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Following is a question by the Hon Wong Ting-kwong and a written reply by the Secretary for Commerce, Industry and Technology, Mr John Tsang, in the Legislative Council today (June 22):
Question:
The global quota system for textile trading has been eliminated since January 1 this year. However, with allegations from the United States of America (USA) and the European Union (EU) that the quantities of exported textile products from China into Europe and USA have increased substantially, USA has reinstated its quota restrictions on seven types of textile products from China, and EU has also demanded China to restrict its exports on two types of textile products afterwards. In an attempt to dissuade USA and Europe from reinstating import restrictions on its textile products, China has implemented the automatic export licensing arrangement and imposed export duty on its textile products. However, the Mainland authorities have recently decided to abolish the export duty imposed on 81 types of textile products in order to treat Mainland enterprises fairly and avoid imposing export duty on Chinese textile products which are subject to import restrictions imposed by USA and Europe. Moreover, the Mainland authorities have agreed to exempt from export duty Hong Kong textile and clothing products that undergo outward processing in the Mainland, and to discontinue the automatic export licensing arrangement applicable to such products. In this connection, will the Government inform this Council of:
(a) of the up-to-date figures of Hong Kong textile exports and re-exports since the elimination of the textile quota system, and how they compare to those for the same period last year;
(b) whether it has assessed the impact of the elimination of the global textile quota system and the disputes between China and USA and Europe in textile trading on Hong Kong's textile business operators; and
(c) apart from their successful attempts in seeking exemption of the above duty and discontinuation of the automatic export licensing arrangement for Hong Kong's business operators, of the other measures taken by the authorities to assist Hong Kong's business operators in enhancing their competitiveness and in facing the uncertain future prospects?
Reply:
Madam President,
My reply to the Hon Wong Ting-kwong's question is as follows-
(a) In accordance with the World Trade Organisation (WTO) Agreement on Textiles and Clothing, all quantitative restrictions on textiles and clothing (T&C) products have been completely eliminated by January 1, 2005. For the first four months of 2005, the values of Hong Kong's T&C domestic exports and re-exports were $11.262 billion and $79.1457 billion respectively, representing a decrease of 33.8% in domestic exports but an increase of 15.3% in re-exports over the same period last year.
(b) The elimination of quota restriction is a major milestone in the liberalisation of the T&C trade. It presents both opportunities and challenges for Hong Kong's T&C sector. Trade liberalisation broadens the scope for trade and facilitates market expansion by Hong Kong businesses. At the same time, our T&C trade has to compete freely with places with lower costs of production. Hence, local manufacturing and export of these products, in particular to those previously restrained markets (i.e. the United States (US), the European Union (EU) and Canada) might decline while re-exports and exports of trade-related services may increase along with the growth in Mainland's T&C exports.
Hong Kong has a favourable business environment. Our sound legal system, clean government, level-playing field, free flow of information, international connectivity and simple taxation system are all conducive to trade development. It is therefore likely more and more Hong Kong's T&C manufacturers might transform into trading companies. These companies will be involved not only in the simple buying and selling of T&C products, but also in a series of high-value added services like designing garments, sourcing materials, selecting manufacturers, engaging in quality and cost control, identifying buyers, and delivering orders.
To maintain competitiveness, Hong Kong's T&C manufacturers will have to look to higher-end markets, focus on fashion design, develop brands, set up regional distribution networks and seek to establish a foothold in Mainland's fashion market under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).
The safeguards measures taken by the US against Chinese T&C products and the agreement reached between the Mainland and the EU on June 11, 2005 on the quantitative limits on certain Mainland's T&C exports to the EU are applicable to Mainland products only. They will not apply to those products of Hong Kong origin. In the short term, these measures might slow down the fall in Hong Kong's T&C domestic exports resulting from the elimination of textiles quota and hamper the growth in the Hong Kong's re-exports of T&C products of Mainland origin. Moreover, we understand that our businessmen are also concerned about these measures as they have manufacturing plants in the Mainland. We will continue to closely monitor the situation and keep our trade informed of latest developments.
(c) In response to the changes in the quota regime, the Trade and Industry Department (TID) has made adjustments to the policy and control system of the import and export of the textiles, such as streamlining the import and export arrangements for T&C products and removing all quota-related measures and charges which directly lead to lowered operating costs of the trade.
The SAR Government and our Hong Kong Economic and Trade Offices will continue to keep a close watch on the development of T&C trade in overseas markets. We shall keep our trade informed of the latest information so that the latter can formulate its strategy.
CEPA has brought about new opportunities for the production and trading of our T&C products and the relevant service sectors. A number of Hong Kong's T&C products, as long they meet CEPA rules of origin, can be exported to the Mainland tariff free. The zero tariff preference renders Hong Kong's clothing products more competitive in pricing vis- -vis overseas products. This will facilitate the entry of Hong Kong's brandname and high value-added clothing products into the huge middle-to-high class of the Mainland market. The zero tariff preference also attracts both local and overseas manufacturers to expand their existing production facilities in Hong Kong.
To enhance Hong Kong's competitiveness and in the interest of the long term development of the fashion industry, the SAR Government will provide support to the trade in respect of stepping up manpower training, deepening the development capability of the industry, promoting the image of Hong Kong's fashion brands, encouraging application of technology and creative ideas, strengthening infrastructure and etc, such as -
(i) The "DesignSmart Initiative" promotes the wider use of design and innovation in industries to help them move up the value chain. It comprises a Design Support Programme with four schemes for providing funding support to design projects and the InnoCentre set up by the Hong Kong Design Centre and the Hong Kong Science and Technology Parks Corporation. The InnoCentre aims to sustain a cluster of high value-added design activities among design professionals where ideas which are both creative and functional will be stimulated, nurtured, researched, promoted, commercialised and branded. The aforementioned measures would help enhance the standard of the fashion design in Hong Kong.
(ii) The Innovation and Technology Commission (ITC) also plans to set up five research and development (R&D) centres, including the R&D Centre for Textile and Clothing by the Hong Kong Polytechnic University, for promoting the application of R&D works in the dedicated technology focus areas and technology transfer with a view to supporting the improvement of the technological level and competitiveness of the industries. ITC proposes to provide funding support under the Innovation and Technology Fund for setting up the R&D centres. Subject to the approval of the Finance Committee, the R&D centres will commence operation in the latter half of this year.
(iii) With the participation of other local supporting organisations, TID has launched a dedicated website for the fashion industry early this year to enhance communication with the industry and to provide comprehensive and latest information. The coverage of the website includes news about activities such as fashion courses, jobs and career paths in the fashion industry and seminars; latest information on research and technologies, marketing and promotion, and sourcing and matching; funding, consulting and technical services provided by local supporting organisations; import and export laws; and market information.
(iv) Apart from the above website, TID and the supporting organisations have jointly compiled a booklet "Supporting Services for the Fashion Industry in Hong Kong" which also contains the information mentioned above.
(v) Moreover, TID has set up the Fashion Library in its Support and Consultation Centre for Small and Medium Enterprises providing for practitioners' use reference books, magazines and materials in respect of market information, market trends and development in the fashion sector.
(vi) The Government has since May this year increased the total commitment of the SME Funding Schemes from $7.5 billion to $12 billion. This includes increase in the loan guarantee commitment under the SME Loan Guarantee Scheme and injection of new funds into the SME Export Marketing Fund and SME Development Fund. SMEs in the textile and fashion sectors can seek support from these Funding Schemes in acquiring business installations and equipment, resolving working capital needs, expanding overseas markets and enhancing their overall competitiveness.
Ends/Wednesday, June 22, 2005
Issued at HKT 14:06
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