Speeches and Articles by Former Consul General James R. Keith

Remarks by Consul General James R. Keith
U.S. States & Ports Association (USSPA) / Trade Development Council
"Hong Kong and U.S.: Partnership for Success"

Hong Kong Convention Center
September 30, 2003

U.S. Consul General James R. Keith at U.S. States & Ports Association/TDC event

CONSUL GENERAL KEITH: Thank you everyone. I'm very pleased to be here. I'm glad to have an opportunity to speak to everyone and very glad to be standing here under a banner that reads "Hong Kong-U.S. partnership." I think it's exactly the right theme, and it's the sort of thing that we've been working toward for a long time. We already have a very successful partnership with many of you here in the room. You all know it very well.

I'm very pleased to be able to make remarks in advance of both Fred Lam, the Deputy Executive Director of Hong Kong TDC (Trade Development Council), as well as Shirley Co, the President of the U.S. Ports and States Association. This is the sort of partnership I'm talking about. We've had many years of success together and look forward to improving on those successes.

I want to address all the people in this room. I know you are here for a very specific reason, that is, you have an interest in United States and you have an interest in doing business with us, either through our representatives here or around the world. I want to talk to you just for a moment -- by way of introduction to today's activities -- about the opportunities in the United States and about the kinds of things that we hope that Americans and the people of Hong Kong can do together around the world.

The first point I guess I would make is to note the similarities between the United States and Hong Kong markets. I think you know very well, better than I do, about the Hong Kong market and certainly the fact that the service sector is so important to the Hong Kong market. Of course, that's true in the United States as well. We're lagging behind Hong Kong. We're doing our best to catch up, I suppose, in some ways. But Hong Kong has 85-90% of its market representing in this service sector; the United States has about two-thirds, right around 67%. It's made up in both markets mainly by small- and medium-sized enterprises, which is an important area of complimentary between our two economies and an important area of cooperation between us, as in both cases we seek to do business on the Mainland through small- and medium-sized enterprise cooperation.

Of course, it's also true that, as is recognized every year, it seems, by the Heritage Foundation in their annual survey, Hong Kong is number one in economic freedom around the world. It's an important achievement and one that we can all strive to emulate, the United States included. Certainly we both enjoy free and open trade. So we're very similar economies, and that's one reason why I think you should be interested in and should take advantage of the U.S. market.

It's already happening, of course. We do have extensive economic and commercial ties, including the fact that we're the second largest market for Hong Kong exports and Hong Kong is the 14th largest market for American exports, which says a lot about city of fewer than 7 million people. It's quite an achievement and one that we expect to be built upon year by year.

Like Hong Kong, however, I would be quick to point out -- and I'm sure you all know this -- the U.S. economy has faced some tough challenges. Our stock market isn't yet reaching its peaks, as it gradually seeks to regain ground lost since March 2000. But it is making up that ground, I think, as an indicator of increasing consumer confidence overall. Looking back to the bursting of the IT bubble, we do see the economy in the United States starting to get traction. The value of manufacturing output the United States peaked in the year 2000 at U.S.$1,060 billion. In 2002, we had made it all the way back up to U.S.$1,222 billion. I think you can see that we really are making progress in the United States, and I think there is increasing confidence that this will be able to sustain and have some lasting affect.

It's true that even before the terrorist attacks of September 11, 2001, there was already some softness in our economy. But that was a major event. I think you all know that it was a transforming event and has had a very significant and telling effect on our economy. Quite apart from the human costs of the terrorist attacks, we lost about a million and a half jobs. Not just the United States; the effects of that terrorism were global. We saw the world's export shrink about 4% after that event. So the U.S. was not alone, but was hit hard. U.S. unemployment -- I know that Hong Kong is worried about its unemployment rate -- the U.S. unemployment is around 6% now.

All of that said, however, there is some -- as I mentioned, not just the stock market -- but some other leading indicators show that there is reason to believe that there is more good news coming. Our interest rates are very low, as you may be aware, and consumer confidence has increased just from July, from an index of 77, to August, all the way up to 81. So I think while this news is mixed, and consumer confidence news most recently wasn't as positive as that, I think the general trend is up, and so one can count on American consumers to continue to do what they have done over the years, and that is lead the world in economic growth.

I think one of the things that is most telling about the prospects for improvement in the U.S. economy is the productivity rate. We made very significant gains in productivity in recent years in the United States. I think that's something that you ought to take note of, and that ought to be good news for all of you who are interested in the U.S. market.

There are very significant advantages to doing business in U.S. market. I think many of you know them. I know the TDC and the States and Ports Association and others can tell you more about this, but just very briefly: Much like Hong Kong, the advantages of the U.S. market are the free market philosophy, of course. Like Hong Kong, our entrepreneur drive -- the small- and medium-sized enterprises I think reflect that especially -- the absence of trade barriers, the well established rule of law, low and predictable taxes, transparency, freedom of capital movement.... In other words, all those things that make Hong Kong such an attractive place. Therefore, I think you can see that the United States and Hong Kong are very similar markets, and you ought to feel comfortable in the U.S. market.

We're clearly open for business, I suppose you could say. We are very interested in foreign investment in the United States. We encourage and maintain open capital markets for the free flow of foreign investment, receiving over U.S.$200 billion a year in that kind of investment. For us that provides substantial benefits: not only increased employment, but also new technology being introduced, the reduction in capital costs, and the strengthening of our capital markets. There is every reason to believe that this openness to foreign investment will continue. Despite some of the problems that have occurred around the world since September 11 in international trade flows, the United States remains absolute committed to its free and open trade philosophy, and that includes being very receptive to foreign direct investment.

The U.S. capital market is a major financing source. That's true not only because of its size, but also because of its sophistication and stability. There is no regulatory limitation on the types of financing available to non-U.S. investment, non-U.S. users. I certainly would encourage that sort of investment.

I ask you to understand that, as you're looking at the U.S. market, since September 11 we have had to take some measures to try to deal with the terrorist threat. One example of that is the Container Security Initiative, something that is a real highlight of cooperation in the law enforcement and anti-terrorism field between the United States and Hong Kong. Our Customs Commissioner considers our cooperation in this program -- for short CSI (the Container Security Initiative) -- to be an example of the way it should work all the way around the world. That is, our Customs officials and Hong Kong Customs officials integrated in working hand-in-hand, not only to improve the security of international trade -- and by extension of America's sea ports -- but also our hope is, through this program, to make international trade -- that is, at least in this respect, seaborne container trade -- more efficient and more effective. It's not only a matter of increased security, but also increased efficiency that comes with the kind of information flows that we're creating to make the Containers Security Initiative work. I would just underline my thanks to the Hong Kong government and also Hong Kong businessmen who have participated in this program and made it such a success. In fact, made it a prime example around the world for how this kind of operation should be conducted.

And it's important for Hong Kong. One in ten of the containers in the United States comes from or through Hong Kong. It says something about what sort of background you have for increasing your interest in U.S. market. There is a tremendous infrastructure already for the bilateral relationship, and so you're plugging into something that's working well, and you should have every reason to believe will continue to work well.

Finally, I guess I'd just briefly comment on what it is that U.S. companies would be looking for from the kinds of people who are here in this audience. While I can touch on these things, there are people here today who can help you. Sarah, perhaps you could stand up just so everybody could see you? (She stands.) This is Sarah Kemp of our Foreign Commercial Service. We have an office here at the Consulate, and you can be in touch with her and, I know, others both in the catalog showroom and around the room can help you with some sense of what it is that we're looking for from the United States perspective. That includes our partnerships, as I mentioned at the outset: partnerships for third country projects, including introducing complementary products into the U.S. market or gaining complementary products into overseas markets. I think there is a lot that American firms and Hong Kong firms can do together, whether it's bringing Hong Kong firms into the U.S. market or working together in the Asian market in areas that make sense, where there is some cooperation available.

So, I guess the final point I would make is simply that the U.S. States and Ports Association, as well as the TDC, are very experienced, very well versed, in providing the kind of support you're no doubt looking for, that no doubt brought you to this room today. I certainly point you in their direction and am pleased to hand the microphone over to them shortly. Of course, if you have very specific questions about the U.S. market, our Commercial Service would also be very happy to answer your questions. I think you've seen Sarah, so if you have questions, please see her at the break or at the end of the session.

Finally, I just want to say thanks to the organizers. It's the tremendous opportunity for us to focus on the continuing potential. We've realized a lot of it, but there is always more that we can do together. I'm very thankful and grateful to the organizers, to Frederick Lam and Shirley Co, for everything they've done today and want to plug my own Commercial Service, too. Thank you for everything you did.

(Applause.)

Remarks by U.S. Consul General James R. Keith

Press availability at Hong Kong Convention Center
Following speech to U.S. States & Ports Association (USSPA) / Trade Development Council

" Hong Kong and U.S.: Partnership for Success"

September 30, 2003

Q: We want to ask you about today's afternoon announcement that the government launched the new capital investment scheme in Hong Kong. Can it attract the people that come from the U.S. to invest in Hong Kong?

CONSUL GENERAL KEITH: We are certainly looking forward to every opportunity. We have to look at all the details. We are looking for opportunities to expand our partnership, as we made clear in our remarks just now - not only the United States government, but also all the States & Ports organization membership. That is, those representing the various states in the United States as well as TDC (Hong Kong Trade and Development Council).

I think the key word that is involved here is the word partnership. We're looking for opportunities to bring this relationship closer together in all respects, including on the economic side, including by encouraging investment both ways.

Q: Is Hong Kong's current economic situation attractive for U.S. people to come to Hong Kong for investment?

CONSUL GENERAL KEITH: I think it's clear that Hong Kong is very closely tied to the global economy. The U.S. economy and the Hong Kong economy both are showing signs of moving forward. I think that is good for people on both sides, and it is likely to increase the kind of interaction, especially between our small- and medium-sized enterprises on both sides.

Q: Will CEPA encourage people with interest in doing business on the mainland to set up operations in Hong Kong?

CONSUL GENERAL KEITH: I certainly hope so. We are still looking at the details, all the final details on CEPA are just out and we are looking through this sort of thing. But I think we are sensitive to the opportunity to increase our presence here. If in certain areas it is possible for us to do so under the auspices of CEPA, I'm confident that many of our private sector entities will take advantage of those opportunities.

It is a little early yet for us to tell precisely, with any sense of detail or quantification, what that kind of opportunity will be, but we are looking for it and looking forward to trying to take advantage of whatever we can. We are very grateful that American firms will have the opportunity, operating in Hong Kong, to take advantage of the elements of CEPA that might apply.

Q: Mr. Keith, you recently gave a speech in Washington where you talked about the importance after July 1st of the government "getting it" and "getting it right." We've seen a U-turn on the question of closing polling hours, we've seen the government decide to hold off of filling in the port while a court decision is handed out, even a reversal of a position on pets in houses. Do you see this as evidence of "getting it" or "getting it right"?

CONSUL GENERAL KEITH: Without reference to the specifics that you mentioned, because I don't think it is my place to put each and every political development in Hong Kong into perspective - that's really up to the government and the people of Hong Kong - but certainly it is my sense that since July 1st the people of Hong Kong feel, I think, good about what has been happening in Hong Kong. I think a big part of that was the sense, especially among the middle class who came out in such large numbers on July 1st, that they spoke up and the government heard. And they feel, I think, encouraged by that. Certainly that's my perspective from the outside. My sense is that the mood in Hong Kong is quite positive these days. We would like to be able to continue to promote that from an economic point of view in the United States.

As far as getting it right on the political side, I think that is something we'd like to see the Hong Kong government and people work out together. We'll certainly continue to encourage that that happen.

Q: Seeing delegations, many of them going up to Beijing and being told, "Support Mr. Tung, it's what you have to do," even the media being instructed -- do you feel that is involving Beijing in a way here that will help or make it more difficult for the government in order to deal with the people?

CONSUL GENERAL KEITH: I think it is up to the Hong Kong government to define for itself the meaning of one country, two systems. Certainly from the American perspective, on the basis of the underlying legislation that allows us to treat Hong Kong as a separate customs territory and a separate entity, we are interested in the continuing success of the Hong Kong government's implementation of one country, two systems.

There is every indication that the mainland is also interested. We certainly encourage that and hope for the continued support from all parties of one country, two systems because our policy is predicated on the fullest possible autonomy in Hong Kong - which is another way of saying the success of one country, two systems.

We'd like to see that continue to work. I think this is an on-going experiment in many respects. It's up to the Hong Kong government to find ways of making this implementation work well. We certainly wish them well and wish the Hong Kong people well in making that work.

Q: But does it concern you to see one delegation after another coming up there and being given instructions? Does that undermine the one country, two systems?

CONSUL GENERAL KEITH: I think it is up to the Hong Kong people to determine where the boundaries are. These are not easy questions to answer. It is not as if there is an off-the-shelf solution to every problem that might come up under one country, two systems.

I think rather than looking at the words and the rhetoric, it's most important to look at the deeds. It seems to me that since July 1, the actions on the part of all involved parties have been very much respectful of one country, two systems. We certainly welcome those actions that have taken place since July 1 that advance one country, two systems.

Thank you all very much.

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