Following is a speech by the Financial Secretary, Mr Henry Tang, at the Senior Officials' Forum, Boao Forum for Asia today (April 24)(English only):
Mr Wei, distinguished guests, ladies and gentlemen,
It is wonderful to be back in charming Hainan for the Boao Forum. I would like to thank the organisers and the people and government of Hainan for their warm hospitality. It is also my great pleasure to be with all of you today. I treasure the chance to share ideas with those involved at the forefront of economic and trade issues.
Although it began just three years ago, the Boao Forum for Asia has become a premier platform for interaction among government officials, business leaders and academics on how to promote trade and economic ties within Asia and with other parts of the world, so that we can make the most of the emerging global challenges and opportunities.
Asia on the world stage
Asia has made great strides in the past few decades. We have witnessed remarkable achievements in both the economic and social spheres. More than half of the world's population lives here. Asia's combined GDP amounted to more than one-third of the world's GDP in 2002. According to the latest IMF forecasts, real GDP in East Asia, excluding Japan, will rise by a formidable 6.4% this year, following impressive growth of 6.1% in 2003. Asia is gradually climbing out of our recent economic doldrums. With a positive global outlook for 2004, regional economies can be expected to continue to perform well.
Notwithstanding these positive prospects, Asian countries, like others, face the critical task of harnessing globalisation, a process that is fast reshaping the economic fabric of the entire world. Globalisation offers extensive prospects for substantial and balanced socio-economic development, but it also brings a host of adjustment issues to address. Some of us are integrating into the global economy more quickly than others, resulting in greater growth and poverty reduction. All in all, openness and co-operation are essential to prosperity in the new economic order.
Closer economies ties and co-operation in the region
The key to Asia's future in a globalised world is vividly illustrated by the growing economic interdependence and co-operation in the region. APEC bears the best testimony to this.
Founded in 1989 on a common commitment to open trade and investment and to domestic economic reform, APEC has made a significant impact on trade liberalisation over the years. It has played a unique role in helping to take forward WTO negotiations. Despite the setback at the Cancun Ministerial Conference last year, the APEC Leaders, at their meeting in Bangkok last October, re-affirmed their unwavering support for early completion of the Doha Development Agenda negotiations, the cornerstone for a more liberal and equitable trade regime worldwide.
APEC members have been progressing towards more liberalisation by introducing trade facilitation measures, cutting tariffs and harmonising technical agreements. We have set the very ambitious Bogor Goals of free and open trade and investment in the Asia-Pacific region by 2010 for industrialised economies, and by 2020 for developing ones. I am most happy to see that these measures are bearing fruit. Let me cite some examples. During the past 10 years or so, APEC economies have substantially reduced both tariffs and non-tariff measures, some well beyond their Uruguay Round commitments. They have generated nearly 70% of global growth. Exports of goods and services have increased by 113% to over US$2.5 trillion. And foreign direct investment in the region has grown by a staggering 210%.
APEC as a region has therefore consistently outperformed the rest of the world, even during the regional financial crisis. Asia's open economic policies have created the wealth necessary to dramatically lift living standards in the region, reduce poverty and create employment. This wealth has led to significant improvement in health, education and environmental protection. Looking ahead, APEC should continue to encourage progress towards the Bogor Goals, maintaining momentum on practical issues such as strengthening economic legal infrastructure, improving standards of governance and reducing the costs of international trade.
Preferential trade initiatives
While APEC is pursuing open regionalism, there is also an increasing trend of embarking on preferential trade initiatives, in the form of free trade agreements (FTAs). Many of the FTAs extend beyond the traditional trade parameters - such as tariffs and non-tariff measures - and into investment, services and standards. The number of FTAs has risen in recent years - as of July 2003, only three WTO members were not party to any FTA. Indeed, many Asian economies have put FTAs high on their trade agenda. Judging by the number of such agreements planned or under negotiation, the total number of FTAs in force might well approach 300 by next year. That's a figure much higher than the number of WTO members! So it's not surprising that about half of current world trade is conducted under preferential trading arrangements.
This also highlights the fact that today, a small economy like Hong Kong can no longer compete effectively on its own. On the other hand, a regional economic grouping, pooling strengths and leveraging on its advantages, is a logical way to let everyone reap the benefits of globalisation. So while we must continue to hone our competitive skills, we should also reach out to integrate our resources with those of other economies. Against this background, Hong Kong and the Mainland of China last year signed a Closer Economic Partnership Arrangement (CEPA), the first ever FTA-style arrangement entered into by either of us.
CEPA eliminates tariffs on many Hong Kong products exported to the Mainland, provides local businesses and professionals in various services sectors with early access to the Mainland market, and simplifies cross-boundary trade. It also allows for further liberalisation in future. CEPA opens up new and exciting opportunities for Hong Kong and the Mainland - as well as foreign investors, because its terms are non-discriminatory and racially non-biased. Any overseas company, regardless of its nationality, size and ownership structure, can take advantage of zero-tariff treatment as long as the goods it produces meet the rules of origin under CEPA. It can also capitalise on the greater market access opportunities in the services sectors under CEPA simply by incorporating in Hong Kong or forming a joint venture with a Hong Kong company.
The essence of CEPA lies in institutionalising the economic co-operation between Hong Kong and the Mainland, which has been thriving for over 20 years. I won't bombard you with details, but let me stress that CEPA is fully consistent with WTO rules. This is a high-standard free trade pact that will contribute to the global trading system by serving as a catalyst for further multilateral liberalisation.
CEPA strengthens Hong Kong's position as a centre for value-added manufacturing and high quality services for a vast market of 1.2 billion people, particularly the Pearl River Delta, Hong Kong's dynamic next-door partner. It enhances Hong Kong's role as a two-way platform between the Mainland and the world. It generates new business opportunities for all, and attracts foreign investment to the region. And, by setting a high-standard benchmark for FTAs, CEPA helps forge regional co-operation.
Any discussion of regional co-operation would not be complete without mentioning the proposed ASEAN-China FTA. It will cover trade and investment liberalisation in goods and services, trade and investment facilitation, capacity building and technical assistance, and co-operation in many areas. The agreement promises profound economic benefits across the region. Its eventual implementation will be an historic landmark in regional co-operation.
FTAs are assuming an increasingly prominent position in global trade. As a staunch supporter of free trade, Hong Kong would like to see this development become a building block, rather than a stumbling block, to multilateral trade. Indeed, we hope that the proliferation of FTAs will help speed up trade liberalisation, and will lead to a fruitful outcome of the Doha Development Agenda negotiations in the WTO.
Ladies and gentlemen, Asia is characterised by immensity and diversity. While we have differences in stages of development, culture and traditions, the prosperity of the region relies on our collective efforts in sustaining the momentum for free trade and open economies, and resisting the re-emergence of protectionist tendencies. In the years to come, the trend of economic globalisation and regionalisation will no doubt continue. I do not under-estimate the magnitude of the opportunities or the challenges. It is incumbent upon all of us to strengthen co-operation among ourselves and with other parts of the world. With this approach we can put into practice the theme of this conference: a win-win Asia, open to the world.
Thank you very much.
Ends/Saturday, April 24, 2004