Speeches and Articles by U.S. Consul General James B. Cunningham

Remarks by U.S. Consul General James B. Cunningham
American Chamber of Commerce in Hong Kong

Ritz Carlton Hotel Ballroom
September 20, 2005

(As prepared for delivery)

Thank you, Jon (Zinke, AmCham Chairman), for your kind introduction. I'm very pleased to join you today. In the short time I've been here, I have seen the potential for Hong Kong to play an important role in this region in the coming years. I have also seen that Hong Kong is a society in transition. Along with the rest of the region, it is challenged by the effects of an increasingly globalized world.

I thought I might discuss with you today why the United States cares about Hong Kong and its future. The answer goes beyond U.S. commercial interests, which are nonetheless considerable. I have only to look around the room to see that. With its 55,000 resident Americans, Hong Kong is probably the largest American community in Asia. There are over 1,100 U.S. companies with offices in Hong Kong, employing a quarter of a million people. American foreign direct investment totaled $43.7 billion in 2004. U.S. exports to Hong Kong reached $15.8 billion in 2004, with a $6.5 billion trade surplus. Hong Kong remains the world's busiest port and the top source of container shipments to the U.S. Last year, Hong Kong raised more equity funds than such traditional financial markets as London and Tokyo, second only to New York.

The U.S. has strong historical and cultural ties with Hong Kong as well, the personal ties that bind. Americans have been coming to Hong Kong since it was established. Hong Kong immigrants have enriched the United States. U.S. universities have educated many of Hong Kong's leading citizens. At the same time, Hong Kong has absorbed foreigners to create a unique culture all its own. Americans and Hong Kong people share a dynamic business culture. Hong Kong is one of the few places in Asia that understands that quintessential American phrase, "Time is money."

Americans also look at Hong Kong in the context of our engagement with all of China. We see tremendous potential for Hong Kong's continuing to play a vital role as a center for investment and business activity, as a major shipping and aviation hub, and as the premier Asian financial center. The United States and Hong Kong work together in combatting terrorism, preventing proliferation, and law enforcement. In short, we see Hong Kong, this unique world city of Asia, as a key element in this important region. We have a vested interest in Hong Kong's economic growth, its regional role, and in its future.

Hong Kong's present situation is certainly encouraging. The economy is strong, and the major financial houses have been busy readjusting Hong Kong growth estimates upwards. Hong Kong's strong rule of law, personal freedoms and free flow of information make it a magnet for business. Hong Kong looks to be back on track, and the polls show that its people know it. They are optimistic about the future, and pleased with the success Hong Kong enjoys today.

It is fitting that this year's 6th Ministerial Conference of the World Trade Organization, tasked with lowering global trade barriers, will be held in the world's freest economy, a title bestowed on Hong Kong this year for the 11th year in a row by the Heritage Foundation.

Vice President Zeng made clear during his visit to Hong Kong, and in my meeting with him last week, that Beijing wants to maintain Hong Kong's stability, prosperity and its attractiveness to foreign investors. The United States shares those goals, and there is much interest in my country in Hong Kong's future. With its solid foundation of entrepreneurship, strong legal institutions, human freedom and market economy, Hong Kong has much to offer the region and the international community.

With all its success, it would be of concern if Hong Kong were to become complacent. As the events of 1997 and 2003 have shown, prosperity cannot be taken for granted. Moreover, with China's continued economic development and Hong Kong's demographics, continual reinvention will be called for. Today's world is about change, adaptation and innovation. And the pace of change is accelerating, with important implications for Hong Kong, the rest of China and this region.

Hong Kong is much more than a gateway for business to China. Indeed, it is already developing as a gateway for Chinese business going abroad. And it can and will play an ever greater regional role, beyond finance and business.

For instance, during the SARS outbreak, Hong Kong's research institutions led the way in isolating and identifying the responsible corona virus. World-class research is conducted in Hong Kong every day. Hong Kong is best-prepared in the region to respond to an avian flu pandemic. The U.S. Centers for Disease Control collaborate closely with Hong Kong researchers. The countries of East Asia should be able to look to Hong Kong's expertise and leadership in public health.

Hong Kong can be a regional leader in pollution prevention and energy efficiency. Anyone who attended the Disney opening saw this is an urgent issue. Last May, my Consulate organized a highly successful conference involving the public and private sectors and officials from the Pearl River Delta. We are developing a program called "P2-E2" -- for "pollution prevention and energy efficiency" -- to mobilize private sector resources in Hong Kong to improve the environment in Hong Kong and the Pearl River Delta. Our innovative model does not require manufacturers to commit upfront capital. Instead, savings in energy and raw materials, as well as increases in productivity, offset the cost of the pollution-abating, energy-saving improvements. This is a model where everyone wins, including the general public, and it should appeal to Hong Kong's business sector.

This model is timely because Hong Kong's integration with the Pearl River Delta, while benefiting the economy, also contributes to worsening pollution. Whatever the precise figures, it is clear that the vast majority of pollution in this region comes from the Pearl River Delta. There are at least 77,000 Hong Kong-run factories in the Pearl River Delta employing more than twelve million workers. Many of these factories, in sectors as diverse as electronics, textiles, food processing, cement and iron and steel, are contributing to pollution that comes here from the mainland. This southbound pollution from factories is combined with pollution from about one hundred power plants in the Pearl River Delta. Only a few -- some 13% by capacity -- of those power plants are operated by Hong Kong interests. But the majority of them are financed by joint ventures in Hong Kong to raise capital.

Hong Kong can play a leading role in stimulating government and business on both sides of the border to develop cleaner and healthier industrial and power facilities.

Another area where Hong Kong can lead is in the protection of intellectual property rights. Hong Kong has made great strides in combatting counterfeiting and optical disc piracy. Hong Kong has shown how IPR protection -- through new legislation, law enforcement, and increased public awareness -- makes good business and economic sense.

There is still some room for improvement. One key area is end-user piracy, which the Hong Kong Government can address by amending the Copyright Ordinance to provide a stronger deterrent. Another concern in Hong Kong's wired society is the unauthorized sharing of movies, music, games, and books on the Internet. It is possible via peer-to-peer file sharing to make movies available to an infinite universe of Internet users. We need to focus enforcement on this new area. Hong Kong should also strengthen its protection of pharmaceutical patents by creating a patent link in the drug registration process. This would give patent owners the chance to stop patent-infringing generics from being sold on the market.

Competition is another opportunity that Hong Kong should explore. The "world's freest economy" is one of the few developed economies that has not enacted general anti-trust legislation. Hong Kong's experience with competition in the telecommunications sector, however, has been very successful, with significant benefit to Hong Kong consumers. While this subject should be carefully studied, the telecom experience would support general pro-competitive policies. A more competitive environment may also attract more international companies.

Hong Kong has invested billions of dollars in its transportation infrastructure, as evidenced by the Kwai Chung container terminals and the wonderful Hong Kong International Airport. Given the increasing integration of the Pearl River Delta, however, it will become easier to operate from any place in the region. To maintain its leadership position, Hong Kong needs to stay ahead in liberalization of regulations for both passenger and cargo flights. As Secretary of Transportation Mineta told you in May, civil aviation liberalization is a global trend. China is embracing liberalization. The U.S. and China signed a civil aviation agreement in July 2004 that allows a five-fold increase in air cargo and passenger services between China and the United States through 2010. We have just signed an "Open Skies" agreement with Thailand. Without liberalization, Hong Kong's status as a global aviation hub is at risk.

Another comparative advantage for Hong Kong is its professional work force and widespread use of English. Hong Kong must maintain its English proficiency to be a regional leader. My government can help. The U.S. Consulate General has joined with the private sector to create the Fulbright Junior Scholar Awards in honor of former AmCham president Frank Martin. This program is sponsored by the American International Group and the Bank of America. Awards for Hong Kong students will enable them to undertake graduate studies at major American universities. As this award program demonstrates, U.S. businesses can help Hong Kong redefine itself for the future.

To maintain and develop this regional role requires the leadership and engagement of the Hong Kong Government, as well as the energy and creativity of Hong Kong's people. Lately of course, there is much good news here. Recent polls show that the Government enjoys much support and that "good governance" is highly valued. There are the beginnings of a necessary dialogue between the central government and all Hong Kong. This is all to the good.

In order to secure its future, Hong Kong needs to advance on the "gradual and orderly movement towards universal suffrage and political reform" that is stipulated in the Basic Law. The aspirations of Hong Kong people for democracy are manifest. A sound, stable and innovative society requires the institutions that over time give governments enduring legitimacy and enable people to express their preferences in an orderly and legal way. Democratic systems provide the most reliable institutions to accomplish those goals and are essential for the promotion of the good governance, which is needed to promote general prosperity.

My government has been outspoken on Hong Kong's democratic development. There is nothing unusual about this. We speak out for democracy every day, all over the world. Secretary Rice has a scarf that says, "Democracy is not a spectator sport." It's an active, dynamic process. It's not something that can come from the outside; it's a process that grows with civic action.

Democratic progress in the Asia-Pacific region has been dramatic. A few years ago people were saying that "Asian values" were incompatible with democracy. Yet the past year has seen elections in Japan, the Republic of Korea, Taiwan, Mongolia, the Philippines, Malaysia, Indonesia, Thailand and Hong Kong.

Americans and many others around the world are convinced that democracy is essential to the advanced, prosperous, free and stable system most of us wish to see in the 21st century. Universal suffrage is enshrined in the Basic Law, and we support that goal. We believe it could have been achieved by 2007. We believe that for Hong Kong to meet its own aspirations, and indeed to realize Beijing's own hopes, that goal must be achieved. With its high degree of personal freedom, its prosperity, its experience with good governance, and strong rule of law, Hong Kong enjoys tremendous advantages that no other society in transition to democracy has enjoyed.

The United States is certainly not in the business of telling Hong Kong or the central government how to move ahead with constitutional reform. The pace and scope of democratization is an issue for the people of Hong Kong and their government, within the framework of the Basic Law.

Some in Hong Kong worry that greater democratization could impact Hong Kong's stability. That is certainly a legitimate concern for a society in transition. We believe just the opposite, and that is why I speak about democracy today. Stability and democracy are not mutually exclusive. Indeed, while building democracy can be difficult, over time democracy, stability and prosperity go hand in hand. Democracy cannot long be isolated from the freedom and prosperity that Hong Kong enjoys today. If it is, they will be curtailed, over time. Greater democracy promotes stability because people want accountable and transparent government which takes into account their interests, and which abides by law. They want to be assured of a mechanism for change, and a chance to effect change. Ultimately, stability without democracy is illusory.

All who are concerned with Hong Kong's future, I expect, want the same thing: for Hong Kong to succeed. The United States has important interests here. We believe Hong Kong is a positive influence in a region of immense importance to the United States. We also want the Basic Agreement and the historic experiment undertaken by the "one country, two systems" approach to succeed. We believe that China, and all of us committed to peace and prosperity in Asia, will benefit as this unique and dynamic city of seven million people takes its place as a major regional center and an economic force in its own right, ready to meet the challenges of the 21st century.

Thank you.

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