  individuals.  Hong  Kong’s  container  port  remains  the  largest  in  the  world  in 
terms  of  the  number  of  containers  passing  through.  The  EU  also  has  strong  civil  aviation 
relations with Hong Kong: most Member States have bilateral air services agreements. Hong 
Kong  is  a  major  airfreight  and  passenger  hub  for  onwards  traffic  to  the  wider  Asia-Pacific 
region as well as an important gateway to the Chinese mainland. Hong Kong’s open English-
speaking environment means it is also a key tourism, education and conference destination. 

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Overall, our bilateral relationship with Hong Kong is good across the board, with highlights 
including: 

•  the  strength  of  trade  relations  and  shared  priorities  for  multilateral  trade  engagement 

through the WTO process; 

•  our  Customs  Cooperation  Agreement,  signed  in  1999,  which  facilitates  co-operation  to 
combat  fraud,  piracy  and  other  forms  of  illegality,  and  the  exchange  of  information  and 
coordination between the customs authorities of Hong Kong and the EU's Member States. 

•  and  our  agreement  on  'readmission  of  persons  residing  without  authorisation',  which 
entered into force in 2004, and which provides a good basis to take forward co-operation 
on wider immigration issues. 

But there are also areas where we would like to see improvements. Two key areas are: 

•  competition  policy,  where  European  companies  often  complain  about  the  lack  of  a  level 

playing field in certain key sectors; 

•  and  IPR  violations,  where  Hong  Kong  has  worked  hard  in  recent  years,  but  nonetheless 

remains the source of some 8 % of all recorded violations in the EU. 

Since 1993, the EU has maintained a permanent Office in Hong Kong (which is accredited to 
both Hong Kong and Macao). It is staffed and operated by the European Commission and is 
active  in  a  number  of  areas,  with  the  focus  on  economic  and  trade  issues.  16  EU  Member 
States  are  represented  by  resident  missions  accredited  to  Hong  Kong  and  to  Macao  (the 
mission of Portugal is located in Macao and the other missions are located in Hong Kong).  

In February 2006 the Hong Kong Government proposed to reinforce its representation offices 
in Europe, opening a new trade office in Berlin to serve Germany and the eastern European 
Member States  of the  EU.  The  existing Hong Kong Office in Brussels is to be  upgraded to 
become the Hong Kong head office in Europe, with the London and Berlin offices reporting 
to Brussels.  

Macao 

The  EU  is  Macao’s  third  largest  trading  partner.  While  there  are  only  a  few  EU  companies 
based  in  Macao,  those  that  are  there  express  satisfaction  with  the  infrastructure  and 
communications.  

Macao retains close links with Portuguese culture, and Portuguese remains one of the official 
languages of Macao. This contributes to the strength of the EU’s relations with Macao and its 
attractiveness as a tourism, education and conference destination.  

The  EU  concluded  a  Trade  and  Cooperation  Agreement  with  Macao  in  1992  and  the  EC-
Macao Joint Committee, established under this agreement, meets annually. Since signature of 
the  agreement,  the  EU  has  funded  cooperation  projects  with  Macao  worth  around  1  million 
euros  per  annum.  Projects  have  included:  training  for  the  tourism  industry  (1999-2001);  a 
European  studies  programme  (1999-2001);  a  services  development  programme  (1999-2001) 
advising Macao on ways to improve Macao's services sector; and the Asia-Invest programme 
(2001 and 2002). The EU-Macao Legal Cooperation Programme (2001-2005) is ongoing and 

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provides training, workshops and seminars to develop Macao's legal system and to promote 
the rule of law in the SAR. The European Union’s interpretation service (SCIC) is providing 
translation and interpretation training in 2006, financed by the Government of Macao. 

The  EU–Macao  Readmission  Agreement  signed  in  2002  is  working  well,  and  constructive 
annual bilateral meetings are held to review progress.  

The  Macao  representative  in  Europe,  based  in  Lisbon,  Geneva  and  Brussels,  plays  a  very 
useful and positive role in EU-Macao relations. 

4. 

DELIVERING CLOSER COOPERATION : OBJECTIVES 

The existing policy and regulatory dialogues and cooperation between the EU and the Hong 
Kong  and  Macao  SARs  have  provided  an  excellent  base  for  relations.  To  move  relations 
further  forward,  this  base  needs  to  be  built  upon  and  strengthened,  and  at  the  same  time 
widened to include other sectors and take account of the much greater EU cooperation with 
mainland China. Hong Kong and Macao are indeed platforms for deepening cooperation with 
mainland China. The EU should now widen and deepen the scope for greater EU involvement 
in the ongoing trilateral cooperation between Hong Kong, Macao and mainland China. 

Accordingly,  this  section  sets  a  number  of  challenging  new  objectives  for  moving  forward 
cooperation in seven key areas: trade and customs; finance; people-to-people links (including 
academia); transport; the environment; health; and food safety. 

Trade and customs cooperation 

Trade  and  customs  cooperation  remains  the  cornerstone  for  a  strong  bilateral  relationship 
between the EU and both partners. This should be built upon by: 

•  Improving  informal  consultation  and  coordination  on  multilateral  trade  and  economic 

regulation, particularly within the framework of the WTO as and where appropriate; 

•  Continuing  close  consultation  on  bilateral  trade  issues,  in  particular  on  trade  facilitation, 
and  strengthening  customs  cooperation  on  IPR.  The  EU  should  consider  programmes  to 
disseminate  and  explain  measures  on  regulations,  standards,  customs  procedures,  phyto-
sanitary requirements and other regulations that may affect the trade in goods and services 
between the EU, Hong Kong, Macao and China; 

•  Building  on  the  framework  of  the  Customs  Cooperation  Agreement  to  strengthen  action 
against  copyright 
transnational  smuggling  of  counterfeit 
cigarettes  by  sharing  information  and  intelligence;  and  working  towards  a  more  secure 
global shipping system by electronically scrutinizing containers, without slowing the flow 
of international commerce. 

infringement;  combating 

•  Exchanging  views  and  best  practice  on  competition  policy  and  public  procurement 

procedures as appropriate; 

•  Greater  support  for  business  (particularly  SMEs),  including  provision  of  information  on 
greater  China  markets.  The  European  Chambers  of  Commerce  in  Hong  Kong  and  the 
Offices of Hong Kong and Macao in Europe could be involved and more closely integrated 
with the work of the EU-Hong Kong Business Council Cooperation Committees;  

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•  Encouraging  universities  and  business  schools  in  the  EU,  Hong  Kong,  Macao  and  the 

Chinese mainland to cooperate on management education and training. 

With  the  establishment  of  Closer  Economic  Partnership  Arrangements  between  both  SARs 
and  China  (CEPAs)  since  July  2003,  companies  in  the  SARs  are  benefiting  from  widening 
access  to  the  Mainland  Chinese  market.  This  is  a  positive  development,  but  the  EU  will 
continue  to  monitor  the  CEPAs’  WTO  compliance  and  any  potential  negative  impact  on 
foreign invested companies. 

Financial cooperation 

The financial, banking and investment relationship between the EU and the SARs is already 
strong, but there is scope for: 

•  Improved  regulatory  dialogue  and  convergence  on  financial  regulation  matters,  in 
particular  on  issues  like  anti-money  laundering  legislation  and  its  implementation, 
investment  fund  regulation,  corporate  jurisdiction  and  governance  issues,  and  accounting 
and financial reporting standards. 

•  Improved dialogue, cooperation and convergence on issues relating to good governance in 
tax  matters,  taking  account  of  the  fiscal  autonomy  of  the  Hong  Kong  and  Macao  SARs 
within  a  sovereign  China.  In  line  with  its  stated  tax  policy  of  promoting  internationally 
accepted good governance principles as widely as possible, the Commission proposes work 
with both SARs to improve transparency and  the  exchange of  information, strengthening 
enforcement  measures  to  prevent  the  avoidance  or  evasion  of  taxes,  and  in  particular 
promoting application of measures equivalent to those applied within the EU on taxation of 
income from savings. In addition the Commission will encourage both SARs to adopt the 
principles  of  the  Code  of  conduct  on  business  taxation  which  aims  to  develop  a  fair, 
transparent  and  cooperative  tax  environment  that  favours  business,  growth  and  jobs  on 
both sides. 

People-to-people and academic links 

•  The  education  and  research  sectors  provide  a  rich  area  for  possible  EU/Hong  Kong  and 
EU/Macao  cooperation.  The  Commission  should  consider  the  scope  for  improving 
relations  through  contacts  between  think  tanks  and  journalists,  parliamentary  exchanges, 
student  and  teacher  exchanges,  institutional  twinning  arrangements,  joint  research  and 
debate on public policy, cultural exchanges, and language training (building on the current 
Commission support to enhance capacity for Portuguese/Chinese interpretation in Macao); 
the EU should also continue to encourage civil society and non-governmental debate and 
dialogues. 

•  Both the Erasmus exchange scholarships and the Jean Monnet Programme are relevant and 

should be made accessible;  

•  A more substantial visitors programme should be built upon the existing European Union 

Visitors Programme (EUVP), which is successful but of limited scope at present; 

•  Hong Kong and Macao universities and research institutes are already bidding jointly with 
European  institutions  for  access  to  funding  from  the  EU  Framework  Programmes  for 
Research  Technology  and  Development.  Measures  should  be  developed  to  enhance  this 

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trend  and  in  parallel  to  encourage  deeper  cooperation  —  possibly  though  twinning  and 
cooperation  agreements  (and  possibly  including  mainland  Chinese  institutions)  —  to 
provide opportunities for information exchanges and networking; 

•  Immigration cooperation should continue. The EU and Hong Kong and Macao maintain a 
regular dialogue through the Joint EC-Hong Kong Readmission Committee, which last met 
in  January  2005  in  Hong  Kong.  This  should  form  a  basis  for  moving  toward  greater 
cooperation on wider immigration issues; 

•  The current legal cooperation and training project in Macao is a good example and should 
be  built  upon;  international  cross-border  legal  issues  could  form  an  interesting  area  for 
cooperation  on  the  rule  of  law,  good  governance,  human  rights  issues,  civil  law  and 
commercial law; 

•  EU visibility should be enhanced in Hong Kong and Macao. This should be done mainly 
through practical actions, including through the possibility of setting up a “Europe Centre” 
or “Europe House”. But there is also a need to reinforce EU visibility more generally and 
directly. There should be a concerted public diplomacy strategy for the EU in Hong Kong 
and Macao and for the wider region. 

Transport cooperation 

•  There is significant shared expertise on maritime security and regulation, and this should 
form  the  basis  for  further  cooperation.  The  ongoing  pilot  project  for  the  security  of 
maritime  containers,  involving  the  Commission  and  ports  in  the  UK  (Felixstowe), 
Netherlands (Rotterdam), Shanghai and Hong Kong, provides a good example. 

•  The EU has strong aviation relations with Hong Kong: most Member States have bilateral 
air  services  agreements  with  the  SAR.  Hong  Kong  is  in  itself  a  major  hub  in  Asia  for 
onwards  traffic  to  the  wider  Asia-Pacific  region  as  well  as  an  important  gateway  to 
mainland China. The EU wishes to strengthen aviation relations with Hong Kong as well 
as with Macao, which are key partners in the region for the EU aviation industry. 

•  Joint efforts are underway, and need to be reinforced, to conclude horizontal agreements at 
Community level with Hong Kong and Macao, which would restore legal certainty for air 
carriers  on  each  side  under  existing  bilateral  agreements.  This  would  represent  an 
important first step in developing closer cooperation between the EU and Hong Kong and 
Macao  in  civil  aviation.  Broader  areas  of  cooperation,  including  technical,  industrial  and 
regulatory cooperation in areas such as air traffic management, aviation safety and security 
as well as in other areas, should also be explored. 

Health, food and product safety 

The  EU  and  Hong  Kong  and  Macao  have  shared  interests  in  international  health,  food  and 
product safety issues.  

•  On internationally transmittable diseases the informal consultations already begun between 
the  European  Commission  and  Hong  Kong  in  January  2006  should  form  the  basis  for 
future discussions and possible co-operation with both SARs. 

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•  Both sides should consider scope for strengthening cooperation on the Rapid Alert System 

for Food and Feed. 

•  Given  the  importance  of  Hong  Kong’s  role  in  the  export  of  consumer  products  and  the 
importance  of  combating  seriously  dangerous  consumer  products,  both  sides  should  co-
operate  closely  to  ensure  that  products  produced  in  or  transited  through  Hong  Kong  are 
safe and are monitored against EU safety standards. 

Environmental cooperation 

•  The  Commission  welcomes  the  deepening  EU  dialogue  with  mainland  China  on  the 
environment  and  climate  change.  The  Commission  should  also  explore  with  Hong  Kong 
and Macao the scope for cooperation on air and water pollution and industrial emissions to 
help the Hong Kong and Macao SARs better carry out their pollution control strategies, to 
take  into  account  and  influence  cross-border  issues  and  to  work  on  solutions  at  regional 
and global level where relevant.  

•  mong other things, this should have the aim of promoting business cooperation for SMEs 
and  dialogue  on  air  and  water  pollution  and  industrial  emissions.  Hong  Kong's  and 
Macao's universities, business associations and training facilities could serve as a platform 
for engagement on these issues. 

5. 

DELIVERY MECHANISMS 

Consultations and transparency 

In July 2005 President Barroso and the Chief Executives of Hong Kong and Macao — Donald 
Tsang  and  Edmund  Ho  —  agreed  it  was  important  to  have  structured,  regular  dialogue 
between  the  European  Commission  and  the  two  SAR  governments  on  matters  within  the 
competence of the two governments under their respective Basic Laws.  

As far as Hong Kong is concerned, this would best be achieved through regular dialogue, for 
which the arrangements might be as follows: (a) meetings should be held annually; (b) there 
should be an adequate level of representation from the European Commission and the Hong 
Kong  government;  and  (c)  the  agenda  for  each  meeting  should  cover  the  full  range  of 
practical  issues  in  the  relationship  and  be  agreed  in  advance  by  both  sides.  These 
arrangements,  which  would  compliment  and  not  replace  existing  sector-specific  dialogue, 
should be implemented as soon as possible, with the first annual meeting taking place before 
the end of 2006.  

The  Commission  believes  that  the  existing  EC/Macao  Joint  Committee  mechanism  works 
well and should continue, and positive lessons drawn from it might inform the establishment 
of dialogue with Hong Kong.  

There  should  be  public  and  transparent  reporting  of  the  annual  meetings  and  the  ongoing 
cooperation,  which  could  be  achieved  through  a  combination  of  Joint  Statements  and  the 
existing mechanism of the Commission’s Annual Reports. 

The  Commission  will  continue  to  maximise  policy  coordination  with  all  EU  partners  (both 
with  Member  States  and  the  European  business  community)  in  Hong  Kong,  Macao,  and 

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Europe  —  as  well  as  in  mainland  China,  as  appropriate.  Making  available  information  and 
ensuring  open  communication  on  initiatives  for  future  cooperation  should  help  ensure  that 
these  actions  complement  and  support  the  strategies  of  EU  Member  States,  the  Hong  Kong 
and Macao governments, and private entities and individuals. 

Already  during  2005  and  early  2006,  in  order  to  discuss  and  explore  possible  content  and 
means  to  deepen,  develop  and  broaden  cooperation  between  the  EU  and  Hong  Kong  and 
Macao  in  areas  of  mutual  interest,  a  series  of  informal,  open,  brainstorming  consultative 
seminars were arranged by the Office of the European Commission in Hong Kong and Macao 
with over 200 representatives of various sectors of Hong Kong and Macao society: trade and 
economic  operators,  EU  Heads  of  Mission,  environment  and  health  professionals,  and 
representatives  of  civil  society,  NGOs,  and  the  academic  and  research  community.  A  sixth 
seminar was held in November 2005 with representatives of various sectors of Macao society 
in Macao. 

Financing cooperation 

Hong  Kong  and  Macao  are  important  partners  that  share  many  values  and  institutional 
structures with the EU in the economic, regulatory, social and cultural spheres.  

Dialogue and cooperation should therefore be backed up and reinforced by an EU financing 
instrument,  such  as  the  new  Industrialised  Countries  Instrument  under  the  future  Financial 
Perspectives  of  the  EU.  This  could  provide  funding  for  meetings,  conferences,  and  other 
actions  fostering  economic  partnerships,  business  collaboration  and  science  and  technology 
cooperation, as well as people-to-people exchanges and the development of policy dialogues 
in  the  areas  detailed  in  this  Communication.  The  overall  aim  of  such  action  would  be  to 
promote better  mutual understanding and co-operation and stimulate  further development in 
bilateral  trade,  investment  flows  and  customs  cooperation  between  the  EU  and  both  partner 
SARs.  The  Commission  should  explore  potential  synergies  for  trilateral  cooperation  with 
mainland China including under the Development Cooperation Instrument.  

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