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Speech by FS at WTO Day in Shanghai (English only) (with photos/video)
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     Following is the speech by the Financial Secretary, Mr John C Tsang, at the Honour Day for WTO at Expo 2010 Shanghai China today (July 22):

Distinguished guests, ladies and gentlemen,

     Good afternoon.
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     It is a great pleasure for me to join you today here in the fabulous city of Shanghai.

     WTO Day is an important event that is connected to the holding of the World Expo, and that embraces the theme of "Better City, Better Life".

     I am also delighted to see so many friends here today who have been working selflessly for years to bring about a much-improved trading environment for global citizens.  

     Indeed, attending this event brings back vivid and fond memories from December 2005.  That is when Hong Kong hosted the WTO 6th Ministerial Conference, or MC6 for short.  And I had the honour of chairing that week-long congregation of ministers, NGOs, activists, trade officials, journalists, and of course, demonstrators and protesters of all denominations.

     I remember the intense negotiations, endless meetings, sleepless nights, emotional protests, and the ultimate sweet success of bringing about the Hong Kong Ministerial Declaration.

     Above all, I remember the commitment and determination of many WTO members - inspired by Pascal Lamy, our Director-General - doing all they can to reach broad agreement on the best way forward for global trade.  Unfortunately, we have not been able to go beyond the point that we had so painstakingly reached that fateful Sunday evening.  The reason for this failure has been thoroughly analysed, no doubt, and is perhaps a suitable subject for another occasion, but for us in Hong Kong, hosting of the MC6 back in 2005 was important for two main reasons.

     First, we were confident that Hong Kong's central geographical location, long history of free trade and international connectivity would provide the ideal environment for constructive discussion at that crucial juncture in forging a consensus to advance negotiations to the final stage.

     Second, hosting MC6 was a way for us to highlight the important role that Hong Kong can play in promoting open markets and free trade around the world.

     Hong Kong has been a member of the WTO since 1995.

     Since our reunification with our motherland in 1997, we have continued to enjoy individual member status under the name "Hong Kong, China".

     The multilateral trading system embodied in the WTO is the cornerstone of Hong Kong's external trade policy.  Our participation as an individual member of the WTO helps to secure maximum market access for our exports of goods and services to international markets.

     The WTO provides a solid and predictable rules-based system. This safeguards our rights and interests on an equal footing with the rest of the world.

     Although broad agreement was reached in signing the Hong Kong Ministerial Declaration in December 2005 to establish a launching pad for the Doha Development Agenda (DDA) negotiations to conclude the round, we are sad to see that the DDA remains stalled.  

     Over the past two years, the world has been hit hard by the global financial crisis.  Its effect on trade has been unprecedented in our generation.  I believe progress in the DDA is more important now than ever in the post-financial crisis era.

     Some economists have used the global financial crisis as counter arguments to further policies of open trade, but I firmly believe that the recent economic turmoil actually provides good reasons to strengthen our resolve to promote free market policies and lower barriers to trade.  That is the best way to increase overall competitiveness, create jobs and spread wealth.

     The DDA is an ambitious round of multilateral trade negotiations in bringing down global barriers to trade in goods and services.

     Equally important, it helps to deter protectionist policies that have emerged during the recent economic turmoil.

     What makes the DDA unique is that the interests of the least developed and developing economies are placed at the centre of the negotiations.  These are the economies most at risk in an environment of growing protectionist sentiments.

     In the 21st century, when the trading of goods has gone beyond a simple bilateral relationship, protectionism does not necessarily protect.  It is no more than a short-sighted political gesture that will not manifest in the protection of the intended industries. It does not result in creating more jobs in those economies under protection.  It will only bring about greater inefficiencies for the world economy.

     Today, goods are made through complex, international supply chains.  The competitiveness of an economy's exports is directly connected to the cost of imported parts and components that have been made by a chain of economies at different stages of the manufacturing process.  Raising tariffs or introducing protectionist measures on manufactured imports not only affects the individual targeted economy, it also affects many other economies along the chain as well, most of which are less developed ones.

     As a direct result of protectionist measures, businesses involved in the global supply chain will be hurt, leading to job losses around the world and many wider negative economic impacts in the longer term.

     A speedy conclusion of the DDA negotiations remains the most effective safeguard against protectionism.  Although the global economy is recovering from the financial crisis, this recovery so far is still fragile.  The worldwide unemployment rate remains high and there is a temptation for governments under pressure to resort to subtle, but usually not-so-subtle, protectionist strategies.  And such strategies will only prolong the economic downturn and hinder recovery.

     Hong Kong is well placed to play a bridging role between the developed and developing WTO members.  This is especially true in the context of the DDA negotiations.

     The term "honest broker" is one that I used in an interview back in 2005, and we remain keen to take up this role in bringing about tangible results for world trade.

     A successful conclusion of the DDA negotiations would bring value to the global economy, benefiting both developed and developing economies.

     The World Bank has estimated that between US$290 billion and US$460 billion could be gained from global trade liberalisation annually, lifting millions of people out of poverty.  We certainly need that uplift now.

     It is, therefore, important for WTO members, particularly the key players, to exercise even greater flexibility to bring about a breakthrough in the negotiations.  Hong Kong will continue to give full support to Director-General Lamy and his colleagues, and we will do all we can to help break the current deadlock.

     The International Monetary Fund has projected an economic growth rate of 9.2% for developing Asian economies and 6.7% for newly industrialised Asian economies in 2010.  This is well above the projected global economic output of 4.6%.  

     Leveraging on the strong economic recovery in Asia, Hong Kong's economy has also bounced back from recession.  Our recovery began in the second quarter of 2009 and strengthened further in the first quarter of 2010 with year-on-year GDP growth of 8.2% while maintaining unemployment at 4.6%.

     China was first among the major economies to recover from the financial tsunami.  In 2009, the Mainland's economy grew 8.7% year-on-year, the fastest growth recorded among major economies.  

     With strong growth in the Mainland and other developing economies, coupled with closer economic co-operation, this region will become an even more important player globally.

     A new spirit of regional co-operation is echoed by the establishment this year of the ASEAN-China Free Trade Area?(ACFTA).  This has eliminated tariffs for most goods traded between China and the ASEAN nations since?January?1 this year.  The ACFTA is expected to expand further to create even more opportunities for trade in the region.

     At the same time, cross-strait trade and economic relations have also entered a new development phase.  This follows the recent successful conclusion of the Economic Co-operation Framework Agreement (ECFA) between Mainland China and Taiwan.

     The enhanced and closer regional co-operation will certainly be conducive to long-term and steady economic and financial development within Asia.

     Where does this leave Hong Kong?

     Our city is well established as a leading international trading and services hub.

     We practise free trade, support free market principles, and we have our own freely convertible currency with no foreign exchange controls.

     Other competitive advantages include a free flow of information, excellent communications infrastructure and a low and simple tax system.

     Our investment regime is highly liberal, which is attractive to foreign investors, and a level playing field for business means that local and international companies compete on an equal footing.

     Our independent judiciary upholds the rule of law. We have legal protection for contracts, and arbitration is widely used for resolving disputes.  Hong Kong arbitration awards are enforceable in more than 130 jurisdictions, and those made in Hong Kong and the Mainland are reciprocally enforceable.

     Hong Kong is also becoming even more financially integrated with the Mainland.

     Just yesterday, I spoke at a high-level Finance Forum organised by Hong Kong here in Shanghai.  The forum brought together leading players in the financial services sector of Hong Kong and Shanghai to identify measures in achieving our mutually shared objective of enhanced co-operation and enjoying even closer financial ties.

     We will continue to streamline our financial system with that of the Mainland to better connect Chinese financial markets with those around the world.

     One initiative is to enhance Hong Kong as the offshore centre for renminbi business.  This is particularly relevant given the trend towards greater internationalisation of the currency.

     Our renminbi business also got a boost from the trade settlement scheme introduced by the Central Government in July last year and expanded further last month.

     Under the expanded scheme, enterprises in 20 Mainland provinces and cities can choose to settle their trade transactions with any part of the world in renminbi.  Trade settlement between Hong Kong and the Mainland using renminbi has increased steadily since the launch of the scheme.

     We took a step further this week. The Hong Kong Monetary Authority and the People's Bank of China (PBoC) signed on Monday a Supplementary Memorandum of Co-operation on the expansion of the renminbi trade settlement scheme. The two sides agreed to strengthen co-operation to further promote Hong Kong as the off-shore renminbi platform in the process of developing renminbi business outside the Mainland.

     The PBoC and the Bank of China (Hong Kong), the renminbi clearing bank in Hong Kong, also signed a revised Settlement Agreement on the clearing of renminbi business.

     Following the revision of the Settlement Agreement, there will no longer be restrictions on banks in Hong Kong in establishing renminbi accounts for and providing related services to financial institutions. Individuals and corporations will be able to conduct renminbi payments and transfers through the local banking system.

     I expect that many more types of financial intermediary activities denominated in renminbi will be introduced in our market, lifting Hong Kong's RMB business to even greater heights.

     Against the backdrop of economic and financial integration within our nation and our region, we will continue to make the best of Hong Kong's advantages as a financial, trading and services centre in Asia.

     Ladies and gentlemen, our geographical location, our international connectivity and our commitment to promoting free trade and open markets provided an ideal setting for the WTO 6th Ministerial Conference in 2005.

     Since then, the global economic landscape has shifted significantly away from the West towards Asia.

     The WTO's latest Trade Policy Review of China, released just last month, recognises the Mainland's key role in stimulating international trade during the recent global recession.  The review also highlights the potential benefits to both our nation and its trading partners of further liberalisation, particularly in the services sector.

     Hong Kong, with its history as a free trader, its evolution as a services-oriented economy and its close links with the Mainland, has a leading role to play in this ongoing process of breaking down barriers to trade within the WTO family.

     As a regional centre for trade and the premier international gateway to the Mainland, Hong Kong will continue to play that full and active role in promoting the free trade agenda.  

     Thank you very much.

Ends/Thursday, July 22, 2010
Issued at HKT 18:07

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