State Department Says Hong Kong Does Not Warrant Special Trade Treatment
Secretary of State Mike Pompeo said, “No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” in a statement May 27 to Congress that Hong Kong no longer warrants the same treatment under U.S. laws as it did before the handover to China in 1997.
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The end of British rule of Hong Kong did not change the special status of the island because China said Hong Kong's rule of law and democracy would continue for 50 years. But now, with China saying it will impose a national security law in Hong Kong that changes Hong Kong's criminal justice system, that one-country-two-systems promise is falling apart.
Pompeo said: “Hong Kong and its dynamic, enterprising, and free people have flourished for decades as a bastion of liberty, and this decision gives me no pleasure. But sound policy making requires a recognition of reality. While the United States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself.”
The administration has the ability to rescind Hong Kong's status by executive order, which would not only change the tariffs on Hong Kong goods to Chinese tariffs, but could also have implications for export controls.
The law that required Pompeo to make a determination on Hong Kong's autonomy does not automatically change the export control or special customs status for the island. But Senate Foreign Relations Committee Chairman Jim Risch, R-Idaho, said Beijing's move “could lead to a significant reassessment on U.S. policy towards Hong Kong.”
Rep. Eliot Engel, D-N.Y., chairman of the House Foreign Affairs Committee, said: “If the National People's Congress enacts this proposed national security legislation, its actions not only imperil Hong Kong's special status, but Beijing's own interests.”
Sidley Austin trade attorney Ted Murphy said in a blog post: “Any company that imports from, or exports to, Hong Kong should keep a close eye on developments in this area.” Among other possible effects, “if certain additional steps are taken, Hong Kong-origin articles could soon be subject to the Section 301 duties imposed on Chinese-origin articles,” he said.
Bonnie Glaser, a China scholar at the Center for Strategic and International Studies, said Pompeo's announcement suggests that the U.S. will resort to what she called “the nuclear option of removing Hong Kong’s special status.” She said, “We don’t import a great deal from Hong Kong,” but such an action could still change commerce in that region significantly. “We may see a mass exodus of capital, of businesses and expats and people who have the means -- even Hong Kongers -- to emigrate.”
Michael Swaine, senior associate in the Carnegie Endowment for International Peace's Asia Program, was speaking on the same Cato Institute webinar on China as Glaser. He said that if Hong Kong “is going to be treated just the same as mainland China in trade and everything else -- this certainly isn’t going to help Hong Kong.” Swaine said he wishes that diplomatic efforts had been made behind the scenes to soften the new law's effects in Hong Kong. “I don’t know if this is even possible now,” he said.