RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/109
18 November 2002
(02-6320)
Trade Policy Review Body Original:  English
TRADE POLICY REVIEW
HONG KONG, CHINA
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Hong Kong, China is
attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Hong Kong, China.Hong Kong, China WT/TPR/G/109
Page 3
CONTENTS
Page
I. OVERVIEW 5
A. T HE SUCCESSFUL OPERATION OF THE HKSAR 5
B. A N EW ERA OF GOVERNANCE 5
C. T RADE POLICY OBJECTIVES 5
II. ECONOMIC AND TRADE ENVIRONMENT 6
A. M ACROECONOMIC SITUATION 6
B. F ISCAL SITUATION 7
C. B ENEFITS OF CHINA 'S WTO A CCESSION TO THE HKSAR 7
D. E XTERNAL TRADE RELATIONS 8
(a) Merchandise Trade 8
(b) HKSAR’s Major Trading Partners 9(c) Trade in Services 9
III. TRADE POLICY DEVELOPMENT 9
A. M
ULTILATERAL TRADE LIBERALISATION 9
(a) Staunch Support for the Multilateral Trading System 9
(b) Active Participation in the WTO 10
B. P ARTICIPATION IN ASIA-PACIFIC ECONOMIC CO-OPERATION (APEC) AND
THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD) 10
C. R EGIONAL TRADE AGREEMENTS 11
(a) Hong Kong/New Zealand CEP 11(b) CEPA 11
IV. SECTORAL DEVELOPMENTS 12
A. D
EVELOPMENTS IN TRADE IN GOODS 12
(a) Textiles and Clothing 12(b) Reserved Commodities 12(c) Strategic Commodities 13
(d) Other Licensing Control 13
B. D
EVELOPMENTS IN SERVICES 14
(a) Financial Services 14(b) Telecommunications 16(c) Broadcasting 16(d) Professional Services 17
C. P
ROTECTION OF INTELLECTUAL PROPERTY RIGHTS IN HONG KONG 17
(a) Comprehensive Legislation 17(b) Vigorous Enforcement Actions 18(c) Sustained Public Education 18(d) Close Co-operation with Rights Owners and Other Law Enforcement
Agencies 19
D. E
LECTRONIC COMMERCE 19WT/TPR/G/109 Trade Policy Review
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E. G OVERNMENT PROCUREMENT 19
F. C OMPETITION POLICY 19
V. DOHA DEVELOPMENT AGENDA 20
A. H ONG KONG, CHINA ’S OVERALL POSITION IN THE DOHA DEVELOPMENT AGENDA 20
B. H ONG KONG, CHINA ’S PRIORITY AREAS IN THE NEW ROUND 21
(a) Services 21
(b) Non-agricultural Market Access 21
(c) Review of Trade Rules 21
C. O THER AREAS IN THE DOHA DEVELOPMENT AGENDA 22
(a) Intellectual Property Rights 22(b) Dispute Settlement Understanding Review 22
(c) Trade Facilitation 23
(d) Transparency in Government Procurement 23(e) Trade and Investment 23(f) Trade and Competition 23(g) Trade and Environment 23Hong Kong, China WT/TPR/G/109
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I. OVERVIEW
A. The Successful Operation of the HKSAR
1. The year 2002 marks the fifth anniversary of the establishment of the Hong Kong Special
Administrative Region (HKSAR) of the People’s Republic of China (PRC).  In the past five years, the
HKSAR has risen to tough challenges including the Asian financial crisis and other economic shocks.
The high degree of autonomy enjoyed by the HKSAR is a testament to the effective implementation
of the principle of “One Country, Two Systems”.  The institutions and policies that servedHong Kong well in the past, such as the rule of law, the free and open trade policy, and a level
playing field for business, remain the bedrock of Hong Kong’s success.
2. The Basic Law, the constitutional document of the HKSAR, sets out the way in which the
HKSAR is to be administered.  Under its provisions, the HKSAR shall remain a free port, a separate
customs territory and 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 international
organisations in the appropriate fields including the economic and trade fields, and participate in
international organisations and conferences not limited to states.  This provides the very foundation
for our separate membership in the World Trade Organisation (WTO).
B. A New Era of Governance
3. The Government implemented a new accountability system with effect from 1 July 2002.
The objectives of the new system are to strengthen the accountability of principal officials, to ensure
that the Government can better respond to the needs of the community, enhance coordination in
policy formulation, strengthen the co-operation between the Executive and the Legislature, ensure
effective implementation of policies and provide quality services to the public.
4. There are a total of 14 principal officials under the accountability system, comprising three
Secretaries of Department (the Chief Secretary for Administration, the Financial Secretary and the
Secretary for Justice) and 11 Directors of Bureau.  Principal officials are accountable to the Chief
Executive for matters falling within their respective  portfolios.  They are appointed to the Executive
Council, the main advisory body for the Chief Executive, and are responsible for the success or
failure of their policies from initiation to implementation.
C. Trade Policy Objectives
5. The HKSAR’s trade policy objectives are to promote a free, open and stable multilateral
trading system; to safeguard our rights and fulfil our obligations under multilateral, regional, and
bilateral trade and trade-related agreements and arrangements; and to secure, maintain and improve
access for our exports.
6. The cornerstone of our trade policy is active participation in the WTO, which provides a fair,
predictable and rules-based multilateral trading system.  Our participation in the WTO is guided by
two objectives.  First, to sustain the momentum of trade liberalisation, especially in areas important to
us, such as non-agricultural market access and trade in services.  Secondly, to strengthen and update
the rules-based multilateral trading system so that it continuously provides an effective framework to
promote trade expansion and liberalisation, as well as to protect the HKSAR against arbitrary anddiscriminatory actions of others.WT/TPR/G/109 Trade Policy Review
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7. The HKSAR welcomes the launching of a new round of multilateral trade negotiations,
which provide a platform for the HKSAR to pursue these objectives.  We believe that further trade
liberalisation can help forestall regression into protectionism and provide the engine for sustained
economic growth worldwide.
II. ECONOMIC AND TRADE ENVIRONMENT
A. Macroeconomic Situation
8. Hong Kong is recognised as one of the world’s freest economies.  The Heritage Foundation
has put Hong Kong at the top of the list in its Index of Economic Freedom for eight consecutive
years.  Canada’s Fraser Institute and the US-based Cato Institute, in conjunction with institutes from
54 other countries, also ranked Hong Kong as the freest economy in the world in the Economic
Freedom of the World 2002 Annual Report.
9. In maintaining Hong Kong's economic freedom, the Government plays an active role in
maintaining an institutional framework conducive to ma rket development, including the rule of law, a
low and simple tax regime, a level playing field, law and order, and a business-friendly environment.
The Government is also responsible for securing more favourable market access for Hong Kong
through multilateral and bilateral economic and trade negotiations, and participation in relevanteconomic and trade organisations.
1  Hong Kong also has a fully convertible and stable currency2, and
a sound monetary system.
10. As a free and market-driven economy, Hong Kong is not immune from the volatilities that
the rest of the region and the world have experienced.  In the past few years, Hong Kong has faced a
double blow stemming from the Asian financial turmoil in 1998 and the global economic downturn in
2001.  Yet the economy remains resilient.  Following the severe setback in 1998, the economy
quickly turned around in 1999, yielding a 3.4% growth in that year.  The recovery process broadenedand became more entrenched in 2000, when a 10.2% growth was recorded, the fastest growth since
1987.  In 2001, amidst a worsening external environment prompted by the downturn in the US
economy, and with the situation aggravated by the tragic event in the US on 11 September, the
Hong Kong economy still registered a growth of 0.6%.
11. For 2002, Hong Kong’s GDP growth in real terms is forecast at 1.5%.  Exports of both goods
and services should continue to benefit from the pick-up in regional demand, in particular demand in
the mainland of China.  The weakening in the US do llar so far this year should benefit Hong Kong’s
exports in the coming months.
12. The latest GDP forecast has taken cognisance of likely caveats on both the external and
domestic fronts.  Externally, a possible relapse in the US economy would have inevitable knock-on
effects on the rest of the world, including the European and East Asian economies.  Domestically,
apart from the continued slack in the labour market, there is also concern about the extent to which
the better performance in exports is able to filter through to resurrect local demand.  There may
nevertheless be upside potential if the growth momentum in exports of goods and services, helped by
a weaker US dollar, could be sustained, and if th e transmission process to the local economy could
bear fuller effect in due course.
                                                     
1 These are elaborations of the economic role of the Government as a proactive market enabler, as
stated by the Financial Secretary in the 2002 Budget Speech.
2 Hong Kong operates a linked exchange rate system, which was established in 1983.  The Hong Kong
dollar is linked to the US dollar at a rate of HK$7.8 = US$1.Hong Kong, China WT/TPR/G/109
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13. The outlook for Hong Kong’s economy beyond the short term remains good, underpinned by
further economic reform and development and continued market liberalisation in the mainland of
China.  China’s accession to WTO will open up more opportunities for trade and investment.
Hong Kong will remain an important foothold and conduit for business between the mainland of
China and the rest of the world.
14. Hong Kong is a major destination for foreign direct investment (FDI).  Hong Kong was
named as the best-performing host economy for FD I in Asia, according to the World Investment
Report 2002 released by the United Nations Co nference on Trade and Development (UNCTAD).
Hong Kong holds the second place in the global rankings after Belgium/Luxembourg.  Hong Kong
has also been classified in the report as a “front-runner” economy, which means that Hong Kong
outperformed its investment potential by attracting very high FDI flows relative to its economic size.In 2001, Hong Kong ranked 10
th in the world in FDI inflows, with a total FDI inflow of
US$22.8 billion (HK$178 billion).
B. Fiscal Situation
15. Fiscal prudence has been the guiding principle of the HKSAR in managing public finances.3
Our long-standing fiscal policy objective has been to maintain sound and stable public finances and to
foster a fiscal environment conducive to continued economic growth and success.  Our target is to
ensure that the right balance is struck between meeting public demand for better government services
on the one hand and adhering to our principles of small government and low taxes on the other.
16. The HKSAR remains debt-free although it registered fiscal deficits in three out of the past
four financial years (1998-99 to 2001-02) as its economy underwent restructuring alongside the Asian
financial turmoil in 1998 and the global economic slowdown in 2001.  It has met the deficits by
drawing on its substantial accumulated fiscal reserves which, at the end of financial year 2001-02 (i.e.end-March 2002), stood at US$48 billion (HK$373 billion) or nineteen months of government
expenditure.  As the economic restructuring is expected to continue for some time, the Government
has laid down a plan to solve the deficit problem in the medium term through reducing the growth of
government expenditure and modestly raising revenue.  The targets to achieve in 2006-07 are to
restore fiscal balance and to reduce public expenditure to 20% of GDP or below.  The forecast fiscalreserves at the end of 2006-07 are US$35 billion (HK$271 billion) or twelve months of government
expenditure.
C. Benefits of China's WTO Accession to the HKSAR
17. Hong Kong, as the financial and services hub in the Asia-Pacific region, will benefit from the
further opening up of market and the resulting boom in business opportunities arising from China’sWTO membership.  Following the accession, China's trade relations with its trading partners will be
governed by the framework of WTO rules, and th e risk of unilateral trade sanctions imposed upon it
by other economies will be significantly reduced.  This will create a more stable trading environment
for the HKSAR, given that the mainland of China ha s been our largest trading partner since 1985.  In
addition, WTO membership will bring about a more transparent, predictable as well as rules-basedmarket in China.  As a major trading partner of the mainland of China (total bilateral trade in 2001
                                                     
3 Article 107 of the Basic Law of the HKSAR sets out the budget principles to be followed –"The
Hong Kong Special Administrative Region shall follow the principle of keeping expenditure within the limits ofrevenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budgetcommensurate with the growth rate of its gross domestic product."WT/TPR/G/109 Trade Policy Review
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amounted to US$157 billion), the HKSAR is well positioned to leverage on the continued robust
growth and further liberalisation there.
18. We estimate that the HKSAR’s real GDP will be raised, as a result of China’s WTO
accession, by an additional 5.5% by 2010 (an average of 0.5 of a percentage point per annum), and its
exports involving the mainland of China by an additional 15% (an average of 1.3 percentage points
per annum).  These assessments are only partial, representing a quantification of impact arising fromtariff reduction and non-tariff barrier relaxation for trade in goods.  The wider effects of investment
flows and liberalisation of the service sectors have not been accounted for.
19. The HKSAR sees enormous comparative advantages of combining its successful service
economy with the great manufacturing capability of the Pearl River Delta, which is Hong Kong’s
natural hinterland.  The Pearl River Delta is one of the most prosperous economic regions in themainland of China: it is the largest exporter and the most popular destination for foreign investment.
Hong Kong's private sector has, for many years, been making the most of the unparalleled
complementary strengths of the two places.  There are more than 33,000 Hong Kong-linked
enterprises employing some 5 million people in Guangdong Province.
20. To maximise the synergy, the HKSAR will leverage on the aggregate strengths of the Pearl
River Delta in terms of manpower, the breadth and depth of economic activities, production capacity,
market size, expertise, technology, infrastructur e, telecommunications and transport.  The HKSAR
Government will do more to smooth the flows of people, cargo, capital, information and services
between Hong Kong and the Pearl River Delta.
D. External Trade Relations
21. External trade has flourished over the past two decades.  Trade in goods and services
expanded by about 12 times and 9 times respectively during this period.  The HKSAR is one of thelargest trading entities in goods and in services wo rldwide.  In 2001, our total trade in goods valued at
US$391 billion (HK$3,049 billion).  We were the world's 10
th largest trading entity in goods (or the
6th largest trading entity if the European Union wa s taken as a single trading entity), the world's
10th largest exporter and the 10th largest importer of goods.
22. As for trade in commercial services, the volu me valued at US$66 billion (HK$513 billion) in
2001.  We were the world's 12th largest services trading entity, the 10th largest services exporter and
15th largest services importer.
(a) Merchandise Trade
23. From 1998 to 2001, the value of the HKSAR’s merchandise trade4 grew from US$356 billion
(HK$2,777 billion) to US$391 billion (HK$3,049 billion).  After a slight drop of 1% in 1999,merchandise trade increased substantially by 17.9% in 2000.  Owing to significant worsening in the
global trade environment, merchandise trade dropped again by 6% in value terms in 2001.
Nevertheless, with improvement in the global and regional economies, merchandise trade has
resumed positive growth by the second quarter of 2002, and looks set to grow further in the second
half of the year.  According to our latest forecast, total exports and imports of goods are expected torise by 5.4% and 4.9% respectively in real terms in 2002.
                                                     
4 The total merchandise trade comprises im ports, re-exports and domestic exports.Hong Kong, China WT/TPR/G/109
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24. In 2001, electrical machinery, apparatus and appliances accounted for the largest share (16%)
by value of total exports of goods, followed by apparel and clothing accessories (12%), and
telecommunications and sound recording and reproducing equipment (10%).
(b) HKSAR’s Major Trading Partners
25. During the reporting period, the HKSAR’s largest merchandise trading partners continued to
be the mainland of China, followed by the United States and the EU.  They accounted for 40.3%,14.3% and 12.0% of our total merchandise trade respectively in 2001.
26. The mainland of China has for decades been Hong Kong's principal supplier of imports, the
largest re-export market as well as one of the largest domestic export markets.  Total trade with the
mainland of China increased by 18% from 1998 to 2001.  The major export items to the mainland of
China in 2001 included electrical machinery, apparatus and appliances.  The major import itemsincluded apparel and clothing accessories, and miscellaneous manufactured articles.
27. Total bilateral merchandise trade between the US and the HKSAR increased by 3% from
1998 to 2001.  The principal export items to the US in 2001 included miscellaneous manufactured
articles; apparel and clothing accessories; and electrical machinery, apparatus and appliances.  Major
imports from the US in 2001 included electrical machinery, apparatus and appliances; automatic dataprocessing machines; and telecommunications and sound recording and reproducing equipment.
28. Total bilateral merchandise trade between the EU and the HKSAR grew by 0.4% from 1998
to 2001.  The major goods traded between the two economies included apparel and clothing
accessories; electrical machinery, apparatus and appliances; and telecommunications and sound
recording and reproducing equipment.
(c) Trade in Services
29. The HKSAR is a strong exporter of services.  In 2001, the HKSAR exported US$41 billion
(HK$323 billion) worth of services, bearing a ratio of 25% to the GDP.  Transportation services
continued to account for the largest share in Hong Kong’s exports of services, at 32% by value in
2001.  This was followed by exports of trade-related services (comprising mainly offshore-trade)
(with a share of 31%), travel services (20%) and financial, business and other services (18%).
30. Imports of services decreased by 2% from 1998 to 2001.  Travel services continued to take up
the largest share in Hong Kong’s imports of services, at 51% by value in 2001.  This was followed by
imports of transportation services (with a share of 26%), financial, business and other services (18%)
and trade-related services (6%).
III. TRADE POLICY DEVELOPMENT
A. Multilateral Trade Liberalisation(a) Staunch Support for the Multilateral Trading System
31. External trade plays a key role in the Hong Kong economy.  The development of Hong Kong
into an international trading centre owes a great deal to the liberalisation of world trade under the
multilateral trading system.  We are firmly in support of this system, and will continue to pursue our
rights, fulfil our obligations, and secure, maintain and improve access for our exports.WT/TPR/G/109 Trade Policy Review
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(b) Active Participation in the WTO
32. Hong Kong is a founding member of the WTO.  Since the establishment of the HKSAR in
1997, we have continued to participate in the WTO as a separate member using the name
"Hong Kong, China".  This status is not affected by China’s formal admission to the WTO in
December 2001.  Being a separate customs territory, the HKSAR continues to formulate its positions
on the basis of its own trade policies and interests, separate from those of the mainland of China.  Thetwo operate separately in the WTO under the principle of "One Country, Two Systems".
33. Hong Kong, China has been in the forefront of multilateral trade liberalisation efforts in the
WTO.  We have participated in many important decision-making processes and informal groupings.
Together with other members, we engaged activel y in the intensive negotiations leading to the
adoption of the Doha Development Agenda launching the new round of multilateral tradenegotiations.
34. Hong Kong, China has also been active in extending contributions to technical assistance
activities in the WTO.  We donated US$1.25 million to the WTO Trust Fund in 1999, and made a
further contribution of CHF 1 million to the Fund in April 2001.  The unused balance of our donation
(approximately CHF722,000) was transferred to the newly established Doha Development AgendaGlobal Trust Fund in March 2002.  Separately, we contributed US$300,000 to the Advisory Centre on
WTO Law in 2000.
B. Participation in Asia-Pacific Economic Co -operation (APEC) and the Organisation for
Economic Co-operation and Development (OECD)
35. Hong Kong, China not only supports the multilateral trading system but also attaches great
importance to participation in regional economic and trade co-operation fora.  One of the most
important economic fora in the region is the APEC, in which we have participated actively.
36. To achieve APEC’s goal of free and open trade and investment in the Asia-Pacific region by
2010 for industrialised member economies and 2020 fo r developing ones, Hong Kong, China has
been faithfully implementing actions set out in its APEC Individual Action Plan (IAP) and in the
Collective Action Plans.
37. As committed in our 1996 APEC IAP, we bound tariffs at zero on an additional 20% of our
imports in 2000.  Since 2000, we have also contribu ted to the formulation and implementation of the
APEC Strategic Plan on Capacity Building to assist developing APEC members in building their
capacity for the implementation of WTO agreements.
38. In addition, we have been playing a facilitating role in APEC’s work ever since we joined the
forum.  One example is that the APEC Government Procurement Experts’ Group, chaired byHong Kong, China, developed a set of Non-bindi ng Principles on Government Procurement and
forwarded it to the WTO Working Group on Transparency in Government Procurement in 1999.  We
also took the lead to develop a set of APEC Trade Facilitation Principles, which was sent to the WTO
for reference in 2001.  Hong Kong, China is now the Vice-chair of the Committee on Trade and
Investment, which oversees APEC’s agenda on trad e and investment liberalisation and facilitation.
39. Hong Kong, China has been an observer to OECD's Trade Committee and Committee on
Financial Markets since 1994 and 1995 respectively.  We have contributed to and benefited from the
work of these two Committees, and will continue to participate actively in the committees.Hong Kong, China WT/TPR/G/109
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40. Hong Kong, China hosted an OECD Glob al Forum on Trade on 19-20 June 2002 which
brought together some 80 participants from 24 OECD countries (including observer countries) and
13  non-OECD countries.  The Forum was part of the OECD's ongoing dialogue with non-member
countries on trade issues, and focused on the multilateral, regional and capacity building aspects of
trade and competition, trade and investment, transparency in government procurement and trade
facilitation.
C. Regional Trade Agreements
41. The HKSAR has been one of the strongest advocates of the primacy of multilateralism and
has all along relied on the rules-based multilateral trading system for the conduct of our external
commercial relations.  While not a constituent party to any free trade agreements (FTAs), we
recognise that high standard FTAs with a meaningful framework for liberalisation could helpcomplement and spur global trade liberalisation.  Pursuant to interests expressed by our trading
partners and the business community in FTAs, we conducted a review of our FTA policy and decided
to adopt a more open-minded approach in pursuing high-standard FTAs with our trading partners,
while upholding our commitment to the prim acy of the multilateral trading system.
42. The HKSAR accepts that high-standard FTAs consistent with WTO provisions should bring
about expansion of trade and investment, better  market access and a more favourable business
environment among the parties, as well as contribute to global trade liberalisation.  In the light of
these objectives, we have started separate discussions with New Zealand on a Closer Economic
Partnership (CEP) Agreement, and with the main land of China on a Closer Economic Partnership
Arrangement (CEPA).  Notwithstanding these FTA discussions, the HKSAR remains a staunch
supporter of the multilateral trading system as embodied in the WTO.
(a) Hong Kong/New Zealand CEP
43. New Zealand is an important trading partner of the HKSAR in the South Pacific Ocean
region.  The two economies share a common interest in the further liberalisation of world trade.  The
HKSAR Government hopes that forging a closer economic and trading relationship between the
two places will help generate momentum for the attainment of APEC’s Bogor Goal of free and open
trade and investment, as well as global trade liberalisation in the WTO.
44. Formal negotiations on a CEP Agreement commenced in May 2001.  The negotiations
encompass a wide-ranging scope, covering the following areas among others:
• early elimination of tariffs on goods of New Zealand and Hong Kong origin under a set
of forward looking rules of origin which could encourage bilateral trade;
• liberalisation of trade in services; and
• liberalisation and promotion of bilateral investment.
The negotiations are in progress.
(b) CEPA
45. The mainland of China is the HKSAR's largest trading partner.  A closer economic
partnership between the two places will further promote trade and investment flows, as well as
exchanges of talents and capital.  To take forward the proposal to establish a free trade area between
the mainland of China and HKSAR, the two economies began consultations in early 2002.  NowWT/TPR/G/109 Trade Policy Review
Page 12
formally named “Mainland/Hong Kong Closer Economic Partnership Arrangement”, the
consultations cover trade in goods, trade in services, as well as trade and investment facilitation.
46. Both sides agreed that the CEPA should be fully consistent with WTO rules and mutually
beneficial, and should take into account the trends of economic developments in the two places.
Consultations are in progress.
IV. SECTORAL DEVELOPMENTS
A. Developments in Trade in Goods
47. The HKSAR applies zero tariffs on all imports and exports of goods.  Import and export
controls are kept to the minimum, and no subsidy is provided to exports.
(a) Textiles and Clothing
48. Textiles and clothing are a major export item.  In 2001, domestic exports of textiles and
clothing accounted for 52.4% of total domestic expo rts.  Certain textiles and clothing exports from
Hong Kong, China are currently subject to quantitative restrictions to Canada, the EU and the US in
accordance with the WTO Agreement on Textiles and Clothing (ATC), which are set to be abolished
by the end of 2004 under a ten-year phase-out programme. Certain quantitative restrictions have been
fully or partially removed pursuant to the phase-out programme of the ATC.  Through co-operationwith the International Textiles and Clothing Bure au (of which Hong Kong, China's representative has
been the Chairman from 1999 to September 2002), Hong Kong, China and a group of exporting
countries and exporters of textiles and clothing have been working together to ensure that the
liberalisation process under the ATC is on course and to explore possibilities for further liberalisation.
49. A comprehensive control regime is in place to administer the quantitative restrictions on
exports and ensure compliance.  All imports and exports of textiles and clothing, other than a few
exempted items, are required by law to be covered by valid licences or notifications.  Moreover, since1999, most garment manufacturers are required by law to lodge a production notification with the
Trade and Industry Department (TID) before key production starts.  This enables officers of the
Customs and Excise Department (C&ED) to carr y out real-time verification of key production in
factories.  A great deal of improvement has been introduced in recent years to streamline procedures
enabling traders to lodge electronically (through Electronic Data Interchange) their applications forrestrained textiles export licences, production notifications and certificates of origin in a quicker and
more convenient way.  Development of other electronic services is also underway.
50. An effective control system is enforced by the C&ED to forestall circumvention.  Illegal
textile transhipment and origin frauds are subject to both criminal prosecution and administrative
penalties.  Since December 1998, a number of enhanced administrative actions have been introducedto stiffen the penalties against origin malpractice.  To further enhance the effectiveness of the control
system, the C&ED has introduced a package of new measures since 2000 and 2001 to strengthen
enforcement actions.
(b) Reserved Commodities
51. Rice is the most important staple foodstuff in the HKSAR.  As there is no commercial
production of rice locally, we rely entirely on imports for local consumption.  Importers are registered
with the TID as stockholders to ensure that they  share the responsibility of maintaining an adequate
reserve stock of rice in the HKSAR.  Imports for local consumption are governed by quota.Hong Kong, China WT/TPR/G/109
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52. Since the last Trade Policy Review in 1998, significant liberalisation measures have been
implemented to provide more flexibility for stockholders and facilitate new entrants.  The level of
reserve stock has been reduced by 66%, from 45 days’ consumption in 1998 to 15 days’ consumption
in 2002.  The registration criteria, such as the capital and financial requirements, for stockholders
were further relaxed in July 2000, and a registration exercise was conducted in the second half of
2000.  As a result, the number of stockholders increased from 40 in August 2000 to 55 inJanuary 2001.
53. The rice trade will be fully liberalised in January 2003.  Import quota will be removed and
importers will make their own decision on the level of rice to import.  The registration criteria for
importers will be further relaxed by lifting all capital and financial requirements.  Any interested
parties registered with the Business Registration Office could apply to register as importers.
54. Frozen and chilled meat and frozen poultry had been removed from the list of reserved
commodities under the Reserved Commodities Ordinance and its subsidiary legislation since
1 August 2000.  As a result, the requirement for importers to keep a reserve stock of the commodities
and the import/export licensing control over the commodities maintained under the legislation were
lifted.  For the protection of public health, import licensing control over frozen and chilled meat andpoultry under the Import and Export (General) Regulations was introduced on 1 August 2000.  The
Food and Environmental Hygiene Department took up the licensing responsibilities with power
delegated from the Director-General of Trade and Industry.
(c) Strategic Commodities
55. The Government maintains a comprehensive and effective control system on the import and
export of strategic commodities.  The system serves to prevent the HKSAR from being used as a
conduit for the proliferation of weapons of mass destruction, and to secure the HKSAR’s continuedaccess to high-tech goods and technology that are essential for its economic development.  The
HKSAR’s control list, which takes account of the control lists maintained by the international
non-proliferation regimes, is reflected in the law.  The import, export and, in some cases, transit of
strategic commodities are subject to licensing control administered by the TID, supported by vigorous
enforcement action by the C&ED.
56. In 2001, the Government introduced into the Legislative Council the Chemical Weapons
(Convention) Bill, which seeks to fully implement the Chemical Weapons Convention in the
HKSAR.  The Bill underlines the HKSAR’s commitm ent to internationally agreed arrangements on
the ban of chemical weapons and on the monitoring of activities involving sensitive chemicals.  The
legislation will help ensure the HKSAR’s continued access to a full range of chemicals needed forlocal industrial, medical, research and trading purposes.
(d) Other Licensing Control
57. To further develop Hong Kong into an international and regional air cargo hub and to provide
the necessary environment to facilitate this deve lopment, the Air Cargo Transhipment (Facilitation)
Ordinance was enacted in May 2000 to provide exemption for miscellaneous categories of lesssensitive air-to-air transhipment cargoes from licensing control.  Examples of the exempted
categories include dutiable commodities such as alcoholic liquor and tobacco, and pharmaceutical
products.  This facilitation is made having regard to the fact that the restricted areas of the airport and
its cargo terminals, where air cargo transhipments are handled, are kept under tight security control
and placed under close surveillance by the C&ED.  Such security control and surveillance help
minimise the risk of illegal diversion of the cargoes concerned.WT/TPR/G/109 Trade Policy Review
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58. Adequate safeguard measures are in place to prevent unauthorised movement of air
transhipment cargo.  The C&ED imposes stringent co ntrol measures, and deploys officers to carry out
surprise pre-shipment checks and post shipment verification on air transhipment cargo.  The Customs
air cargo computer system has been enhanced to keep track of the movement of air transhipment
cargo, and sophisticated equipment has been procured for on-site inspection of such cargo.
B. Developments in Services
(a) Financial Services
(i) Banking Industry
59. The HKSAR maintains a three-tier system of deposit-taking institutions, namely licensed
banks, restricted licence banks (RLB) and deposit-ta king companies (DTC).  They may operate in the
HKSAR as either locally incorporated companies or branches of foreign banks.  To enhance theattractiveness of the banking system, we relaxed in May 2002 the market entry criteria by lowering
the asset size criterion for foreign bank applicants, and reducing the required period of operation as an
RLB or DTC.  As a result of this relaxation, more foreign banks can enter the market as full licensed
banks.
60. The one-building condition which had restricted foreign banks licensed since 1978 and
foreign incorporated restricted licence banks licensed since 1990 to operate from not more than one
building was relaxed to three buildings in September 1999, and completely removed in
November 2001.  The relaxation has provided foreign banks with greater flexibility in carrying out
business in Hong Kong and has helped to enhance Hong Kong’s status as an open financial centre.
61. In addition, following the deregulation of the interest rate rules in 2000 and 2001, banks can
now compete for deposits freely on a price basis.  The deregulation has helped to encourage more
innovation in the banking industry.
(ii) Securities and Futures
62. The securities market continued to grow during the reporting period, with the stock market
capitalisation increasing by 44% from HK$2.7 trillion in December 1998 to HK$3.9 trillion in
December 2001.  Our stock market is now the 10th largest in the world.  The Government’s policy
towards the securities industry is to provide a fair, transparent and business-friendly environment forthe industry to operate and a level playing field for market participants, with robust regulation to
ensure sound business standards and protection for investors.
63. In 2000, through the merger of two exchanges and three clearing houses, the Hong Kong
Exchanges and Clearing Limited (HKEx) was established and became a listed company.  The merger
seeks to create a new market structure to achieve higher efficiency, cost reduction, and better risk
management, and to facilitate development of new products and services thereby improving the
competitiveness of the market.
64. The Securities and Futures Ordinance was enacted in March 2002.  The Ordinance
consolidates and modernises ten existing ordinances into a composite piece of legislation governing
the securities and futures markets to keep the regulatory regime on a par with international standardsand practices.  The Ordinance seeks to provide a more transparent and coherent regulatory regime and
strike a reasonable balance between protecting investors and promoting market development.  The
target is to bring the new legislation into operation in early 2003 when the necessary subsidiary
legislation is in place.  This will enhance Hong Kong’s position as a major international financialHong Kong, China WT/TPR/G/109
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centre and the premier capital formation centre for the mainland of China.  The regulatory
requirements under the Ordinance will apply equally to relevant companies, irrespective of their place
of registration.
(iii) Insurance
65. The insurance industry in Hong Kong is a cosmopolitan and competitive one.  This is evident
from the large number of authorised insurers (204 as at 31 December 2001) and the strong presenceof foreign companies.  Over half of the authorised  insurers were incorporated outside Hong Kong in
25 other places, with the United States (23) taking the lead.  The total gross premium of the
Hong Kong insurance industry grew from US$7 billion (HK$54.2 billion) in 1998 to US$9.8 billion
(HK$76.3 billion) in 2001, equivalent to about 5.9% of Hong Kong’s GDP.
66. A level playing field is maintained for all insu rers and insurance intermediaries irrespective
of their countries of origin.  The same set of rules or requirements applies to both domestic as well as
foreign insurers or insurance intermediaries.  Any insurer, whether incorporated in or outside the
HKSAR, which is able to meet the requirements of the Insurance Companies Ordinance, can apply to
the Insurance Authority for authorisation to carry on insurance business in or from the HKSAR.
(iv) Mandatory Provident Fund System
67. In December 2000, the Mandatory Provident Fund (MPF) System, a privately managed
system of contributory schemes for the working population’s retirement protection, was implemented.
A statutory body, the Mandatory Provident Fund Schemes Authority (MPFA), has been established
for the prudential regulation and supervision of the MPF System.
68. The MPF System operates under a free market competition environment.  There is no barrier
to entry, quantitative or qualitative, for foreign institutions intending to participate in the MPF
market.  MPF schemes are governed by trust.  Any institution, irrespective of its place of origin, thatmeets the eligibility requirements (including paid up capital and net asset requirements) may apply
for approval as a trustee or a substantial financial institution (an associated institution of a trustee that
provides continuous financial support to that trustee).  Local and foreign market participants can
compete on a fair and equitable basis without artificial friction.  There is no fixed quota on the
number of approved trustees and the number is currently 20.
69. As at the end of 2001, about 88% of employer s, 95% of relevant employees, and 91% of
self-employed persons were enrolled in MPF schemes, and the net asset value of MPF was over
HK$36 billion.  Total MPF contribution amounted to some HK$2 billion per month.
(v) Corporate Governance
70. The high standard of corporate governance in the HKSAR is well recognised.  The Managing
Director of the International Monetary Fund said in 2001 that the HKSAR was the standard setter for
corporate governance and transparency in Asia.
5  According to Standard and Poor’s Corporate
Governance Study on the HKSAR published in January 2002, the HKSAR is a leader in the domain
of corporate governance in Asia.
71. The Securities and Futures Ordinance (the Ordinance) enacted in March 2002 contains
significant improvements to corporate governance.  In the area of protection of shareholders’ rights,
the extent and timeliness of disclosure of price sensitive information is improved.  A Market
                                                     
5 The remark was made on 11 January 2001 at the opening of the IMF's HKSAR Office.WT/TPR/G/109 Trade Policy Review
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Misconduct Tribunal will be set up under the Ordi nance to deal with a wider range of market
misconduct.  The Securities and Futures Commission’s power to inquire into possible misconduct of
listed companies is also strengthened.
72. To enhance transparency, the Ordinance has put in place a disclosure regime in line with
international standards.  For example, the initial di sclosure threshold for substantial shareholders has
been lowered from 10% to 5%.
73. Proposals to further enhance corporate governance have been made by the HKEx and the
Standing Committee on Company Law Reform, an advisory committee set up by the Government.
The proposals seek to, among other things, enhance the rights of minority shareholders by clarifying
when substantial shareholders must not vote on a matter and by requiring that such votes must be by
way of poll, and strengthen the role of independent non-executive directors by clarifying thedefinition of when a director is considered as independent.  These proposals are part and parcel of an
on-going task to further enhance our corporate governance regime.
(b) Telecommunications
74. The HKSAR has one of the world’s most liberal ised telecommunications markets.  There is
no restriction on foreign ownership of telecommunication companies, and no limit on the number oflicences to be issued except for reasons of physical constraints such as spectrum scarcity.  During the
reporting period, the Government continued with its progressive liberalisation policy to promote fair
and effective competition in the telecommunications market.  In January 2002, the Government
announced the implementation details of the policy to fully liberalise the fixed telecommunications
network services (FTNS) market from 1 January 2003, and invited applications for licences.  As a
result, all market sectors will be fully liberalised by January 2003.
75. In May 2002, the Telecommunications (Amendment) Bill 2002 was introduced to the
Legislative Council to further enhance competition in the market.  The Bill aims at providing a
transparent and efficient regulatory regime governing merger and acquisition activities in the
telecommunications market, and gives the Telecommunications Authority an effective tool to
intervene where he has regulatory concern that the relevant transaction may substantially lessen
competition in the market.
(c) Broadcasting
76. Following the 1998 Review of Television Policy, the Government decided to open up the
television market for competition.  There is no limit on the licences to be issued, subject to physical
or technological constraints.  In 1999, the Government invited applications for domestic pay TV
service licences, and the three new licensees have committed to providing at least 70 channels afterfull rollout of service.  We have granted eight new non-domestic television programme service
licences since the technology-neutral Broadcasting Ordinance came into effect in 2000.  There are at
present a total of 12 such licences.
77. Terrestrial radio and television services are at present transmitted in analogue form.
Licensing more operators to provide broadcasting services is not possible due to spectrum constraint.Digital broadcasting will allow the compression of the signals to be transmitted, and improve
spectrum efficiency.  As less spectrum capacity will be required to carry the same amount of
information, more operators can be licensed to provide services, enhancing competition in the market.
The Government published a consultation paper on digital terrestrial broadcasting in December 2000
to invite views from the public.  The Government is reviewing the 23 submissions received andHong Kong, China WT/TPR/G/109
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taking stock of the latest developments overseas with a view to developing a regulatory framework
for digital broadcasting within 2003.
(d) Professional Services
(i) Chinese Medicine
78. Chinese medicine is a recent example of the introduction of an open and fair regulatory
regime for a professional service.  Legislation for statutory control on Chinese medicine including theregistration of Chinese medicine practitioners was enacted in July 1999.  Under the legislation,
Chinese medicine practitioners are regulated by the Chinese Medical Council of Hong Kong, a
statutory body made up of a majority of Chinese medicine practitioners and Chinese medicine traders.
There is no discriminatory or undue barrier to practitioners from overseas who intend to practise in
the HKSAR.  All practising and registration requirements are equally applied to both locals andforeigners.
(ii) Liberalisation of Legal Services
79. Practising lawyers in the HKSAR are admitted either as solicitors or barristers, and there are
different admission requirements for the two branches of the profession.  All foreign lawyers can gain
admission as Hong Kong solicitors through specified examinations.  This is in line with ourobligations under the GATS.
80. As regards barristers, under the criteria for admission stipulated in the Legal Practitioners
Ordinance, only qualifications and experience obtained locally or in selected commonwealth
territories are recognised.  An amendment to the Ordinance was made in June 2000, so that barristers
from the commonwealth countries and non-commonwea lth countries would be subject to the same
admission criteria.  The amended Ordinance will come into effect on a date appointed by the
Secretary for Justice, to give the Bar Association sufficient time to prepare the rules required toimplement the changes.
C. Protection of Intellectual Property Rights in Hong Kong
81. The HKSAR is committed to protecting intellectual property rights (IPRs).  This commitment
is underpinned by our respect for private economic rights and our recognition of the importance of
IPR protection regime to our economic growth.
82. We achieve this through comprehensive legislation, vigorous enforcement actions, sustained
public education and close co-operation with rights owners and other law enforcement agencies.
(a) Comprehensive Legislation
83. The HKSAR has comprehensive legislation for the protection of patents, trade marks,
copyright, registered designs and layout-designs (topographies) of integrated circuits.  Our IPR lawscomply fully with the international standards laid down in the Agreement on Trade-Related Aspects
of Intellectual Property Rights (“TRIPS”).  Hong Kong, China notified the TRIPS Council of its laws
at the end of January 2000, and participated in a TR IPS review of its IPR legislation in June 2000.
84. We keep our laws under constant review to ensure that they meet the needs of the changing
environment.  Over the past few years, we have introduced a number of additional legislativemeasures to further strengthen the protection of IPR.  The major ones are -WT/TPR/G/109 Trade Policy Review
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• the schedule of the Organised and Serious Crimes Ordinance was amended in
January 2000 to include certain IPR offences.  This gives Customs officers additional
powers of investigation against copyright piracy and counterfeiting offences, particularly
where criminal syndicates are involved.  It also provides for the confiscation of the
proceeds related to such offences;
• the Prevention of Copyright Piracy Ordinance was amended with effect from
1 April 2001 to combat bootlegging by making the unauthorised possession of video
recording equipment in cinemas, theatres and concert halls a criminal offence;
• the Copyright Ordinance was amended with effect from 1 April 2001 to introduce a
criminal liability for copyright piracy by end users in business.  Anyone who knowingly
possesses an infringing copy of a computer programme, movie, television drama ormusical recording for the purpose of or in the course of any trade or business commits a
criminal offence; and
• the schedules to the Prevention of Copyright Piracy Ordinance were amended with effect
from 19 July 2002 to establish a compulsory registration system for stampers6
manufacturers and a mandatory requirement for all locally manufactured stampers to bear
a unique identification code.  The new legal tool also empowers Customs to inspect all
licensed stampers manufacturing plants to further combat copyright piracy.
(b) Vigorous Enforcement Actions
85. The piracy situation has been brought under control by vigorous enforcement actions.  The
HKSAR has one of the strongest dedicated teams (over 400 Customs officers) in the region in
combating IPR offences.  We have eradicated all pirated optical disc production by underground
factories.  At the retail level, we conduct constant raids at outlets selling pirated discs.
86. Our persistent enforcement actions have proved to be effective as we witnessed a rapid
shrinking in copyright piracy.  We have succeeded in bringing down the number of outlets of pirated
optical discs by 90%.  Daily circulation of pirated optical discs has also reduced significantly by 98%.
In 2001, some 9 million suspected pirated discs worth about US$23 million were seized, resulting in
the arrests of nearly 1,700 people.  In the first nine months of 2002, some 8 million suspected pirateddiscs worth over US$20 million were seized, resulting in the arrests of about 1099 people.
87. Our relentless enforcement efforts in combating IPR piracy have won the complements of our
major trading partners.  The Office of the U.S. Trade Representative now regularly cites Hong Kong
as a model for other Asian economies struggling with their own problems of IPR piracy.
7
(c) Sustained Public Education
88. We have an on-going and substantial public education programme to promote the public’s respect
for IPRs.  A total of about US$2 million (HK$17 million) was spent during the 1999-2002 financial
years.  In 2002-03, the Intellectual Property Department will spend about US$1 million
(HK$7 million) to sustain its publicity and educational efforts.
                                                     
6 Stampers are a special type of optical disc and are used as master discs for the mass production of
common optical discs.  They are the essential tool for the illegal production of optical discs containing piratedcopyright works.
7 U.S.- Hong Kong Policy Act Report 2002Hong Kong, China WT/TPR/G/109
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(d) Close Co-operation with Rights Owners and Other Law Enforcement Agencies
89. We liaise closely with IPR owners to solicit their assistance in fighting copyright piracy and
trade mark counterfeiting.  We also maintain regu lar liaison with other enforcement agencies in the
region to prevent cross-boundary infringing activities.
D. Electronic Commerce
90. The Government fully recognises the strategic importance of promoting the development of
electronic commerce to enhance Hong Kong’s long-term competitiveness.  In January 2000, we
enacted the Electronic Transactions Ordinance to establish a clear legal framework for e-commerce,
and established a Public Key Infrastructure (PKI) to provide a secure environment for the conduct of
electronic transactions over open networks.  A review on the Electronic Transactions Ordinance is
under way with the aim of keeping our legal framew ork up-to-date with e-business developments.  To
facilitate the conduct of cross-border electronic transactions, Hongkong Post, the public certification
authority, has signed memoranda of understanding on cross-certification arrangements with its
counterparts in the United Kingdom, Singapore, Malaysia, Korea, Shanghai and Guangdong.
Moreover, Hongkong Post joined as one of the founding members of Asia Public Key Infrastructure
Forum, which fosters regional and international co-operation in PKI-related matters.  Other foundingmembers include China, Japan, Korea, Singapore, Malaysia and Chinese Taipei.
91. The Government also organises various promotional activities to encourage the business
sector, especially small and medium sized enterprises (SMEs), to adopt e-commerce, and works with
industry support organisations to assist SMEs in doing so.  88.5% of the people aged 15 or above in
Hong Kong have used e-business services according to our survey conducted in 2001.  Hong Kong is
recognised as one of the leaders in e-business development in the Asia-Pacific region by international
research and consulting firms.
E. Government Procurement
92. The Government adopts an open, fair, competitive and transparent system in the procurement
of goods and services.  Local and overseas suppliers and contractors are treated on an equal footing.
The procurement system of the Government is fully consistent with the WTO's Agreement on
Government Procurement, to which Hong Kong, China is a party.
F. Competition Policy
93. As a small and externally-oriented economy, competition has been crucial to Hong Kong’s
economic development.  The Government sees comp etition as a means to spur economic growth and
does not pursue it for its own sake.  The objective of the Government’s competition policy is to
enhance economic efficiency and free flow of trade, thereby benefiting the consumer.
94. The Government believes that competition is best nurtured and sustained by allowing the free
play of market forces and keeping intervention to the minimum.  Hence Hong Kong maintains
minimal restrictions on trade, and free flow of capital and investment.  The Government takes action
when market imperfection or distortion limits market accessibility or market contestability, and
impairs economic efficiency or free trade, to the detriment of the overall interest of Hong Kong.
95. The Statement on Competition Policy promulgated in 1998 provides a comprehensive,
transparent and over-arching competition policy fram ework.  It clearly defines our pro-competition
principles and sets out business practices which may be considered restrictive and detrimental to
economic efficiency or free trade.  It also provides concrete examples of restrictive practices (such asWT/TPR/G/109 Trade Policy Review
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price fixing, market allocation, joint boycotting, etc.) and examples that may involve an abuse of
market position (such as predatory behaviour of selling below cost for the purpose of driving out
competition followed by substantial price increase s) to illustrate what practices would warrant more
thorough examination.  The Statement is implemented through a range of sector-specific legislative
and non-legislative measures ranging from licensing conditions, contractual provisions, codes of
practice, administrative means, public censure and anti-competition provisions in specific legislation.
96. In December 1997, the Government established a Competition Policy Advisory Group
(COMPAG), chaired by the Financial Secretary, to provide a high-level, dedicated forum to review
competition-related issues which have policy or systemic implications.  COMPAG’s membership
includes senior officials and the Consumer Council.
97. Promotion of competition is a government-wide responsibility.  All policy bureaux and
departments are required to proactively give due regard to the competition angle in formulating policy
and devising measures within their respective policy portfolios.  More specifically, they are required
to examine the impact of all major policy proposals on competition, consider new initiatives to
promote competition, review existing practices to ensure they comply with the competition policy,
and handle competition-related complaints.  COMPAG provides oversight and guidance to allbureaux and departments.
98. Over the years, the Government has implemented a large number of initiatives to promote
competition in various sectors including broadcasting, telecommunications, legal services, financial
services, transport, construction and food supply.  These could be in the form of explicit stipulation to
preclude and censure anti-competition behaviour or acts or implicit measures such as liberalisation or
de-regulation initiatives to facilitate market access and encourage competition.  Since the last Trade
Policy Review in 1998, the Government has adopted over 60 new initiatives to enhance competitionin various sectors and taken follow-up actions in over 50 competition-related complaints.  All these
initiatives were detailed in the annual reports published by COMPAG.  Examples include the
introduction of a code of practice for retail payment service providers; liberalisation of the Rice
Control Scheme, which aims to fully open up the rice trade by 2003; deregulation of interest rate
rules; developing a strong private school sector; introduction of new off-street driving schoolsthrough tendering; review of the electricity supply market; and liberalisation of the
telecommunications market.  All policy burea ux and departments, the Consumer Council and
COMPAG receive and conduct investigations into complaints/allegations of anti-competitive
behaviour or actions.  Remedial measures are implemented as appropriate.
99. Hong Kong’s pro-competition achievements have not gone unnoticed.  As noted in
Chapter II, Hong Kong has been ranked as the freest economy in the world by the Heritage
Foundation in the US; and by Canada’s Fraser Institute in conjunction with the Cato Institute in the
US.  Looking ahead, the Government will continue to promote competition in various sectors and
maintain a level-playing field by consistent application of policies, transparent and accountable
operations and adherence to equitable and non-discriminatory standards and practices.  TheGovernment will also step up publicity to increase  the awareness of the business community and the
general public.
V. DOHA DEVELOPMENT AGENDA
A. Hong Kong, China’s Overall Position in the Doha Development Agenda
100. The Doha Development Agenda is balanced and manageable.  It comprises both further trade
liberalisation and new rule-making, underpinned by commitments to strengthen assistance to buildHong Kong, China WT/TPR/G/109
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capacity in developing economies.  Hong Kong, Chin a will continue to be an active and constructive
player in the WTO and will take a keen interest in matters of substantive or systemic concern.  We are
committed to concluding the negotiations by the agreed deadline of 1 January 2005.
B. Hong Kong, China’s Priority Areas in the New Round
101. The Doha Development Agenda adequately addresses those subjects of particular interest to
Hong Kong, China.  As a small, open and externally oriented economy, Hong Kong, China accordshigh priority to market access related issues, such as industrial tariffs and services, in the new
negotiations.  Further liberalisation in services and industrial tariffs will bring about more business
opportunities for our services and manufacturing industries.  The clarification and improvement of
WTO rules will be conducive to freer and more open trade and investment.
(a) Services
102. Hong Kong, China sees the services negotiations as an important constituent part of the WTO
progress, in view of the increasing significance of services to economic growth.  Being a strong
exporter of services trade, Hong Kong, China is k een on the progressive liberalisation of trade in a
wide range of services sectors, in particular in areas related to logistic services, audio-visual services,
telecommunications, and financial services.  In this connection, Hong Kong, China has tenderedrequests for further liberalisation to a number of WTO members and has been engaging in useful
bilateral discussions with them.  In parallel, in lin e with the call for strengthening the WTO legal and
institutional architecture, Hong Kong, China consider s it paramount to strengthen the rules in the area
of services, including the adherence to the MFN principle, stronger disciplines on domestic
regulation, and enhancing the legal certainty of members' specific commitments.
103. For this purpose, we have been participating actively in the multilateral discussions on these
rules issues, often endeavouring to bridge the differences amongst Members in reaching constructiveconsensus.  Hong Kong, China is pleased to see the fruits of these efforts, as evidenced, for instance,
by the accomplishment of the Disciplines on Domestic Regulation in the Accountancy Sector during
1998-99.  Since then we have continued to contribute to widening the applicability of the accountancy
disciplines, and developing horizontal disciplines on domestic regulations.  On other issues, over the
years we have assisted in formulating the modalities for the treatment of autonomous liberalisation,and helped to advance the discussion on the definition and effect of subsidies.  While our delegate has
been elected to chair the Working Group on GATS Rules, as a delegation we shall continue to take an
active part in the discussion in the areas of safeguard, subsidies and government procurement.
(b) Non-agricultural Market Access
104. In the area of non-agricultural market access, Hong Kong, China’s objective is to seek
significant market access improvements through substantial and early reduction/elimination of tariffs
and non-tariff measures.  In line with this objective, Hong Kong, China supports a comprehensive
coverage and a formula approach for tariff cuts.  Nevertheless, we are prepared to consider other
complementary approaches in the context of compre hensive negotiations to take into account other
members’ interests.  Hong Kong, China supports addres sing high tariffs, tariff peaks, tariff escalation
and nuisance tariffs in this round.
(c) Review of Trade Rules
105. Hong Kong, China supports reviewing and cl arifying certain trade rules in the Doha
Development Agenda.  As a staunch supporter of free trade, Hong Kong, China has never been a user
of anti-dumping (AD) measures.  We believe that AD action has become an outdated trade defenceWT/TPR/G/109 Trade Policy Review
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instrument that is incompatible with the globalised economy today.  We are concerned about the
upward trend in the number of AD investigations and the increase in protectionist use of AD actions.
In face of these phenomena, we see a need to update the existing AD disciplines to better reflect
modern business realities and to ensure that the results of trade liberalisation would not be eroded by
abusive use of AD.  With a view to clarifying and improving the WTO AD Agreement, Hong Kong,
China and more than 10 other members have submitted to the Negotiating Group on Rules two jointpapers listing some areas of concern in the Agr eement.  We will continue to participate in the
negotiations mandated by Ministers at Doha.
106. On negotiations relating to rules on regional trade agreements (RTAs), Hong Kong, China
considers it important to ensure the coherence of RTAs with the multilateral trading system through
clarifying and, where appropriate, reinforcing existing WTO rules and decisions.  We will participatein the negotiations actively.
C. Other Areas in the Doha Development Agenda
(a) Intellectual Property Rights
107. Hong Kong, China welcomes the adoption of the Declaration on TRIPS Agreement and
Public Health in Doha that clarifies the scope of flexibility under the TRIPS agreement for membersto pursue policy options to address public health problems.
108. We recognise the potential problem faced by WTO members with insufficient or no
manufacturing capacities in making effective use of compulsory licensing to deal with health crisis.
We will continue to play a constructive role in further discussions on the issue with a view to finding
an expeditious solution before the end of 2002 as mandated by the Ministers.  Hong Kong, China also
takes an interest in other areas on the Doha Development Agenda relating to intellectual property
rights, including those concerning geographical indications.  We will continue to work with otherWTO members with a view to seeking solutions acceptable to all WTO members.
(b) Dispute Settlement Understanding Review
109. Hong Kong, China has been participating actively and constructively in the negotiations
aiming at improving and clarifying the Dispute Se ttlement Understanding (D SU).  Hong Kong, China
agrees with other members about the systemic importance of strengthening the dispute settlementmechanism without upsetting the rights and obligations  of Members.  In particular, we would like to
see the sequencing of actions under Articles 21 and 22 of the DSU.  We also support the enhancement
of third party rights.
(c) Trade Facilitation
110. Hong Kong, China supports efforts to simplify and reduce trade procedures as this will
enhance efficiency and reduce costs for business, consumers as well as governments.  We consider
that clarification and improvement of GATT Articles V, VIII and X should aim at providing
enhanced certainty, predictability and transparency, as well as minimising complexities and
incidence.  The eventual negotiations, to be launched on the basis of an explicit consensus among
members on the modalities at the Fifth Ministerial Conference (MC5), should build upon existingrules and avoid duplication of efforts with other relevant fora.Hong Kong, China WT/TPR/G/109
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(d) Transparency in Government Procurement
111. Hong Kong, China maintains an open, fair, competitive and transparent government
procurement system.  As transparency in government procurement policies, laws, regulations,
procedures and opportunities would help create and maintain an open and predictable market
environment, and foster open and effective competition, we fully support the early conclusion of a
multilateral agreement on transparency in government procurement.  We look forward to thecommencement of the negotiations on such an ag reement at MC5.  To this end, Hong Kong, China
has been participating actively in the Working Group on Transparency in Government Procurement
with a view to reaching an explicit consensu s on the modalities of the negotiations by MC5.
(e) Trade and Investment
112. Hong Kong, China is committed to progressive liberalisation of international investment as a
means to promote global economic well-being.  As a major source and recipient of foreign direct
investment, we believe that a set of properly devised multilateral rules could help foster a transparent,
stable and predictable environment for cross-border investment.  In furtherance of the Doha
Development Agenda, we are working closely with members to clarify the various elements referred
to in paragraph 22 of the Doha Ministerial Declaration.  We regard such clarification as aninstrumental step to facilitate a decision to be taken, by explicit consensus, at MC5 on the modalities
of negotiations on a possible multilateral framework on investment.  It is important to take the matter
forward at a pace acceptable to the wide WTO membership and in a manner addressing members'
needs and concerns.
(f) Trade and Competition
113. Hong Kong, China considers that the key to building a consensus among the WTO members
on trade and competition at MC5 is to come up with modalities of negotiations that couldaccommodate the wide-ranging needs of members as well as the diversity of their competition
regimes.  Hong Kong, China is prepared to address the question of negotiations from a pragmatic and
forward-looking perspective.  We are prepared to work closely with members to identify practical
options which meet the needs of pro-negotiation members whilst retaining sufficient flexibility for
those with unique domestic circumstances.
(g) Trade and Environment
114. Hong Kong, China fully supports the objective of sustainable development and will work
constructively with members in the negotiations to enhance the mutual supportiveness of free trade
and environment.  We would also actively work with members to explore other environment-related
trade issues in the Doha Development Agenda to ensure that environmental measures would not beabused for protectionist purpose.
______________