DISCUSSION PAPER FOR
LEGCO PANEL ON TRADE & INDUSTRY
TRADE PROTECTIONISM
Introduction
Protectionism exists when trade measures are applied for the purpose of protecting domestic industries from foreign competition. Tariff has traditionally been the most common protectionist measure for trade in goods. Other measures include quantitative restriction, discretionary import licensing, minimum import price and standards and conformance requirements. Protectionism in trade in services is often manifested in the form of restriction on entry/establishment and qualification and licensing requirements.
2. Sometimes governments justify their protectionist measures under disguised cover, for example, on national security, health, consumer protection, or environmental protection grounds, or on the basis that the measures are needed to prevent unfair competition like dumping.
Recent trends
3. The successive rounds of multilateral trade negotiations conducted since the inception of the General Agreement on Tariffs and Trade (GATT) in 1947 have brought down substantially tariff barriers on goods. They have also established a body of rules governing international trade that to a certain extent limits the scope for governments to apply trade measures for protectionist purposes.
4. Against the background of this general trend of progressive global liberalisation, some governments continue to find it necessary to apply from time to time new protectionist measures in response to domestic pressures. Such measures increasingly take the form of non-tariff barriers, for example, unilateral changes to rules of origin, and onerous customs, standards or certification requirements. The shift from tariff to non-tariff barriers as the major form of protectionist measures makes it more difficult to guard against protectionism.
5. In addition, there has been a proliferation of anti-dumping actions, not only by the traditional developed country users but also by developing countries which are used to be receivers of such actions. Using anti-dumping as an excuse, the initiating country can impose at times hefty additional duty on specified goods of targeted countries, over and above the normal tariffs being applied on a most-favoured-nation basis.
6. Apart from governmental measures designed to impede goods from crossing the national border, there is a growing concern that companies are tempted to shield themselves from global competition by creating barriers within the border through price-fixing, market sharing, group boycotts and other restraints.
7. Hong Kong adopts a free trade policy and rejects all forms of protectionist measures. We resort to multilateral, regional and bilateral routes to combat trade protectionism.
Multilateral Trading System
8. We tackle trade protectionism through pressing relentlessly for progressive multilateral trade liberalisation and the strengthening of the rule-based multilateral trading system. Hong Kong is a staunch supporter of the WTO for this reason.
9. Substantial elimination of tariffs and non-tariff barriers have been achieved through multilateral trade negotiations held under the auspices of the GATT/WTO. For example, the Uruguay Round resulted in an agreement which provides for the phasing out of quantitative restrictions on textiles and clothing products by the year 2005. More recent examples are the tentative agreement reached last December to eliminate tariffs on information technology products by economies which collectively account for over 80% of world trade in such products, and the recent multilateral agreement to open up the global basic telecommunications market. Hong Kong played an active part in the negotiations for these and other agreements.
10. We also contribute actively to the development of rules and disciplines in the WTO that prohibit or regulate the use of discriminatory and protectionist trade measures. With the increasing integration of the world economy, some of the existing WTO rules, which date back many years, have produced anomalies or are inadequate to cope with modern commercial realities. We have proposed for consideration at the recent WTO Ministerial Conference in Singapore a broad-based review of existing WTO rules to assess their interaction with globalisation and their inter-relationship with investment and competition policy. One of our key objectives is to set in train a process which would lead in due course to a review of the WTO rules on anti-dumping. The WTO will soon begin exploratory work on the subjects of trade and investment and trade and competition policy, which should largely cover the substance of our proposal.
11. To help ensure that the rights and obligations of members under the WTO agreements are fully observed and implemented, the WTO has established a Dispute Settlement Mechanism (DSM), including the availability of an Appellate Body to adjudicate appeals. The DSM is working well, contributing to the settlement of many disputes between members within a reasonable period of time.
Regional forum
12. Hong Kong is an active member of the Asia-Pacific Economic Co-operation (APEC), a government-to-government forum comprising 18 Asia-Pacific economies which account for over 80% of our merchandise trade. Since its formation in 1989, APEC has emerged as the primary regional vehicle for promoting trade and investment liberalisation as well as economic co-operation.
13. In 1994, APEC set a goal to achieve free and open trade and investment in the Asia-Pacific region by 2020. It developed in 1995 an Action Agenda to achieve this goal. In 1996 each APEC member produced an Individual Action Plan setting out its own voluntary plan of action to reduce or eliminate trade barriers in fifteen specific areas including, inter alia, tariff, non-tariff measures, investment, services, standards and conformance, customs procedures, and rules of origin.
14. In line with our free trade policy, Hong Kongs main priority in APEC is to sustain the dynamic process of trade and investment liberalisation and facilitation in the region. We will build on APECs achievements so far and promote further initiatives for the removal of trade protectionist measures. APECs work would also reinforce and complement the WTOs efforts on multilateral trade liberalisation.
Bilateral Negotiations
15. Hong Kong is always vigilant and defends robustly its rights (as well as any wider systemic implications for international trade) against actions by trading partners that are not justified or inconsistent with agreed rules. Where appropriate, we would settle the matter with our trading partner bilaterally, or bring the case to the WTO DSM for adjudication.
16. In line with the spirit of the DSM, we would normally try to resolve a trade dispute through bilateral consultation in the first instance and, failing that, bring the case to the DSM. The bilateral route is particularly important for trade disputes where the multilateral rules concerned are inadequate, unclear, outdated or not entirely pro-trade.
Conclusion
17. Hong Kong will continue to practise unwaveringly its free trade policy and to pursue vigorously the ultimate goal of global free and open trade in multilateral and regional forums. We stand ready to challenge breaches of rules and obligations by trading partners through bilateral negotiations and the multilateral trading system. We would continue to maintain close contact with the trading community both for information about such breaches and for advice on measures that we should take to counter any unfair trade practices adopted by our trading partners.
Trade and Industry Branch
February 1997
Last Updated on 21 August 1998
