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

"U.S.-HONG KONG ECONOMIC RELATIONS"

Remarks by U.S. Consul General James B. Cunningham
Chinese Manufacturers' Association of Hong Kong
Dinner Reception
September 29, 2005

(As prepared for delivery)

U.S. Consul General James B. Cunningham

Dr. Hung, thank you for your kind introduction. I am very grateful for the invitation to join you this evening. The CMA has for over 70 years worked to promote cooperation between government and industry in Hong Kong. Given the breadth and depth of U.S. interests here, we deeply appreciate the contributions of your organization to fostering a business environment that is routinely cited in international surveys as among the best in the world.

Let me recall for a moment some of the reasons this city is so favored: a strong tradition of rule of law, free flow of information, respect for intellectual property rights, an admirable entrepreneurial spirit, expertise in trade facilitation, and a world-class cluster of legal and financial talent, just to name a few.

Given that this is the first time I have addressed the CMA, I believe this is a useful occasion to review some of the issues that underpin America's strong economic ties with Hong Kong. Our strong economic partnership is important for the continued prosperity of this region. Both the U.S. and Hong Kong play vital roles in the regional economy. The maturity and stability of our commercial relationship is a result of long-term goodwill and hard work on both sides. The positive environment for trade and investment is one of the reasons that U.S. and other international firms continue to leverage this city's talents as part of their regional business strategies.

U.S. trade, investment, and business with Hong Kong, the world's 11th largest trading entity and 15th largest banking center, flourish in a largely open environment. We have a significant economic stake in Hong Kong. Some 55,000 Americans live and work here. This city hosts more than 1,100 American firms employing a quarter of a million people. In 2004, U.S. exports to Hong Kong totaled US$ 15.8 billion, making Hong Kong our 13th largest overseas export market. U.S. direct investment in Hong Kong through 2004 amounted to over US$ 43.7 billion. Over one million U.S. citizens visited Hong Kong in 2004. Hong Kong remains the world's busiest port and the top source of container shipments to the U.S.

Our financial relationship with Hong Kong is also extensive. Numerous U.S. financial institutions do business here. Their presence reflects Hong Kong's unique role in providing sophisticated fund-raising services to mainland enterprises. Mainland firms have raised over 100 billion US dollars here over the past twelve years, and American firms have played a significant role in this achievement. Additionally, Hong Kong is an accomplished service provider in related areas such as accounting, trade law, and insurance. This makes the city a premier location for multinational firms from the U.S. and other countries to pursue business throughout Asia. Last year, Hong Kong raised more equity funds than such traditional financial markets as London and Tokyo, second only to New York.

Americans share important economic policy interests with Hong Kong:

• We share Hong Kong's interest in liberalizing trade internationally. Hong Kong has been at the forefront of efforts in the Doha Round of the WTO to reduce barriers to trade, and it will cap off its contributions by excelling at the great challenge of hosting the sixth ministerial meeting in December. Hong Kong is also a valued member of APEC and, in its last independent peer review report, which drew input from fellow APEC member economies, Hong Kong was described as quote -- "in many ways a model APEC citizen, and one from which some important lessons can be derived."

• The U.S. and Hong Kong share a commitment to secure trade. As the single largest source of U.S.-bound sea containers, Hong Kong joined the Container Security Initiative in September 2002. Our cooperation in this area underscores our common interest in protecting the smooth functioning of the global trading system in the face of terrorist threats. Securing global trade will be a major challenge for all trading partners and Hong Kong is in the forefront.

• Similarly, as one of the top banking and finance centers in Asia, Hong Kong has worked closely with us to deny terrorists access to funds. Law enforcement cooperation has been excellent across the board and has been targeted at protecting the safety and well-being of the people of Hong Kong and America alike.

• We have also worked productively with Hong Kong on the protection of intellectual property rights. An effective IPR regime transforms the creative talents of people into high-value assets, and is essential to today's economy. Hong Kong has made strides in this regard over recent years and in many respects serves as a model for the region. We look to Hong Kong to sustain the pace of its enforcement activities aimed at local producers and vendors of infringing products, to work with us to develop the means to combat the growing challenge of internat piracy, and to maintain its efforts against end-use piracy and the cross-boundary flow of infringing products.

Let me say a word about Hong Kong as a model for China's economic development. We all have much interest in China's economic rise. Deputy Secretary of State Zoellick just last week observed that China's growing clout brings with it a responsibility to strengthen the very global economic system that has enabled its success. The United States wants a confident, peaceful, and prosperous China. We believe that from China's perspective, its national interest is best served by acting as a responsible stakeholder in the international economic system and working with us to shape its future.

I would note that qualities found in Hong Kong's role as an international economic actor in many ways represent qualities that we would like to see strenghened in the rest of China. That is why I started these remarks by noting several characteristics of Hong Kong that make it attractive to international business: a strong tradition of rule of law, free flow of information, and respect for intellectual property rights. And that is why I noted further along in my comments several other examples of Hong Kong serving as a responsible global stakehholder: its work to secure trade, its strong reputation as a clean and efficient center of finance, its openness to liberalized trade. Hong Kong has much to offer China, including approaches to international commerce that have proven to be "win-win" for both Hong Kong and the other economies that trade with and invest in it.

Hong Kong's openness, its international flavor, its welcoming attitude to businesspeople from around the world, its active participation in economic organizations -- including the World Trade Organization and APEC -- are all elements of Hong Kong's comparative advantage. Hong Kong's commitment to WTO principles and other policies that facilitate responsible trade has certainly yielded dividends both for its prosperity and for its bilateral economic ties with the U.S.

While Hong Kong has also made progress in environmental protection, there is much to be done, and urgently, if this region is to reach its potential. I believe that the U.S. can help. Last May, my Consulate organized a highly successful international conference on pollution prevention and energy efficiency. Officials and businesses from both the Pearl River Delta and Hong Kong participated. As a result of that event, a new business model was developed specifically for Hong Kong and the Pearl River Delta. It builds on five years of cooperation between the Chinese State Environmental Protection Administration and the U.S. Environmental Protection Agency. Called "P2-E2," this new environmental finance model combines Hong Kong's financial expertise and U.S. innovation and know-how to produce an outcome from which Hong Kong and the Pearl River Delta both benefit. It allows Hong Kong-owned factories -- 77,000 of them in the Delta alone, as you well know -- in areas as diverse as textiles, electronics, food processing, iron, steel, cement, and other sectors as well, to adopt new technologies with no up front capital costs. Such plants, as well as their generators, produce significant amounts of the pollutants which befoul the Delta and Hong Kong. These new P2E2 technologies will improve industrial productivity, reduce operating costs and reduce air, water and ground pollution.

As this model is built on a number of financial incentives for factory owners and others, we believe it should meet with widespread approval among Hong Kong's business community -- that is, among many of you. The air pollution that we see in Hong Kong is part of a broader problem that extends beyond the Special Administrative Region's boundaries. Since Chinese Manufacturing Association members play such a prominent role in the Delta , they have a special role to play in dealing with the pollution which is choking the region. We are eager to work with you.

U.S. economic relations with Hong Kong rest on a solid foundation. Our productive ties are not only mutually beneficial, but also of great value to the rest of China as well. Vice President Zeng made clear to me in my meeting with him a couple weeks ago that Hong Kong's attractiveness to business and investment is important to China.

So when people ask me what the coming years will bring to U.S.-Hong Kong economic relations, my answer is that we are looking to build upon the positive environment that exists today. We want The Basic Law and the development of One Country, Two Systems to succeed, and for Hong Kong to realize the promise of its future. Continued expansion of democracy strengthens reputation for freedom, rule of law, and good governance which lie at the heart of its success today, and must continue to do so in the future. These building blocks, in turn, create ideal conditions broadening the base of our economic relations. I am very pleased to be here in Hong Kong, and look forward to working to ensure that our commercial and financial interaction with Hong Kong continues to flourish.

Thank you for the opportunity to share these thoughts with you.

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