LCQ2: Hong Kong's accession to the Trans-Pacific Partnership
************************************************************

     Following is a question by the Hon Frederick Fung and a reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (November 4):

Question:

     Recently, 12 countries, including the United States, Japan, Singapore and Australia, reached an agreement on the formulation of the Trans-Pacific Partnership (TPP). The combined gross domestic product (GDP) of these countries accounts for 40 per cent of the world's GDP. Although some pro-establishment commentators consider that TPP is a move of the United States aimed to exclude China or even a tool used to blockade China, there are comments that TPP will have impacts on Hong Kong's future economic development, economic independence, role positioning and international status. It has been reported that when he was asked the question about Hong Kong's accession to TPP, the Chief Executive only said that the work regarding the Association of South East Asian Nations would be done well. In contrast, the Department of Commerce of the United States welcomes the accession of Hong Kong to TPP. In this connection, will the Government inform this Council:

(1) whether it has conducted studies on Hong Kong's accession to TPP; if it has, of the details; whether it has analysed if Hong Kong will encounter difficulties in meeting the requirements imposed by TPP on its member states; if it has, of the outcome; whether the authorities have studied or analysed issues such as the impacts of the implementation of TPP on the future economic development of Hong Kong and whether Hong Kong will be marginalised as a result; if they have, of the outcome; if not, the reasons for that;

(2) as Article 151 of the Basic Law provides that "[t]he Hong Kong Special Administrative Region may on its own, using the name 'Hong Kong, China', maintain and develop relations and conclude and implement agreements with foreign states and regions and relevant international organisations in the appropriate fields, including the economic, trade, financial and monetary, shipping, communications, tourism, cultural and sports fields", whether, in considering and deciding on Hong Kong's accession to TPP, the authorities will take into account only the economic interests of Hong Kong or also other factors such as political considerations; whether the authorities have discussed relevant issues with the Central People's Government through formal or informal channels and whether they have received any relevant instructions; if they have, what the instructions are; and

(3) whether the authorities will proactively consider Hong Kong's accession to TPP having regard to Hong Kong's future economic development, economic independence and international status as well as from the perspective of risk diversification, so as to avoid making the same mistake of over-reliance of economic development on a single market (such as over-reliance of the tourism industry on the ¢Ûainland market); if they will, of the timetable; if not, the reasons for that?

Reply:

President,

     The Trans-Pacific Partnership (TPP) is a regional Free Trade Agreement (FTA) among 12 economies which is yet to be signed by the parties. We have all along been closely monitoring the development of the TPP. Regarding the questions raised by the Hon Frederick Fung, I will first explain in detail the Hong Kong Special Administrative Region (HKSAR) Government's FTA policy and strategy before responding to the three specific questions raised by the Hon Fung.

     With the globalisation of the world economy, it has become a major trend for trading partners to enter into FTAs and regional economic co-operation arrangements.  As a staunch advocate of free trade, Hong Kong welcomes any initiatives that promote free trade.

     In selecting our FTA partners and determining our priorities, we take into account the unique characteristics of Hong Kong's economy and devise a strategy that is in the best interest of Hong Kong. Hong Kong is a service-oriented economy with the service industry constituting 93 per cent of our Gross Domestic Product (GDP). Given the importance of trade in services to Hong Kong, our primary goal is to enter into FTAs with Hong Kong's major services trading partners.

     First of all, the Mainland is Hong Kong's largest services trading partner, with which we signed the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) in 2003. In the following decade, 10 supplements were signed. Last year, the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong was also signed to enable the Mainland to achieve basic liberalisation of trade in services with Hong Kong in Guangdong first. At present, Hong Kong service suppliers can get access to most service sectors in the Mainland market via CEPA.

     Second, Hong Kong is actively participating in the Trade in Services Agreement (TISA) negotiation which commenced in 2013. Among the 23 participating economies in the negotiation, eight of them are among our ten largest trading partners in terms of trade in services, which account for about half of Hong Kong's total trade in services. Hong Kong service suppliers are active in the services markets of these economies. Our exports of financial services and business services to them account for 80 per cent and 70 per cent of our total exports in the respective sectors.  In view of this, we actively take part in the negotiation of TISA to secure more favourable conditions for trade.

     Third, Southeast Asia is one of the fastest growing economic regions in the world.  The 10 member states of the Association of South East Asian Nations (ASEAN) collectively are fourth largest trading partner in terms of trade in services. We commenced the FTA negotiation with ASEAN in July 2014, and trade in services is a key area in the negotiation.  It is our target to conclude the negotiation next year.

     CEPA, TISA and the FTA with ASEAN will benefit 95 per cent of Hong Kong's services trade. Our current priority, therefore, is to conclude the negotiations on the new Agreement on Trade in Services under CEPA, TISA and the FTA with ASEAN, with a view to enhancing Hong Kong's strengths and competitive edge in the service industries.

     Moreover, subsequent to the conclusion of the FTA negotiation with ASEAN, we will seek to join the Regional Comprehensive Economic Partnership (RCEP) currently being negotiated between ASEAN and its six FTA partners. Apart from the 10 member states of ASEAN, the other six participating economies of the RCEP are the Mainland, Japan, Korea, Australia, New Zealand and India. All these economies are important trading partners of Hong Kong. The combined GDP of the 16 RCEP participating economies represents nearly one-third of the world's GDP. The RCEP negotiation is the largest FTA negotiation in the Pan Asia region.

     Although Hong Kong's manufacturing industry accounts for less than 2 per cent of our GDP, we also attach importance to the flows of trade in goods and hope that Hong Kong's FTA network will cover our major goods trading partners. Hong Kong has already signed CEPA with its largest trading partner, the Mainland. This clearly reflects our FTA strategy to secure, through various means, more open and facilitating market access conditions for Hong Kong's trade in services and goods, taking into account the unique characteristics of Hong Kong's economy.

     In relation to the three specific questions raised by the Hon Fung, my response is as follows:

     Regarding questions (1) and (3), I reiterate that Hong Kong welcomes and supports any regional initiative that promotes free trade. The HKSAR Government has all along been closely monitoring the development of regional FTAs, including the TPP, the aforementioned RCEP, and the Free Trade Area of Asia-Pacific advocated by the Asia-Pacific Economic Cooperation.

     Regarding the TPP, we are watching closely its development. Unlike the World Trade Organization (WTO) and traditional FTAs, the TPP has an extensive coverage. Details of the TPP negotiation have been kept undisclosed throughout the negotiation process. Thus far, only a summary of the TPP has been made public, while its details and texts still remain unreleased. A concrete assessment of the impact of TPP on Hong Kong could only be possible after more information is made available. Hence, it is too early to consider Hong Kong's participation in TPP at this juncture. We maintain an open mind towards joining the TPP. We will study the provisions carefully and assess its impact on Hong Kong when the TPP text is available.

     Regarding question (2), Hong Kong has, on various occasions and platforms, exchanged views with its trading partners (including members and non-members of TPP) on the development of TPP and other regional or bilateral FTAs. To our understanding, the Mainland maintains an open attitude towards any institutional arrangements that are consistent with the rules of the WTO and may contribute to regional economic integration of the Asia Pacific region. They will also conduct comprehensive assessment on the TPP upon the release of its text. The HKSAR Government will also continue to closely monitor the development of the TPP. In fact, it is still uncertain as to when the TPP may take effect.  In terms of procedures, TPP members have to first complete its congressional approval or other necessary procedures. Meanwhile, many of the members are still facing much domestic controversies on joining the TPP. It is thus believed that it will take quite some time before the TPP can come into effect. With the effective date of the TPP remaining uncertain, it is rather unlikely that other economies will join the TPP at this stage.

     Thank you, President.

Ends/Wednesday, November 4, 2015
Issued at HKT 13:35

NNNN