[CTC] Hong Kong's Trade Status Hanging in the Balance

[Arthur Stamoulis]

Politico Morning Trade

HONG KONG’S TRADE STATUS HANGING IN THE BALANCE <http://go.politicoemail.com/?qs=3a640fb46dbb69ffc4ddda1e7aa026223f2f60ad1835b75597e10fa02e49940aec676672d0ac7102c33378831f233949>: The Trump administration formally notified Congress on Wednesday that it doesn’t view Hong Kong as an autonomous region from China, putting its status as a separate customs territory at risk and opening Beijing to sanctions. The move could cut both ways, hurting Beijing but also diminishing Hong Kong’s position as an Asian hub for business and finance.

“I fully expect the U.S. to proceed with sanctions on individuals and entities deemed to be undermining Hong Kong's autonomy,” Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies, told the South China Morning Post <http://go.politicoemail.com/?qs=3a640fb46dbb69ffcac2535d2d9c683b792b5a40e6fe9ff356b5f196241b9dcba51450462ec795595e2003c287e6526b>. “Secondary sanctions are possible on banks that do business with entities found in violation of law guaranteeing Hong Kong’s autonomy.”

What’s next? Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell told reporters it was up to Trump to decide what moves to take, but the U.S. does not expect Beijing to reverse course. Trump hinted at possible sanctions on China this week. The possibilities “are across the spectrum,” Stilwell said Wednesday. “It can be personnel, it can be visa sanctions as determined in the Hong Kong Policy Act and the Human Rights and Democracy Act. Obviously, there’s economic sanctions and other things that we can do.” 

The notification to Congress satisfies a requirement of last year’s Hong Kong Human Rights and Democracy Act (H.R. 3289) <http://go.politicoemail.com/?qs=3a640fb46dbb69ff822231bd9946484d693ecf6295fb0096379f368d55f57621f46b7cc1aae53b0151f442edf41258a6> to assess whether Hong Kong continues to govern itself to sufficient degree to still be considered autonomous. The action taken by Secretary of State Mike Pompeo came after Beijing proposed a so-called national security law that would bypass Hong Kong’s legislature and give China more authority to crack down on protests. 

The move could precede an executive order removing some or all of Hong Kong’s special status under U.S. law, an industry official said. 

What about Congress? The administration’s tougher moves on China could also give President Donald Trump more leeway to sign legislation aimed at Beijing. Congress could pass a bill <http://go.politicoemail.com/?qs=3a640fb46dbb69ff852101d660c568efede277c4554ff7128cc88ef25e28185fb1ae112ec6ed2046b20711ffdb69d499> that would allow the White House to impose sanctions on individuals involved in implementing the national security law and financial institutions that have ties to those individuals. The House on Wednesday sent to Trump for his signature separate legislation <http://go.politicoemail.com/?qs=3a640fb46dbb69ffdc622adcc114c64255cfaee01cbb4f0b02e0f359bd59babba6c1c0a231e130bb538b69160360a5d1> that could lead to sanctions on Chinese officials involved in the mass detention of Uighur Muslims.

Business concerns: China has already vowed to retaliate  <http://go.politicoemail.com/?qs=3a640fb46dbb69ff53d68cbbf0d1141768fc087c03999b38dba7e87f558d161e2e5fb5bcef6000753d0913aba5f92206>if the U.S. takes strong actions over its Hong Kong moves. An estimated 85,000 U.S. citizens live in Hong Kong and more than 1,300 U.S. companies have operations there. Nearly every major U.S. financial firm has a presence in Hong Kong, with hundreds of billions of dollars in assets under management, according to a 2019 State Department report. <http://go.politicoemail.com/?qs=3a640fb46dbb69ff564bd5257f455005257a9c0b9940849df070a79ca263637fa6cad74c48ed43d170ab52e0b365b1f1>
“Far-reaching changes to Hong Kong’s status under the U.S.-Hong Kong Policy Act as a separate territory in economic and trade matters would have serious implications for Hong Kong and for U.S. business, particularly those with business operations located there who exercise a positive influence in favor of Hong Kong’s core values," the U.S. Chamber of Commerce said.

Revocation of Hong Kong’s separate trade status could also subject exports from Hong Kong to the same duties that Trump has imposed on more than $350 billion worth of goods from mainland China.

Hong Kong could end up "right in the firing line" of the U.S.-China trade war, said Nick Marro, global lead trade analyst for the Economist Intelligence Unit.

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826




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