LegCo Paper No. CB(1)1267/96-97
(These minutes have been seen by the AdministratIon)
Ref: CB1/PL/TI/1

LegCo Panel on Trade and Industry

Minutes of meeting
held on Tuesday, 4 March 1997, at 8:30 am
in Conference Room B of the Legislative Council Building

Members present :

    Hon NGAI Shiu-kit, OBE, JP (Chairman)
    Hon SIN Chung-kai (Deputy Chairman)
    Hon Mrs Selina CHOW, OBE, JP
    Hon Martin LEE, QC, JP
    Hon Henry TANG Ying-yen, JP
    Hon CHAN Kam-lam
    Hon CHAN Yuen-han
    Hon Paul CHENG Ming-fun
    Hon Ambrose LAU Hon-chuen, JP
    Dr Hon LAW Cheung-kwok

Members absent :

    Dr Hon HUANG Chen-ya, MBE
    Dr Hon Philip WONG Yu-hong
    Hon James TIEN Pei-chun, OBE, JP

Public officers attending : All items

Miss Denise YUE, JP
Secretary for Trade and Industry

Item IV
Mr Augustine CHENG
Deputy Secretary for Trade and Industry
Mr P M K CHUNG
EDI Co-ordinator

Items V - VII
Mr Alan LAI, JP
Director-General of Trade

Clerk in attendance:

Miss Odelia LEUNG
Chief Assistant Secretary (1)1

Staff in attendance :

Ms Sarah YUEN
Senior Assistant Secretary (1)1

I Confirmation of minutes of meeting

(LegCo Paper No. CB(1)975/96-97)

The minutes of the meeting held on 14 January 1997 were confirmed.

II Date of next meeting and items for discussion

(List of outstanding items for discussion (1996-97) tabled)

2. The Chairman consulted members on whether any overseas duty visits were proposed for the months of April, May and June 1997. No proposal was put forward.

3. Members noted that the meeting scheduled for 11 March 1997 had been cancelled. They agreed to discuss the following items at the meeting on 8 April 1997-

  1. US import measures on textile and clothing products;
  2. Regulatory mechanism on outbound travel industry;
  3. Prepayment of goods and services; and
  4. Business and services promotion.

III Information papers issued since last meeting

(LegCo Paper Nos. CB(1)718, 767, 788, 905, 976 and 984/96-97)

4. Members noted the following papers issued since the last Panel meeting held on 14 January 1997 -

  1. KPS Retail Stores Limited’s position paper regarding the proposed reform of the law on parallel imports;
  2. Position paper of the International Federation of the Phonographic Industry (Hong Kong Group) on the decriminalisation of parallel importation;
  3. Letter from the legal advisor of KPS Retail Stores Limited, informing the Panel of the adoption by the World Intellectual Property Organisation (WIPO) of the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty;
  4. Information paper on the specific implementation plan of the Services Support Fund provided by the Administration;
  5. Consultation Paper published by the Law Reform Commission’s Sub-committee on Civil Liability for Unsafe Products; and
  6. Information paper on the proposed expansion of Government’s electronic data interchange system provided by the Administration.

IV Community Electronic Trading Service and Trade Declaration

(LegCo Paper No. CB(1)952/96-97(01))

5. The Secretary for Trade and Industry (S for T&I) briefed members on the proposed financial package to encourage the business community to use the Community Electronic Trading Service (CETS) in preparation for the phased withdrawal by March 2000 of the existing facilities for collecting Trade Declarations (TDECs) in the Customs and Excise Department. She explained the proposals as follows -

  1. The Administration proposed to reduce the declaration charges payable to Government in such a way that the total Government and Tradelink charges for using CETS would, as far as possible, be less or no more than the current charges. As a disincentive for the continuation of paper lodgements, the Administration also proposed to increase the declaration charges payable to Government for paper lodgements in order that traders making paper lodgements would pay more than those joining CETS. As a result of the proposed reduction in charges, for 70% of TDECs, the combined Government and Tradelink charges for using CETS would be less or no more than the current charges, while paper lodgements would attract an additional charge of $1.50 for each consignment. For the remaining 30% of TDECs, the combined Government and Tradelink charges for using CETS would be higher than the current charges (by no more than $6.50), while the charges for paper lodgements would be $1.50 more than those for CETS for each consignment.
  2. To promote its TDEC service, Tradelink proposed to waive the TDEC charge of $11 during the three months from April to June 1997 for early subscribers to its service in addition to free registration, free first annual subscription, free customer software and training. Moreover, the Tradelink TDEC charge would be $5.50 instead of $11 for TDECs with a consignment value of $20,000 or below submitted during the period from 1 July 1997 to 30 June 1998. During that period, the combined Government and Tradelink charges would be reduced from $11.50 to $6 for such consignments.

6. S for T&I further advised that as the capacity of the present EDI system could only handle electronic processing of 10% of TDECs and 25% of RTELs, the Administration would seek approval from the Finance Committee for a net increase in commitment of $148,858,000 to expand the present system to cater for full implementation of CETS in 2000. If the proposal was endorsed, the Administration would achieve significant savings in clerical staff costs and office rentals in the long run which would otherwise be still required in 2000 and beyond should paper lodgements be continued. Thus, in effect, the use of CETS would bring real savings to the Government within a few years’ time.

7. Noting that it had been an established Government policy to charge fees at a level sufficient to cover the costs of providing the service, members were concerned that the substantial reduction in declaration charges would go against this principle and result in heavy subsidy by the Government to commercial activities. They requested the Administration to give an estimate of the loss in revenue if the proposed reduction in declaration charges was approved.

8. In response, S for T&I emphasised that the reduction was necessary because if declaration charges remained unchanged, the use of CETS would result in a higher overall charge and this would be a disincentive for the business community to use TDEC service. As for the financial impact, since TDEC was a revenue raising item for the Government, the reduction in charges would only reduce the revenue and the reduced charges could still cover the costs of providing the services related to TDEC. The estimated income loss in the three years from 1997 to 1999 would be around $100 million.

9. A member opined that by charging more for paper lodgements, the Administration was compelling small firms not equipped with electronic data interchange (EDI) facilities to use CETS. This was unfair to small firms because they would in effect subsidise large companies which were in a better financial position to install the necessary EDI facilities. He urged the Administration to consider other ways of encouraging the use of CETS. In response, S for T&I made the following points -

  1. It was the Government, not the small firms, which subsidised companies for the use of CETS. The Administration did not envisage that small firms would ill-afford the installation of EDI facilities the costs of which were limited. The savings from Tradelink’s waiver for early subscribers (paragraph 5(b) above) should be adequate to cover such costs.
  2. As CETS was vital to Hong Kong for continued economic growth, its implementation could not be delayed. To remain competitive, Hong Kong could not afford to fall further behind its competitors in the region in the provision of such a system. In fact, countries such as the United States (US) were gradually replacing paper lodgements of Restricted Textiles Export Licences (RTELs) by electronic means. Hong Kong Government had to introduce effective means to encourage the use of CETS, albeit at a loss in revenue.
  3. Apart from charging more for paper lodgements, the Administration was also gearing up publicity to encourage the use of CETS. For example, seminars, workshops and training courses had been organised to promote Tradelink’s TDEC service.

10. Some members expressed support for the promotion of CETS through the proposed financial package. They pointed out that EDI would greatly enhance the efficiency of information processing and benefit Hong Kong in the long run. However, they queried the rationale for the combined Government and Tradelink charges for using CETS to be higher than the current charges for 30% of TDECs.

11. In response, S/T&I explained that the declaration charges had remained unchanged since 1993. The Administration should have adjusted these charges long ago if not for the introduction of CETS. Tradelink, being a commercial set-up, had to charge fees for its services. S for T&I emphasised that the charge of $11 for handling each TDEC would remain unchanged for the years 1997, 1998 and 1999. As a result of the special Tradelink offers mentioned in paragraph 5(b), the combined Government and Tradelink charges for those 30% of TDECs in the first year were not higher than the current charges.

12. Members were concerned about the effect of Tradelink’s offers on its income and financial position. They enquired how such offers could help to encourage an early take-up of CETS by the business community.

13. In response, S for T&I said that the waiver of TDEC charge of $11 during the three months from April to June 1997 for early subscribers would mean an income loss of around five to six million dollars to Tradelink. However, from April 2000 onwards when lodgements of TDECs through CETS would be the only option, the income of Tradelink would set off the initial income loss since about 19 million TDECs would be lodged through Tradelink every year. In reply to a member’s question, S for T&I explained that Tradelink would be able to keep its price at $11 for three years because it enjoyed a seven-year franchise and could spread out its costs and profits over this seven-year period.

14. Members noted that the Administration had consulted the Trade Advisory Board and the Textiles Advisory Board in January 1997 on the new TDEC charges and the special Tradelink offers and both Boards accepted the proposed charges and offers. Members opined that the Administration should consult more organisations on the proposed financial package to ensure its acceptance by the relevant trades. In response, S for T&I explained that members of the two Boards included representatives from both large and small businesses, service industries and the manufacturing sector, and the two Boards were representative of all related trades. In fact, the proposed economic incentives were made in response to views expressed by the two Boards.

V Departmental business study in Trade Department

(LegCo Paper No. CB(1)952/96-97(02))

15. The Director-General of Trade (DG of T) briefed members on the paper provided by the Administration. He explained that based on the findings of the Trade Department Study, which was one of the seven pilot studies under Phase I of the Government’s Helping Business Programme, Trade Department (TD) had drawn up a plan with targeted time tables to implement 21 recommendations with a view to developing a more pro-business culture. These recommendations covered the following six main areas -

  1. Development of a corporate and pro-business culture;
  2. Strengthening of interface with the public;
  3. Improvement of performance pledges;
  4. Re-arrangement of "cold quota" allocation;
  5. Initiation of service level agreements; and
  6. "One-stop shop" for non-textiles licensing under reference.

16. Addressing members’ concern over the need for additional resources in implementing the recommendations, DG of T said that TD had carefully considered the resource implications. The resources required for implementing the recommendations would be made available through more effective internal deployment. Additional resources were therefore not needed.

17. In response to some members’ comments that the recommended actions should include the promotion of business ethics, S for T&I and DG of T said that this subject should be covered in other studies, e.g., those undertaken by the Independent Commission Against Corruption. In fact, the Consumer Council was promoting business ethics through new initiatives such as the establishment of the Legal Action Fund and the opening of a consumer resource centre in its new Kowloon office.

18. On the reasons as to why the one-stop shop approach was confined to non-textiles licensing only, DG of T explained that at present non-textiles products like frozen meat and poultry, pharmaceuticals, medicines, radioactive materials and irradiating apparatus had to satisfy the requirements of the Department of Health before issue of a licence by TD. The Administration proposed to transfer to the Department of Health licensing controls over such products to streamline the relevant procedures.

VI Briefing on Ministerial Conference of the World Trade Organisation in Singapore

(LegCo Paper No. CB(1)952/96-97(03))

19. S for T&I briefed members on the Administration’s paper. She explained that Hong Kong had achieved most of its objectives through active participation in the first Ministerial Conference of the World Trade Organisation (WTO) held in Singapore in December 1996 (SMC), in particular, on the following areas -

  1. Information Technology Agreement

    The most immediate and concrete achievement of the SMC was a tentative agreement entered into by 28 members, including Hong Kong, to eliminate tariffs on a wide range of information technology products by the year 2000.

  2. Investment and competition policy

    Ministers reached a consensus to establish two working groups to examine respectively the relationship between trade and investment, and the interaction between trade and competition policy.

  3. Labour standards

    Some developed country members pressed strongly for the introduction of labour standards into WTO. Their attempt was strongly resisted by Hong Kong, many developing country members and a number of developed country members. In the end, the two sides struck a compromise.

20. In reply to members’ questions on the role of Hong Kong in the WTO, S for T&I advised that Hong Kong had taken a leading role in securing the inclusion of wordings in the Singapore Ministerial Declaration (MD) to the effect that Ministers "envisaged a world where trade flows freely", and were committed to "progressive liberalisation and elimination of tariff and non-tariff barriers to trade in goods, rejection of all forms of protectionism, and elimination of discriminatory treatment in international trade relations". The word "progressive" had to be added as a compromise to requests from the developed country members which were reluctant to commit for fear of adverse effects on their local industries. On behalf of the Panel, the Chairman expressed appreciation of the Administration’s efforts in getting WTO to commit itself to the ultimate goal of free trade.

21. In reply to the Chairman’s question, DG of T explained the meaning of the phrase "positive pressure" in paragraph 7 of the Administration’s paper. He said that some major developed country members were reluctant to mention market access commitments in MD. It was only after lengthy discussions could Hong Kong secure a more meaningful integration programme by importing members to phase out quota restriction. The phrase was thus intended to reflect efforts that had been taken. In response, the Chairman stressed the need to be prudent in exerting such "positive pressure".

22. Responding to members’ questions relating to the Information Technology Agreement, DG of T elaborated that Hong Kong’s domestic information technology exports included electronic calculators and parts, computer and peripherals, magnetic tapes and discs, telecommunications equipment and parts, capacitors, resistors, transistors, printed circuits and integrated circuits. He and S for T&I further explained that to effect the first stage of tariff reduction, the level of participation would have to reach 90% of the world trade in information technology products by the end of March 1997. Currently the participating member countries made up about 85% to 87% of the world trade in that area. If Malaysia agreed to join, the Agreement should be able to take effect.

23. A member was of the view that Hong Kong should play an active role in the two working groups established to examine investment and competition policy. In response, DG of T clarified that the two working groups had just been established and had not started work yet. The two working groups would report on their work to the next WTO Ministerial Conference to be held two years later. He further explained that Hong Kong had been playing an engineering role in the establishment of the two groups and would certainly participate actively. As a matter of fact, the mandate of the two groups largely covered the substance of the proposal put forward by Hong Kong for a broad-based review of existing WTO rules to assess their interaction with globalisation and their inter-relationship with investment and competition policy. In particular, it was hoped that the broad remit of the working group on trade and competition policy would provide an opportunity for Hong Kong to pursue one of its key objectives, namely, to set in train a process leading eventually to a fundamental review of the anti-dumping rules of WTO.

24. As regards the subject of labour standards, DG of T explained that Hong Kong had categorically rejected using the excuse of labour standards for protectionist purposes. Hong Kong had strongly resisted the introduction of this subject into WTO, lest this would distract the focus of discussions and jeopardise negotiations towards free trade.

25. In reply to members’ questions, S for T&I supplemented that with the completion of the extension works of the Convention Centre, Hong Kong would be fully equipped to host WTO Ministerial Conferences. However, Hong Kong had no plan to lobby member countries for that purpose. The next WTO Ministerial Conference would be held in Switzerland. The absence of a plan for Hong Kong to host WTO Ministerial Conferences in the near future had nothing to do with China’s WTO status. As regards China’s negotiations for accession to WTO, she referred members to paragraph 8 of MD, which stated that the Ministers should "work to bring" applicants now negotiating accession "expeditiously into the WTO system". The Administration was aware that the Chinese delegation had held bi-lateral talks with certain WTO countries during SMC.

26. On the objectives of Hong Kong in participating in WTO matters, S for T&I explained that Hong Kong’s objectives would have to tie in with WTO’s Work Programme set down in the Agreement by which WTO was established. For example, financial service talks would have to start and conclude in April and December 1997 respectively. The Programme also prescribed that by 2000 all WTO service agreements would have to be renewed. It had to be recognised that Hong Kong was only one of 130 members in WTO and could not determine the directions of WTO’s work. Although the Administration could not release the negotiation brief given its sensitive nature, members could rest assured that the Administration would consult the relevant parties prior to and during the negotiations. At members’ request, the Administration would provide information on the objectives of Hong Kong in relation to WTO’s Work Programme.

Admin

VII Trade protectionism

(LegCo Paper No. CB(1)952/96-97(04))

27. DG of T briefed members on the Administration’s paper, highlighting the efforts Hong Kong had made to combat trade protectionism via multilateral, regional and bilateral routes.

28. Members ascertained the reason for WTO not having committed itself to the cause of anti-dumping but was just beginning to explore the subjects of trade and investment, and trade and competition policy. In response, S for T&I explained that it was only after months of intensive negotiations could Hong Kong and its partners manage to get two working groups established under WTO for the above purpose. Resistance from both the developing and the developed camps had been strong. Some developing country members were reluctant to subject themselves to international rules and disciplines against discriminatory and protectionist trade measures as they considered this to be interfering with their sovereignty. Developed country members did not favour the idea of a broad-based review of existing WTO rules to assess their interaction with globalisation and inter-relationship with investment and competition policy as they were well aware that some of their domestic rules were at anomaly with global economy. Any proposal to abolish these rules would trigger off strong local resistance and adversely affect the domestic industries.

29. Some members were concerned that after the change of sovereignty in 1997, some countries such as the US would treat Hong Kong and China alike and might apply protectionist measures in the form of non-tariff barriers against Hong Kong. In response, S for T&I pointed out that both the US Hong Kong Bill passed in 1992 and the US Consul-General in Hong Kong, in a recent speech, reaffirmed that US trade policies towards Hong Kong would remain unchanged after 1997 provided that Hong Kong would remain an independent member of the World Trade Organisation and continue to enjoy autonomy. However, it was understandable that countries like the US would be closely watching Hong Kong to assess if Hong Kong’s situation would change. It was thus of paramount importance that Hong Kong should continue to ensure transparency of its trade activities and to convince its trading partners of its autonomy after 1997.

30. The meeting ended at 10:15 am.

Legislative Council Secretariat
11 April 1997

Last Updated on 21 August 1998