Panel on Trade and Industry (Minutes) 3 Nov 97

Provisional Legislative Council

PLC Paper No. CB(1) 621

Ref: CB1/PL/TI

Panel on Trade and Industry

Minutes of meeting held on Monday, 3 November 1997, at 2:45 pm in Conference Room A of the Legislative Council Building

Members present :

Hon NGAI Shiu-kit, JP (Chairman)

Dr Hon Charles YEUNG Chun-kam (Deputy Chairman)

Hon James TIEN Pei-chun, JP

Hon NG Leung-sing

Hon Henry WU

Hon Henry TANG Ying-yen, JP

Hon YUEN Mo

Hon MA Fung-kwok

Hon Mrs Sophie LEUNG LAU Yau-fun, JP

Hon CHAN Kam-lam

Hon CHIM Pui-chung

Hon Paul CHENG Ming-fun, JP

Dr Hon LAW Cheung-kwok

Hon CHOY So-yuk

Members absent :

Hon HO Sai-chu, JP

Prof Hon NG Ching-fai

Hon Mrs Selina CHOW, JP

Dr Hon Philip WONG Yu-hong

Public officers attending :

For item III

Miss Denise YUE, JP,: Secretary for Trade and Industry
Mr John TSANG,: Director-General, London
Mr Paul LEUNG, JP,: Principal Hong Kong Economic and Trade Representative, Tokyo
Mr Peter LO, JP,: Special Representative for Hong Kong Economic and Trade Affairs to the European Communities, Brussels
Mr Stuart Harbinson, JP,: Permanent Representative of the Hong Kong Special Administrative Region of China to the World Trade Organization
Mr Kenneth PANG,: Commissioner for Economic and Trade Affairs, USA
Mr Christopher Jackson,: Director-General, Hong Kong Economic and Trade Affairs, Washington
Mr David TSUI, JP,: Director, Hong Kong Economic and Trade Affairs, New York
Mr Michael LEE,: Director, Hong Kong Economic and Trade Affairs, San Francisco
Mr Donald TONG,: Director, Hong Kong Economic and Trade Affairs, Toronto
Mr Thomas TSO, JP,: Director, Hong Kong Economic and Trade Affairs, Singapore
Mr Philip CHOK, JP,: Director, Hong Kong Economic and Trade Affairs, Sydney

For item IV

Miss Denise YUE, JP,: Secretary for Trade and Industry
Mr K Y TANG, JP,: Government Economist
Miss CHEUNG Siu-hing,: Department Secretary for Trade and Industry
Miss Elizabeth TSE,: Principal Assistant Secretary for Trade and Industry

Clerk in attendance :

Ms LEUNG Siu-kum,: Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU,: Senior Assistant Secretary (1)3

I Confirmation of minutes of previous meeting

(PLC Paper No. CB(1) 270)

The minutes of the meeting held on 8 September 1997 were confirmed.

II Information paper issued since last meeting

2. Members noted that no information paper had been issued since last meeting

III Briefing by Heads of Overseas Offices

3. The Chairman welcomed the Secretary for Trade and Industry (S for TI) and the Heads of the Overseas Economic and Trade Offices (ETOs) to the meeting and invited them to brief members on their work.

Briefing by Commissioner for Economic and Trade Affairs (ETA), USA

4. The Commissioner for ETA, USA said that he had an oversight responsibility for the three ETOs in US viz. the Washington Office, the New York Office and the San Francisco Office to ensure that they were operating in a co-ordinated manner. Although these ETOs had similar principal functions of safeguarding economic and trade interest, promoting inward investment and strengthening public relations for Hong Kong, their target clienteles were different. The focus of the Washington Office was on cultivating liaison with the US Administration and Congress whereas the emphasis of the New York Office and the San Francisco Office was on establishing business links in the east coast and the west coast respectively.

5. The Commissioner for ETA, USA noted that in the States there had been diverse views on Hong Kong's reversion to China prior to the handover. Following the very smooth transition on 1 July 1997, the enthusiastic response to the Chief Executive (CE)'s visit to US, the success in holding the 1997 World Bank and International Monetary Fund annual meetings as well as the performance in managing the recent currency turmoil, most of the US reactions to Hong Kong after the transition were positive. However, there remained some skepticism about the election of the first Legislature of the Hong Kong Special Administrative Region (SAR) in May 1998 and the ability of Hong Kong in maintaining the pegged exchange rate and in sustaining its competitiveness in the international market. ETOs in US would endeavour to address any concern which might arise.

Washington Office

6. The Director-General, HKETA, Washington echoed that there was increasing concern about Hong Kong's autonomy after the transition. US negotiators were particularly concerned about the independent position of Hong Kong in bilateral/multilateral trade negotiation in the World Trade Organization (WTO) and the Asia Pacific Economic Co-operation. They were also worried that Hong Kong would no longer continue to discharge its international obligations in combating illicit trade in strategic commodities. The Director-General, HKETA, Washington advised that should there be any sign suggesting that Hong Kong was losing its autonomy, Hong Kong's access to US high technology, which was vital to the service industry, would be hampered. The US State Department, in accordance with the US-Hong Kong Policy Act 1992, was required to assess and report to the US Administration in March each year on Hong Kong's situation. So far, US officials seemed to be impressed with Hong Kong continuing to act as an independent economic entity.

7. On the trading front, textiles and intellectual property protection issues remained the focuses of attention. While acknowledging that Hong Kong was fighting vigorously against infringing activities, US officials questioned the effectiveness of some of the enforcement measures. The Washington Office would continue to work with the US Customs in this respect.

8. As regards the renewal of the Most Favoured Nation (MFN) status for China, the Director-General, HKETA, Washington anticipated that the debate would be heightened by the forthcoming US Congressional election in November 1998 and the election of the first SAR Legislature in May 1998 could also have impact on the issue. He added that there had been over 50 bills associated with China introduced into the US Congress. Although very few of these were likely to make much progress, they represented a poll of ideas on Sino-US relationship. There were also specific pieces of legislation with reference to Hong Kong, including the Hong Kong Reversion Act. The Office would keep a vigilant watch on the progress and would take the opportunity during the recess of Congress in February 1998 to explain to staffers and Congressmen the concept of "one country two systems".

New York Office

9. The Director, HKETA, New York said that the New York Office continued to promote a better understanding of the economic situation and business opportunities in Hong Kong through discussion fora in academic institutions and business chambers. He noted that the business sector in the east coast was more optimistic about the implementation of "one country two systems" having regard to the rapid economic development in China and Southeast Asia.

San Francisco Office

10. The Director, HKETA San Francisco reported that a new Hong Kong Association had been established to strengthen Hong Kong's bilateral economic and trade link with Northern Texas. Before the handover, the San Francisco Office organized a series of speaking engagements, conferences and photo exhibitions with a view to promoting the positive image of Hong Kong. Post handover, the office adopted a softer approach by organizing more cultural activities. Generally speaking, the business sector held a favourable view of the "one country two systems" concept whereas the media remained skeptical. The academics on the other hand adopted a wait and see attitude. He added that the "Home Page" on internet was well received since its inception. An average of over 40,000 hits were recorded each month.

Toronto Office

11. The Director, HKETA, Toronto said that the Canadians were quite familiar with Hong Kong issues and therefore were more optimistic about its future. To strengthen the bilateral trading relationship, the Toronto Office had organized a series of business seminars and tours for think-tanks, academics and businessmen to visit Hong Kong. A number of firms had subsequently decided to establish their regional offices in Hong Kong.

London Office

12. The Director-General, London said that CE's recent visit to the United Kingdom (UK) had heightened the bilateral relationship. Over the past year, the London Office had organised three symposia and participated in 12 seminars. It contacted over 70 UK firms which had shown interest in investing in Hong Kong and successfully assisted 7 companies to open business in Hong Kong. On the public relations front, the Office issued monthly newsletters to 1,600 contacts interested in Hong Kong affairs. It also launched a small film festival and a Hong Kong weekend in June 1997 to promote Hong Kong from a different perspective. The programmes were well attended by a total of 20,000 to 30,000 participants. In October, the Academy for Performing Arts provided entertainment for two gala dinners in London and in Edinburgh. It was a successful attempt in using culture to promote the "business as usual" message.

Brussels Office

13. The Special Representative for HKETA to the European Communities, Brussels advised that there were two important issues forthcoming relating to Hong Kong. They were the Customs Co-operation Agreement with the European Union (EU) and visa free treatment for SAR passport holders. The Brussels Office would keep a vigilant watch on the progress of these issues.

Sydney Office

14. The Director, HKETA, Sydney said that given the increasing importance of Southeast Asian market to Australia which constituted 60% of its overall export, Australia was adopting an Asia-first trade policy. Hong Kong continued to maintain a good trading relationship with Australia. Between 1992 to 1996, the average annual growth in bilateral trade was 12.3%. The two economies also joined forces in pursuing trade liberalization in both the regional and the international arenas. On the transition, the Director, HKETA, Sydney advised that the Australians were generally positive and optimistic about the economic strength and business environment in Hong Kong. However, there were concerns about corruption, freedom of speech and the impact of high production cost on Hong Kong's competitiveness.

Singapore Office

15. The Director, HKETA, said that the Singapore Office was set up in August 1995. The relationship between Singapore and Hong Kong had been very close. Singapore was the fifth largest trading partner of Hong Kong and fourth vice versa. He reported that three major seminars on the transition were held: one in Jakarta in March 1997 with S for TI delivering the key-note address, and two others in Bangkok and Manila in March and May respectively, both with Chief Secretary as the key speaker. The Office also arranged a visit by CE to Singapore and Malaysia in September 1997 which had successfully portrayed a positive image for Hong Kong after the handover. General speaking, members of the Association of Southeast Asian Nations had been trying to develop closer relationship with China and therefore had confidence in Hong Kong. They were also impressed with Hong Kong's performance in handling the recent currency turmoil that had slapped the region. However, there was concern about Hong Kong's ability in maintaining the currency's peg to the US dollar in the long run. Reassurances about Hong Kong's economic fundamentals would be one of the coming focuses of the work of the Singapore Office.

Tokyo Office

16. The Principal HKETA Representative, Tokyo said CE had met with the Prime Minister, principal government officials, political parties, business sector and media during his recent visit to Japan. Questions concerning the handover, pegged exchange rate and competitiveness were raised and addressed. On the whole, the Japanese had a very good understanding of Hong Kong and were positive about the concept of "one country two systems". On the drop in the number of Japanese tourists to Hong Kong, the Principal HKETA Representative, Tokyo attributed this to the recent rise in sales tax from 3 to 5% in Japan and the relatively strong Hong Kong currency. He said that he had clarified with the media regarding the recent row over excessive hotel charges for Japanese tourists. He stressed that the Tokyo Office would continue to promote a good bilateral trading relationship between the two economies.

Geneva Office

17. The Permanent Representative of the HKSAR of China to the World Trade Organization advised that Hong Kong remained an active and constructive WTO member after the transition. Although the image of SAR in Geneva was generally positive, efforts were still being made to promote Hong Kong's commitment to free trade and support for multilateral rule-based trading system. The focus of recent WTO activities was on the implementation of a number of Uruguay Round agreements, including those on textiles and clothing. The delegation of Hong Kong, China was watching closely to ensure that importing WTO Members fully discharged their obligations under the Agreement on Textiles and Clothing. Following the successful conclusion of a negotiation on basic telecommunications, the Geneva Office had been dealing with a number of negotiations on trade and financial services outstanding from the Uruguay Round. It had also taken part in the negotiation on the liberalization of trade and information technology. The Office hoped that the forthcoming Ministerial Conference in Geneva and the 50th anniversary of the General Agreement on Tariffs and Trade in 1998 would enable WTO to prepare for another comprehensive round of trade negotiations.

18 On China's accession to WTO, the Permanent Representative of the HKSAR of China to WTO said that Hong Kong supported the accession in the context of global trading system and in the interest of Hong Kong. The focus of negotiation at the present stage was on bilateral market access between China and her individual trading partners.Discussion sessionGeneral policy19 On the relationship between ETOs and the Ministry of Foreign Affairs, S for TI explained that Article 156 of the Basic Law stipulated that Hong Kong might, as necessary, establish separate official and semi-official economic and trade missions in foreign countries. As such, ETOs operated solely as separate independent entities representing the interest of SAR. They did not have any hierarchical relationship with the local Chinese missions. The same applied to the ETO to WTO in Geneva which had an autonomous role in making decisions in the negotiations in the interest of Hong Kong.

20 In reply to a question on foreign investment in China, S for TI advised that ETOs would not directly promote foreign investment for China because of their limited knowledge on China's latest economic reform. Instead, emphasis was put on the geographic and cultural advantages of Hong Kong as the gateway to China. Overseas investors who were not familiar with China could make use of various mechanisms in Hong Kong to invest in China. An example of one of these mechanisms was the stock market under which state enterprises of China were listed.

21. A member sought elaboration on the effectiveness of ETOs in promoting inward investments for Hong Kong. S for TI advised that ETO representatives called on potential firms on a regular basis to promote business opportunities in Hong Kong. She emphasized that this was a time-consuming process with no guaranteed results. At members request, S for TI undertook to provide information on the number of firms which had invested in Hong Kong upon persuasion of ETOs in the US and the number of job opportunities created as a result.

22. Some members considered it useful for ETOs to comply a consolidated list of overseas concerns about Hong Kong so that concerted improvement measures could be mapped out with the effort of relevant sectors. S for TI advised that as far as business was concerned, overseas counterparts appreciated that China had adopted a non-interventionist approach in Hong Kong. However, they remained skeptical that Hong Kong might lose its autonomy in the long term. Other common concerns included the election of the first SAR Legislature as well as the impact of devaluation of other Asian currencies and high local overhead costs on the competitiveness of Hong Kong. S for TI assured members that ETOs would liaise with relevant parties to tackle the problems. In reply to a related question, S for TI said that the Administration did not compile any index on Hong Kong's investment environment. Nevertheless, the Business Services Promotion Unit under the Financial Secretary was conducting a survey on the competitiveness of Hong Kong with reference to other Asia-Pacific countries. A private institution had also indicated intention to compile a competitive index for Hong Kong.Establishment of ETOs

Admin

23. A member noted that apart from the office of the Commissioner for ETA, USA, there were three ETOs in US. He questioned if there were any overlapping functions, in particular when the Washington Office did not have to play its political role as that before the transition. The Commissioner for ETA, USA responded that US was the second largest trading partner of Hong Kong. The coexistence of three ETOs in the States signified the importance of US trade to Hong Kong. He reiterated that the Washington Office had a federal function in cultivating parliamentarian and congressional relationship whereas the New York and the San Francisco Offices focused on the business, finance and banking sectors in the east and the west coast respectively. The post of Commissioner for ETA, USA was established five years ago. He was the overall representative of Hong Kong in US and his role was to ensure that the work of ETOs in US operated in a united and co-ordinated manner. The division of labour was particularly important after the handover since there were still concerns and doubts about the status of Hong Kong as a separate customs territory under the one country concept. Emphasis would need to be put on promoting the principle of two systems as regards trade and economic affairs.

24. As regards the function of the Washington office, S for TI did not agree that the Washington Office was set up for political purpose given its long history since 1960. The Director-General, HKETA, Washington added that the focus of the Washington Office was on the economic and trade interest of Hong Kong rather than political interest. As Washington was the base of the US Federal Government, Congress, think-tanks, corporation lobbyists and national newspapers, any misunderstanding in Washington might jeopardise the overall trade interest of Hong Kong. Since its establishment, the Washington Office had been maintaining a close dialogue with the Congress and relevant federal departments on issues directly related to the economic and trade interest of Hong Kong. These included textiles export, possible misuse of quota for illegal transhipment, intellectual property rights protection, and strategic commodity trade. The Director-General added that noting the importance of China's MFN status to Hong Kong, the Washington Office also kept on putting across the message on the irrevocable damages to Hong Kong in the event of non-renewal of China's MFN status.

25. Given the increasing importance of the European market to Hong Kong, a member asked if the Administration would consider expanding ETOs in Europe as was the case with US. S for TI clarified that ETOs in both regions had comparable establishments in term of directorate grade staff: they each had one D6 post (the Commissioner for ETA, USA as opposed to the Director-General, London), one D4 post (the Director-General, HKETA, Washington as opposed to the Special Representative for HKETA to the European Communities, Brussels) and four D2 posts (the two Directors in the New York and San Francisco Offices and the two Deputy Director-Generals for ETA, Washington as opposed to the Marine Officer and the Deputy Director-General, London in the London Office and the two Deputy Special Representatives in the Brussels Office).

Overseas Image of Hong Kong

26. A member enquired if the recent negative comments made by three visiting Members of the European Parliament on the election of the first SAR Legislature reflected the general impression of Europeans towards Hong Kong. The Special Representative for ETA to the European Communities, Brussels assured the member that this represented only a minority's views. The majority of decision makers, politicians and principal government officials in European countries such as Germany and France were adopting a pragmatic approach towards Hong Kong considering its favourable economic and trade ties with China and other Southeast Asian countries. Nevertheless, unlike their counterparts in US who were empowered to introduce legislation, the role of European congressmen was confined to raise questions and observations only. As such, the anticipated damage made by the three Members of the European Parliament was minimal.

27. In response to a member's question on the need to provide an overall understanding of Hong Kong to the overseas public, the Director-General, London affirmed that apart from economic and trade affairs, ETOs also took a proactive role in keeping relevant parties abreast of other latest development in Hong Kong. In advance of special events to be taken place in Hong Kong, such as the forthcoming election of the first SAR Legislature, ETOs would organize discussion fora to facilitate the exchange of views. The Principal Hong Kong Economic and Trade Representative, Tokyo supplemented that ETOs would make use of the opportunities such as seminars and luncheons to promote a better understanding of Hong Kong. For instance, the Tokyo Office had taken the initiative to liaise with the Japan Tourist Association with a view to clarifying the recent row over hotel charges for Japanese tourists.

28. As regards the annual trade promotion delegation, S for TI confirmed that arrangement had not been made for such a delegation in 1997 since a large number of activities celebrating Hong Kong's reversion to China had already been organized. The Administration would, in collaboration with the Hong Kong Tourist Association, arrange a trade delegation under the leadership of the Chief Secretary visiting Ottawa, Miami, Los Angeles and San Francisco in 1998.

IV Competition Policy

29. At the invitation of the Chairman, S for TI highlighted the salient points in the briefing note, which was a summary of the booklet entitled "Competition Policy for Hong Kong". The booklet set out the Administration's response to the key issues and recommendations made in the Consumer Council's report on "Competition Policy: The Key to Hong Kong's Future Economic Success". Both the briefing note and the booklet were tabled at the meeting.

30. Owing to time constraints, members agreed to defer discussion on the subject to the next Panel meeting.

V Date of next meeting and items for discussion

31. Apart from the item on Competition Policy, members agreed to include the following items in the agenda for the next meeting to be held on Monday, 8 December 1997, at 10:45 am:

- Business and services promotion;

- Science Park; and

- Prevention of Copyright Piracy Bill.

(Post-meeting note: At the instruction of the Chairman, the meeting was re-scheduled to Friday, 12 December 1997, at 10:30 am. Upon request of the Administration, the item on business and services promotion was subsequently replaced by Credit Guarantee Scheme.)

Scheduling of meetings for the first quarter of 1998

32. Members agreed that meetings of the Panel from January to March 1998 would be held on 12 January, 9 February and 9 March in Conference Room A of the Legislative Council Building.

VI Any other business

33. The Chairman informed members that Dr Hon Mrs TSO WONG Man-yin had withdrawn from the Panel with effect from 13 August 1997.

34. There being no other business, the meeting ended at 5:00 pm.

Provisional Legislative Council Secretariat
10 December 1997