Following is a question by the Hon Holden Chow and a written reply by the Secretary for Commerce and Economic Development, Mr Edward Yau, in the Legislative Council today (April 25):

Question:

     The Government of the United States (US) announced last month its plan to impose tariffs respectively of 25 per cent and 10 per cent on certain steel and aluminium products (including aluminium products imported from Hong Kong). In this connection, will the Government inform this Council:

(1) of (i) the figures of Hong Kong's surpluses/ deficits in merchandise trade with US and (ii) the quantity of aluminium products exported from Hong Kong to US, in each of the past five years;

(2) whether it knows the current number of local enterprises that engage in the businesses of manufacturing and export of aluminium products; whether the Government has estimated the number of such enterprises which will be affected by the measure of imposition of tariffs; and

(3) given that the Government has requested US to exempt Hong Kong from the measure of imposition of tariffs, of the details of such request; whether the Government has any contingency plans to mitigate the impacts on local enterprises in the event that US imposes additional tariffs on other imports from Hong Kong?

Reply:

President,

     Hong Kong is an economy that pursues free trade policy. As a founding member of the World Trade Organization (WTO), Hong Kong always adheres to the commitments and rules of WTO. We staunchly support the multilateral trading system with other WTO Members and are against any restrictive trade measures that are inconsistent with WTO agreements.

     Therefore, in face of measures that are inconsistent with WTO agreements, Hong Kong must advance our arguments robustly in order to uphold the WTO rules on the one hand and to safeguard our rights and interests as a WTO member on the other hand.  

"Section 232 Investigation" Report

     In respect of the additional tariffs unilaterally imposed by the United States (US) on imported steel and aluminium, the US Department of Commerce released on February 16, 2018 "Section 232 investigation" (Note 1) reports relating to the threatening and impairment of US national security by imports of steel and aluminium. The reports recommended the US President consider unilaterally imposing quotas or additional tariffs on imported steel and aluminium (Note 2) covered in the investigation. One of the recommendations is to subject aluminium products imported from five countries/ economies (including Hong Kong) to import tariffs at 23.6 per cent.

     We consider the US' above proposed measures are unilateral, discriminatory and based on unfounded allegations. Since the release of the investigation reports by the US, the Government has been actively following up the matter with the US and in the WTO through various channels. On February 27, 2018, we filed our formal representation to the US Administration to register our objection to US' measures which were unilateral, unfounded and inconsistent with WTO rules. At the same time, we approached major local chambers of commerce as well as the American Chamber of Commerce in Hong Kong to ascertain the impact of the US' actions on the trade, and the five major local chambers of commerce (Note 3) also issued a joint statement to support the Government's follow-up actions on the same day. At the same time, the Permanent Representative of the Hong Kong Special Administrative Region of China to the WTO registered our grave concern on the subject tariff measures at the WTO General Council Meeting held on March 7, 2018 and urged WTO Members to honour their WTO commitments.

     On March 8, 2018, the US President decided to impose as from March 23, 2018 tariffs globally (including Hong Kong) of 25 per cent and 10 per cent respectively on steel and aluminium imports covered in the "Section 232 investigation" reports. Hong Kong does not agree that the US' measures are consistent with WTO rules.  The measures are also detrimental to Hong Kong's rights and interests.

     In this connection, the Secretary for Commerce and Economic Development (SCED) met with the Consul General of the US to Hong Kong and Macau on March 15, 2018 and requested the exclusion of Hong Kong from such improper measures. Our Economic and Trade Office (ETO) in Washington DC took complementary follow-up actions in reiterating Hong Kong's standpoints and requests to relevant local authorities. We issued a note to the US Administration again on April 11, 2018 to reiterate our request for excluding Hong Kong from the tariff measures. We will continue to follow up on the matter with the US Administration and in the WTO. We also reserve our rights to pursue all necessary actions under the WTO. We are now awaiting US' response and will then decide whether to take further actions.

     We have also taken follow up actions at various levels of the WTO. Taking the opportunity of the participation of the Director-General of Trade and Industry at the WTO Informal Ministerial Gathering held on March 20, 2018 in New Delhi, India, we reiterated that WTO Members should act within the WTO framework, and pointed out that unilateral moves could undermine WTO's rules and commitments that seek to uphold the fundamental principles of non-discrimination, predictability and transparency, and bring about systemic risks to the multilateral system. Protectionist measures will also impede global economic growth. At the WTO Council for Trade in Goods meeting held on March 23, 2018, representative of the Geneva ETO reiterated our concerns and stated clearly our position on the subject tariff measures.

     In addition, noting that China has requested for consultations with the US under the WTO Dispute Settlement Mechanism on the latter's measures under the "Section 232 investigation", we made a formal request on April 19, 2018 to join the consultations between China and the US as third party in order to safeguard our interests. WTO Members making the same request include the European Union, India, Russia and Thailand.

     As regards the affected trade, the Government has been keeping in touch with them, and will provide advice and assistance to manufacturers who intend to make representation to the US Department of Commerce to exclude their products from the tariffs unilaterally imposed by the US.

"Section 301 Investigation" Report

     Separately, on March 22, 2018 the Office of the US Trade Representative (USTR) published its findings of a "Section 301 investigation" on the Mainland, and on the same day, the US President signed a memorandum to direct the US Administration to take a range of actions. Among them, the USTR published on April 3, 2018 a list containing approximately 1 300 tariff lines of Mainland products including aerospace, information and communication technology, and machinery, etc. which are proposed to be subject to an additional 25 per cent tariff. The USTR is now collecting public views and will hold a public hearing on May 15, 2018. The USTR will then make a final decision on the list of products subject to additional tariffs.

     The Government is deeply concerned about the proposed trade restrictive measures under the "Section 301 investigation". Of the list published by the USTR, it is estimated that about HK$52 billion of Mainland products concerned were re-exported via Hong Kong to the US in 2017, which accounted for about 20 per cent of Hong Kong's re-exports of all Mainland products to the US. The proposed list involves a wide variety of products and components/ parts. An additional 25 per cent tariff will certainly undermine the market competitiveness of these products and consequentially affect Hong Kong's re-export trade, and Hong Kong companies engaging in associated supporting industries and services.

     SCED met with the chairmen and senior management of the five local chambers of commerce on April 4, 2018 to discuss the impact of the measures to the trade. The chambers will further consult their members on the impact of the measures to Hong Kong's re-export trade and also Hong Kong businesses manufacturing these products on the Mainland.

     The US President instructed the USTR on April 5, 2018 to consider imposing further tariffs on an additional US$100 billion worth of Mainland imports under the "Section 301 investigation". The list of products has not been announced so far.

     We will continue to closely monitor further developments, and assess the potential impact of the measures to Hong Kong trade and companies.

     Our reply to the three questions are as follows:

(1) According to information of US Bureau of Economic Analysis, the US has been enjoying the following trade surplus in goods with Hong Kong in the past five years:
 

Year	Trade Surplus (in USD billion)
2013	37.3
2014	35.3
2015	30.6
2016	27.8
2017	32.8

 
     According to information of Census and Statistics Department, Hong Kong's export (including domestic export and re-export) to the US on related aluminium products in the past five years were:
 

Year	Value (in USD million)
2013	47.30
2014	52.25
2015	63.30
2016	42.92
2017	38.72

 
(2) According to our communication with the industry and other information, there are only a very limited number of companies producing and exporting aluminium products to the US. Nevertheless, the US' unreasonable measures are unfair to the companies concerned and will hurt their business. Moreover, our minimal export of aluminium products could by no means threaten the US' national security, and therefore, we cannot agree to the US' reason for its unilateral tariff measures against Hong Kong.

(3) As mentioned above, we will continue to follow up on the matter through bilateral and multilateral channels. The Government will also continue to closely monitor any further trade restrictive measures of the US and their potential impact to Hong Kong trade and companies. We would promptly keep the trade informed and communicate closely with them and make appropriate response in order to safeguard the interests of Hong Kong companies and the overall trade.

     Besides, the Government endeavours to assist the trade in responding to changes in the business environment and their operational needs and will provide support when necessary.

     Amongst them, the SME Loan Guarantee Scheme launched in 2001 provides loan guarantee to small and medium enterprises (SMEs) to help them secure loans from participating lending institutions for acquiring business installations and equipment or meeting working capital needs of general business uses. Since the launch of the Scheme and up to the end of 2017, a total of 30 870 applications have been approved, involving a guarantee amount of about $24.8 billion.

     Moreover, the Hong Kong Mortgage Corporation Limited launched the special concessionary measures under its existing SME Financing Guarantee Scheme (SFGS) to provide 80 per cent loan guarantees at concessionary fee rates. The Government provides a total loan guarantee commitment of $100 billion. The application period of the special concessionary measures has been extended for the sixth time to the end of February 2019, to help enterprises tide over their liquidity needs, grasp economic opportunities and boost their competitiveness.

     In addition, the Hong Kong Export Credit Insurance Corporation (ECIC) encourages and supports export trade by providing Hong Kong exporters with insurance protection against non-payment risks arising from commercial and political events. The ECIC is committed to supporting SMEs. The tailor-made Small Business Policy offers SMEs policy fee waiver, premium discount and a range of flexible arrangement.

Note 1: It refers to Section 232 of the Trade Expansion Act of 1962 which authorises the US Secretary of Commerce to conduct certain investigations.

Note 2: The coverage of the products in the investigations is set out below:
Steel: carbon and alloy flat products; carbon and alloy long products; carbon and alloy pipe and tube products; carbon and alloy semi-finished products; and stainless products.
Aluminium: unwrought aluminium; aluminium bars, rods and profiles; aluminium wire; aluminium plates, sheets, and strip; aluminium foil; aluminium tubes and pipes; aluminium tube and pipe fittings; aluminium castings and forgings.

Note 3: The Federation of Hong Kong Industries; The Chinese Manufacturers' Association of Hong Kong; The Chinese General Chamber of Commerce, Hong Kong; The Hong Kong General Chamber of Commerce; and The Hong Kong Chinese Importers' and Exporters' Association

Ends/Wednesday, April 25, 2018
Issued at HKT 15:21

NNNN