Few would deny that Beijing’s national security law, which allows Beijing to define for the territory what acts are secession, subversion, terrorism or interference by foreign forces, opens the way for troubling restrictions on the civil liberties of Hong Kong citizens. But once again, President Trump has chosen a dramatic but doomed policy that will do little harm to China and further isolate the United States from its allies.
Like his current trade war, Trump’s Hong Kong policy seeks to inflict punishment on China with little concern for its effectiveness or cost to American interests. Since 1997, the American recognition of Hong Kong as autonomous China has allowed the development of a deep commercial relationship between the United States and Hong Kong. Removing the city’s special business status will highlight the president’s power to retain favor, but recently departing from Hong Kong to pressure China to maintain city autonomy under the “one country, two systems” policy.
The elimination of Hong Kong’s special customs status is toothless and more symbolic than a real consequence for the continent. As a separate member of the World Trade Organization, Hong Kong’s exports to the United States have enjoyed “most-favored-nation” status, subject only to tariffs offered to all other members. Revoking the city’s special status will subject its exports to the high tariffs the president imposed on China during its current trade war. But this change will hardly move the status quo.
This is because Hong Kong’s economy consists primarily of financial, logistical and other services, not manufactured goods. As Nicholas Lardy of the Peterson Institute for International Economics explains, of Hong Kong’s $ 45 billion in exports to the United States, only 1% actually occurs in Hong Kong and is eligible for low tariff rates. Most of Hong Kong’s exports to the United States are goods produced in China that are re-exported through Hong Kong and are already subject to the same high tariffs as the goods that China exports directly.
The interests of Hong Kong and the United States, not Beijing, will be the main victims of Trump’s decision to move away from the special relationship. Free bilateral currency exchange, preferential customs treatment, and visa-free travel have made Hong Kong a U.S. trade hub in the region. In 2018, US foreign investment. USA In Hong Kong it amounted to more than $ 82 billion. More than 1,300 US companies operate in the city, of which approximately 800 are regional offices or headquarters. The city is an important market for US exports of meat and agricultural products. In 2019, the US goods trade surplus. USA With Hong Kong it was $ 26 billion, the highest among its trading partners.
By revoking Hong Kong’s special status, the president risks abandoning US companies based in the city. Along with higher tariffs on products they ship to the United States, these companies may be subject to stricter controls on access to and use of US technology. American business travelers may lose visa-free access to the city, a possible retaliatory response by Beijing to the removal of Hong Kong’s special status. Perhaps most importantly, failing to maintain Hong Kong’s special status represents a missed opportunity to put pressure on China, as it envisages tighter control over the tax, regulatory and legal systems to which US companies are subject.
Trump’s tariffs have produced little change in Chinese practices, while overwhelming American companies and consumers. Its wide coverage and high rates have left it little room to maneuver. After unleashing a litany of complaints against China during a June 5 visit to the Maine coast, Trump said he would apply a fee “to something they sell that is very valuable to them.” It is very difficult to see what he has in mind, as the few products on which the United States has not yet applied tariffs are precious to the United States, as well as China. The tariffs increased at the end of last year, and then were suspended with the signing of their Phase 1 agreement, mainly falling on U.S. imports of computers and cell phones, products designed and marketed by U.S. companies, and a major source of jobs and earnings. Americans.
Withdrawing the United States from international organizations is another way Trump has harmed American interests while showing his discontent with China. Under his supervision, the United States has hobbled the World Trade Organization by refusing to approve new judges for its appeals body, in part because of judgments it considers weak about China. More recently, Trump announced the end of U.S. support for the World Health Organization, citing his view that he had failed to adequately address China’s role in the coronavirus pandemic.
The withdrawal of these arenas, from Hong Kong to Geneva, leaves the United States’ allies in limbo, reluctant to follow Washington’s example and ready to withdraw from China. Away from situations that challenge the interests of the United States, as Trump has done with Hong Kong, only to hide behind a wall of increasingly higher barriers, will only serve to leave China out of control and the United States increasingly alone.
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