On April 24, 1986, when Hong Kong became an independent member of the global trading system in its own right, Michael Cartland stood up from his erstwhile British colleagues within the European Communityâ€™s delegation and walked over to take Hong Kongâ€™s seat between Haiti and Hungary.
More than a third of a century later, Hong Kong is facing an existential crisis in the system in which it has thrived for decades.
In response to sweeping national security legislation that has placed question marks on Hong Kongâ€™s autonomy, Washington has begun to strip away the cityâ€™s special trading status.
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Goods made in Hong Kong for export to the United States must be labelled as â€œMade in Chinaâ€ from September 25. And the city will no longer enjoy unfettered access to sensitive technology due to US export controls on China being broadened to include Hong Kong, while many think additional tariffs on Hong Kongâ€™s exports will follow in due course.
On Thursday, a Hong Kong Commerce and Economic Development Bureau spokeswoman told the South China Morning Post that it â€œwill take action against the US under the WTO dispute-settlement mechanism to defend our separate customs territory status and protect our interestsâ€, adding that the US rules on labelling flout â€œHong Kongâ€™s status as a separate WTO memberâ€.
Citing articles 116 and 151 of the Basic Law, which â€œprovide that the HKSAR is a separate customs territoryâ€, she said that it will seek bilateral consultations with the US, which will proceed to a panel dispute at the World Trade Organisation should the talks fail.
This is uncharted territory for Hong Kong, one of the worldâ€™s most open economies, which has only once been the sole sponsor of a WTO suit when it requested consultation on Turkeyâ€™s garment import quotas in 1996. The Hong Kong government is said to be formulating what kind of complaint it will lodge, and lawyers at the WTO have â€œheard no rumblings as yetâ€, sources said.
But in a city often defined by free trade, there are conflicting views as to whether taking on the worldâ€™s most powerful economy is the best course of action.
It is a hornetâ€™s nest that we might kickâ€¦ [Donald] Trump could easily just make things much worse for Hong Kong
â€œI think it is a mistake,â€ said Cartland, now retired in Hong Kong after having spent decades representing the city, first via the general Agreement on Tariffs and Trade (GATT) in the late â€™80s, then as a judge at the WTO. â€œIt is a hornetâ€™s nest that we might kick; the result could be worse. My advice would be: donâ€™t stir things up, [Donald] Trump could easily just make things much worse for Hong Kong.â€
But others say Hong Kong must stand up for its rights as a separate WTO member, as a matter of principle.
â€œHong Kong people need a legal compass for trading, and the Hong Kong government should take a lead on that. We canâ€™t say: â€˜Trump says this, there is nothing we can do about it.â€™ So, what rules apply? Or are there no rules? We canâ€™t just act like any other mainland city because Trump has redefined us as that,â€ said Alan Hoo, a pro-establishment politician and chair of the cityâ€™s Basic Law Institute.
In interviews with more than a dozen trade scholars, politicians, diplomats and lawyers, a majority said there is a legal case for the US to answer to, with multiple articles in the GATT and WTO covering potential infringements on labelling, tariffs, export controls and autonomy, even if victory would not be guaranteed.
â€œI see potentially multiple violations of WTO rules in the US action a number under the GATT and the Agreement on Rules of Origin, and possibly the Agreement on Customs Valuation as well. If they really want to preserve Hong Kongâ€™s autonomy, they have a funny way of showing it hacking away at one of the main pillars,â€ said Stuart Harbinson, previously Hong Kongâ€™s permanent representative at the WTO, and a strong supporter of action against the US.
Representatives of other trading partners in the city who have been privately critical of the national security law also acknowledged Hong Kongâ€™s WTO membership, with the implication that they would not follow Americaâ€™s lead. â€œWe are rule-abiding,â€ said one official, in an apparent dig at Washingtonâ€™s unilateral assault.
Angered by Trumpâ€™s erosion of Hong Kongâ€™s special trading status, proponents of action insist that the Hong Kong government must act quickly.
â€œJust because it is a labelling issue right now doesnâ€™t mean it wonâ€™t be a prelude to something else,â€ said Chin Leng Lim, a law professor at the Chinese University of Hong Kong (CUHK). â€œIf someone comes onto your land, you donâ€™t make a fuss about it. Tomorrow they pitch a tent, and you think, â€˜I donâ€™t go to that part of my land anywayâ€™. Before you know it, thereâ€™s a settlement, and when you say, â€˜Get off my landâ€™, they might say theyâ€™ve been here for a long time and nobody complained before. So, there is a point of principle, but there is also a practical element to this.â€
The Hong Kong government is going around like a half-decapitated chicken claiming it has still got its head
Hoo urged the government to be more aggressive in defending the cityâ€™s rights under Chapter 5 of the Basic Law, which he described as the most â€œcapitalisticâ€ document you will find anywhere in the world.
â€œThe Hong Kong government is going around like a half-decapitated chicken claiming it has still got its head,â€ Hoo added, accusing the leadership of failing to pre-empt an escalating situation. â€œWhere is the task force on this?â€
But there is also a group of trade watchers urging caution. They do not necessarily dispute the validity of a case, more the practicality and desirability of the process. WTO action could invite further ire from a Trump administration that wants to be seen as being tough on China ahead of Novemberâ€™s presidential election.
Hong Kong might also be inviting an international audience to sift through its relationship with Beijing, raising questions as to whether the spoils of victory would even be worthwhile.
Julien Chaisse, a trade professor at City University of Hong Kong, said that this sort of â€œPandoraâ€™s box scenarioâ€ would emerge if the government brought a case under Article 26.5.c of the WTOâ€™s founding document, which enshrines fair treatment for any member that â€œpossesses or acquires full autonomy in the conduct of its external commercial relationsâ€.
But even if Hong Kong raised a case on other trade-specific grounds, as is more likely, the US could request broadening it to include a forensic analysis of Hong Kongâ€™s autonomy.
â€œThis would need to be sanctioned by Beijingâ€¦ I donâ€™t think that they will want this to be litigated in public,â€ said Henry Gao, a professor of trade law at Singapore Management University. â€œIf I was a Hong Kong government official, I would not want to make such a hoo-ha.â€
Rambod Behboodi, a former Canadian government trade official now at law firm King & Spalding in Geneva, cites the example of Canada bringing a WTO case against France over a ban on asbestos, which was a major Quebecois export. Canada ended up losing the case, but the process in itself was even more damaging for Ottawa, Behboodi said, since it highlighted the governmentâ€™s determination to support the sale of toxic materials.
â€œThis was a cautionary tale about airing your dirty laundry in public. A WTO case could expose more about the Hong Kong-China relationship than they want,â€ Behboodi said. â€œThe US will have a year and a half of solid material showing Hong Kong may not have independent policies to Beijing. Does the Hong Kong government want that evidence judged by an international tribunal?â€
Then there is the fact that the WTO itself is in a state of disarray. Without a functioning WTO appeal court, the US could just keep appealing if it lost. Even a victory may be a pyrrhic one, given that there are few retaliatory options.
â€œSo, if Hong Kong decides to put tariffs on the US which would be a first what does it target? Consumer products or food? What kind of message does that send about Hong Kong? And who would it hurt, the US or Hong Kong consumers,â€ asked Bryan Mercurio, a trade law professor at CUHK.
The Hong Kong governmentâ€™s statements since the US announced the end of â€œMade in Hong Kongâ€ goods have been ferocious. In a statement sent to the Post, a spokeswoman said that the â€œUSâ€™ actions have demonstrated its double standards and hypocrisy, seriously violating international law and the basic norms underpinning international relations, and are despicableâ€.
Through all the tumult of the past year, Hong Kong has tried to maintain its image as a bastion of free trade, and US efforts to wipe this out appear to have stung as much as any of the international criticism that has come the cityâ€™s way since last summer.
Felix Chung, the leader of the Liberal Party, among the most pro-free trade of Hong Kongâ€™s political groupings, summed up the dilemma facing the government: â€œIn reality, this action is totally useless. Even if we win, it will come a few years later, and even then the US can ignore it it is too big, too strong.
â€œIt is symbolic action, but the government has to do something. At least making a complaint will tell the whole world that we are protecting our reputation.â€
Category: Hong Kong