U.S. Revokes Hong Kong’s Special Status
Hong Kong’s special status is under threat
Hong Kong’s special status currently appears to be in jeopardy as tensions between the U.S. and China have escalated after Beijing proposed a new security law for this special administrative region of China..
Wednesday US Secretary of State Mike Pompeo told Congress that Hong Kong is no longer independent of China. He pointed to a new Chinese law that was approved on Thursday, rekindling fears over the diminishing freedoms of the Free City..
«No reasonable person today can claim that Hong Kong retains a high degree of autonomy from China, given the facts on the ground.», – Pompeo said.
A US law passed last year requires Hong Kong to maintain sufficient autonomy for favorable trade relations with the US. So far, the city has been exempted from trade duties that the United States imposed on China as part of the trade war between the two countries..
Hong Kong’s trade with the United States will suffer if trade duties are imposed.
According to the Office of the United States Trade Representative (USTR), US trade in goods and services with Hong Kong totaled more than $ 66 billion in 2018. According to the agency, US exports to Hong Kong amounted to $ 50.1 billion, and imports – $ 16.8 billion..
According to the City Department of Trade and Industry, in 2018, Hong Kong was the third largest market for America’s wine exports, the fourth largest market for beef and the seventh largest for all American agricultural products.
Major imports from Hong Kong include machinery and plastics, USTR data show.
«An even greater risk is that the loss of special status will force the United States to restrict the sale of sensitive technology to Hong Kong firms. Mark Williams, Chief Asia Economist at Capital Economics. – Science-intensive goods from the United States make up only about 5% of Hong Kong’s total imports. But limiting the ability of Hong Kong firms to manufacture sensitive products would eliminate one of Hong Kong’s distinct advantages as a business location relative to mainland China.».
More than 1,300 American companies operate in Hong Kong, as well as 85,000 Americans, according to the US Department of State..
This could affect the international perception of Hong Kong as an independent and attractive place to do business..
«Recent studies by the American Chamber of Commerce show that American firms are already planning to cut their investments in the city, Capital Economics noted. – Much of Hong Kong’s success is based on its ability to attract investment and receive dividends that come from the placement of international companies».
On Tuesday, the U.S. Chamber of Commerce said Hong Kong autonomy under the concept «one country, two systems» has long been one of its main strengths in building a transparent, rules-based economy.
«It would be a serious mistake to jeopardize Hong Kong’s special status, which is fundamental to its role as an attractive investment destination and international financial center.», – writes the department, urging the administration Trump prioritize relations with Hong Kong.
Currently, Americans also enjoy visa-free travel on Chinese soil. But visa restrictions could take effect if these tensions escalate, analysts say..
«Pompeo’s decision opens the door to possible trade duties on imports from Hong Kong, visa restrictions, or an asset freeze for senior officials. China has previously warned that it will retaliate if the United States intervenes in its affairs.», – considers Rodrigo Catril from National Australia Bank.
Removing the special status of a city could have far-reaching consequences, but it «will not directly affect the international status of Hong Kong», notes Capital Economics.
The city will continue to be treated by the World Trade Organization as an independent customs territory and by other institutions such as the International Monetary Fund and the World Bank as a separate entity.
Of course, the United States is unlikely to adhere to WTO rules if it considers the introduction of trade duties in the city, experts say..