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Following is a question by the Hon Emily Lau and a reply by the acting Secretary for Commerce and Industry, Mr Raymond Young, in the Legislative Council today (June 26):

Question:

The Consul-General of the United States of America in the Hong Kong Special Administrative Region (HKSAR) said on June 6 that initiatives such as the proposed Closer Economic Partnership Arrangement with the Mainland and streamlining the operation of the boundary through co-location of customs and immigration officials on the Mainland side of the boundary have raised questions for the international community. He further stated that "it is essential that Hong Kong demonstrates clearly that these changes in the operation of 'One Country, Two Systems' will neither weaken Hong Kong's autonomy nor dilute its core values." In this connection, will the Executive Authorities inform this Council:

(a) of the latest developments of the above two initiatives, and how these initiatives amount to changes in the operation of "One Country, Two Systems";

(b) whether they are aware of expressions of similar concerns by other foreign government officials; if so, of the details of such concerns; and

(c) how the SAR Government demonstrates to the international community that the above initiatives will not weaken SAR's autonomy or dilute its core values?

Reply:

Madam President,

(a) Consultations on the Mainland/Hong Kong Closer Economic Partnership Arrangement (CEPA) formally commenced in January this year. The proposed CEPA will cover three areas: trade in goods, trade in services, and trade and investment facilitation. So far, two rounds of High Level Consultations have been held. Officials of both sides have been meeting regularly and steady progress has been achieved in all the three areas.

Both the Mainland and the HKSAR agree that, first and foremost, the proposed CEPA should be fully consistent with the Basic Law and the "One Country, Two Systems" principle. Our status as a separate customs territory and our full autonomy over trade and economic policy as provided by the Basic Law will not be affected by the CEPA.

As regards the co-location of customs and immigration facilities on the Mainland side, the overall principle as agreed between Guangdong and Hong Kong is that the relevant departments of the two sides will carry out separate immigration and customs clearance procedures in accordance with their own relevant laws and regulations. While they operate at adjacent sites on the Shenzhen side, there will be a buffer zone segregating the facilities of the two sides. Specifically, the two sides will avoid overlapping jurisdictions. The intention is that the area to be managed by the HKSAR will be clearly designated and that Hong Kong laws will apply in such a designated area. Such an arrangement, which preserves the existing mode of operation primarily, will not in any way affect the operation of "One Country, Two Systems". Hong Kong will remain a separate customs territory.

(b) Many of our trading partners have indicated interest over the progress of the CEPA consultations. They are mainly concerned with the economic aspects of the proposal, especially whether their trade interests might be affected by the CEPA.

Some of our interlocutors from local consulates as well as some visiting officials from overseas have expressed keen interest in knowing more about the co-location arrangement. They are aware, though, that there are already in place some co-located border clearance facilities between some countries (for example, the Poland/Germany and Poland/Czech Republic land crossings). Their particular concern is whether and how our status as a separate customs territory, which is the cornerstone of our customs and immigration controls, will be affected by the implementation of the proposed co-location arrangement.

(c) The proposed CEPA will fully comply with relevant rules of the World Trade Organisation (WTO). Similar to other free trade agreements, the CEPA will not weaken the autonomy of any party to the arrangement. When concluded, the CEPA will be notified to the WTO, with the text of the arrangement submitted to the WTO Committee on Regional Trade Agreements for examination. The transparency in respect of the scope and operation of the CEPA will also demonstrate to the international community that the initiative will not undermine the SAR's autonomy on trade and economic policy.

On the co-location arrangement, we have explained to all our interlocutors, both local and overseas, that the major grounds for such an arrangement are the lack of usable land on the Hong Kong side for expansion of our control points and the benefits of streamlined procedures for passengers. However, there will be no relaxation in the HKSAR's customs and immigration control resulting from the co-location arrangement. There will neither be joint inspection nor sharing of database or computer facilities between the relevant HKSAR and Mainland authorities. These basic principles will be observed in the implementation of the co-location arrangement.

End/Wednesday, June 26, 2002

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