Speeches and Articles by Former Consul General Richard A. Boucher

"The U.S.-Hong Kong Relationship Today"

Remarks by U.S. Consul General Richard A. Boucher
to the Hong Kong Rotary Club
Furama Hotel
Tuesday, March 3, 1998

(As Prepared For Delivery)

Good afternoon, and thank you for inviting me to be with you today. Rotary Club luncheons are of course a well-known and time-honored tradition in the United States as well as in Hong Kong, so I feel very much at home with you today. It's been great to have a chance to meet some of you and learn more about the charitable activities that you carry out both here in Hong Kong and across the border.

At this time last year, all of us were living in anticipation of what the transition of sovereignty from Britain to China would mean for Hong Kong. There was excitement in the air, and not a little apprehension. We knew change was coming, and although some of us had spent many years thinking about this change, we couldn't be entirely sure what it would mean for us until it had actually happened.

Now that the handover is nine months behind us, the sense of flux that we felt last summer is beginning to dissipate, and a new sense of flux is taking its place. Things are stabilizing, at least as far as transition issues are concerned. As Gordon Wu observed at one point, what comes after 1997 is 1998. So now in 1998, we in Hong Kong are at a point where we can begin to assess what the normal state of affairs is going to be for the foreseeable future. So today I'd like to look at what now constitutes normality with regard to the relationship between the United States and Hong Kong.

One of the most important factors, and one which is sometimes overlooked just because it is so pervasive, is the active, human side to our partnership. I'm thinking for example of the 157,000 visas we issued to Hong Kong people in 1997. Those visas represent students going off to U.S. universities, families going to visit their relatives in the States, and businessmen traveling to implement the thousands of commercial transactions that cement our bilateral economic relationship.

That relationship is also reflected in the fact that 50,000 Americans live and work in Hong Kong, a number which has doubled in just the past five years. Over 1100 U.S. firms are located here, including more than 450 regional headquarters. My country's direct foreign investment in Hong Kong stood at 16 billion U.S. dollars as of 1996, but this amount is supplemented by even larger amounts of portfolio investment.

Another part of our normal economic relationship is our cooperation in opening up international markets to trade and prosperity. Hong Kong retains its separate membership in agencies like the World Trade Organization and the Asia-Pacific Economic Cooperation forum. We almost always find ourselves in agreement on issues that arise in those discussions, like promoting tariff reductions, more and easier market access, and the reduction of red tape. We have a shared interest in seeing China open up and enter the World Trade Organization on the basis of sound commercial principles.

And here I'd like to add something that has to do with our economic relationship with Hong Kong. We are all aware of the financial turmoil that has been buffeting East Asia for the last few months. Hong Kong has fared better than many of its neighbors because it has had prudent regulation and sound principles, but many people here have been adversely affected. No doubt some of those in this room today have suffered losses because of it.

It is natural to look back at how the financial crisis developed and try to understand its sources. I know that there are some who have an uneasy feeling that perhaps the United States somehow engineered this crisis. This is a rumor around town. There's no evidence for it, but it's something people are saying.

I'd like to take this opportunity to state clearly that the United States does not subscribe to the idea that, if other countries get rich, we Americans will be in danger of getting poor. The world economy is not a cake, where if one person gets a bigger piece, somebody else has to take a smaller one. On the contrary, we believe that prosperity begets prosperity. Our history and the history of others demonstrate clearly that trade, investment and economic interaction lead to greater well-being for all involved, ourselves included. We want all the economies of the world to prosper. This is partly for humanitarian reasons -- we want all the people of the world to enjoy as high a standard of living as possible, with all that that implies in terms of improved health care, education, and employment opportunities. But America's well being -- our jobs and prosperity -- are tied to the world economy. No American believes the Asian financial crisis is in America's interest; rather it threatens the growth of our exports, the stability of our markets, and the living standards of Americans. As President Clinton observed in his State of the Union Address on January 27, 1998, "First, these countries are our customers. Second, they're also our competitors, so if their currencies lose their value.... [that] makes it a lot tougher for our people to compete. And finally, they are our strategic partners. Their stability bolsters our security." We have been harmed by the turmoil. For economic and security reasons we will actively support the restoration of economic health by the countries most affected. We'll get there a lot sooner if we all focus on solving the problem, rather than scapegoating.

Hong Kong also has a role in the recovery. First, Hong Kong stands out with a few other successful economies of the region, Singapore and New Zealand come to mind, as examples of adherence to basic principles and sound regulation. Second, Hong Kong is a source of private capital for the region and the markets here will have an important role in recapitalizing abandoned markets in other areas. Third, Hong Kong manufacturers, while strong in China, are increasingly investing in other countries of the region. I am sure that as opportunities arise they will find the right mix of raw materials, labor, finance and manufacturing capability to reinvigorate industry in various parts of the region. And finally, Hong Kong has become an important player in trade discussions and financial circles and through this can help everyone in this region move to greater economic exchanges, greater trade and greater investment. One of the most important developments of the past several years was the rise in trade and investment between the countries of Asia. It is important that during this crisis this momentum not be lost.

Now back to Hong Kong itself. Beyond the sphere of economics, a normal U.S. relationship with Hong Kong also includes our day-to-day cooperation on law enforcement issues. We regularly work with all of Hong Kong's law enforcement agencies on problems that are of common concern. These include narcotics trafficking and money laundering; organized crime activities; counterfeiting; smuggling of illegal immigrants; car theft and violation of intellectual property rights. We have a number of judicial agreements in effect which underpin this bilateral cooperation. We have been impressed by Hong Kong's commitment to protecting sensitive technology and preventing the transfer or proliferation of illicit weapons. Although we have made no secret of our deep concern about the continuing violation of intellectual property rights in Hong Kong, we do recognize that the government of the Special Administrative Region is seriously engaged in trying to rectify this endemic problem.

Similarly, when it comes to the problems of drug trafficking and associated money laundering, Hong Kong has been putting forth great efforts. As you may have heard, last week Hong Kong was one of the areas certified by President Clinton as cooperating fully with the United States in the fight against drugs. Hong Kong has recently strengthened money laundering guidelines; enacted the 1997 Drug Trafficking Order, which enhanced its ability to recover the proceeds of drug trafficking; stopped a number of shipments of suspected chemical pre-cursors used in drug production; and ratified an extradition agreement between Hong Kong and the U.S. This is an aspect of our relationship that can really make a big difference to the lives of people both here and in the United States, and it will continue to be a major focus of our joint crime-fighting efforts.

Another sign of normality is the fact that ships of the United States Navy continue to call on the port of Hong Kong on a regular basis, in about the same numbers as they did prior to the reversion of sovereignty. Between 50 and 70 ships visit Hong Kong each year in order to reprovision and to give their crews an opportunity for some relaxation on shore. Many crew members are joined here by members of their families for a holiday. They shop, they sightsee, and many of them also spend part of their shore leave volunteering to help Hong Kong social service agencies and schools. They have donated hundreds of man-hours to chores like painting, carpentry, and clearing underbrush. Altogether, the Navy's visits contribute about 55 million U.S. dollars to Hong Kong's economy every year. We have had excellent cooperation from the Chinese Ministry of Foreign Affairs, which grants the diplomatic clearance for these port calls.

So what about the future? The normal U.S.-Hong Kong relationship depends very much on a number of key building blocks that are necessary to preserve and sustain Hong Kong's growth and prosperity. Let me mention a few.

• The rule of law, which ensures a predictable and fair investment environment, contracts that are meaningful and enforceable, and a body of citizens who are free to create.

• Clean government, and also good governance in corporate and financial spheres.

• Freedom of the press and an open information environment, so malfeasance and favoritism can't hide in the face of investigative reporting.

• Freedom of speech, so that new ideas can circulate and falsehoods can be challenged.

• Continuing democratic development, most importantly the expansion of accountable, representative government.

Finally, I'd like to note several areas in which I think there is room to expand our cooperative efforts. I've already alluded to one of these, protection of intellectual property rights. Hong Kong must get a grip on this problem if it wants to avoid jeopardizing its aspirations to become a technology center and to reinvigorate its entertainment industry. Innovative companies are not going to risk having pirates gain access to cutting-edge developments, which come into being only after a great expense of money and of human creative power. We have been disturbed in recent months by a change in the nature of intellectual property rights violations here. Hong Kong, as a free port, has long had a problem with retail sales and as a transit point for pirated goods, but now we are also seeing the actual manufacture of such products here. Some analysts feel this has come about as a black market response to more effective enforcement in the Chinese mainland. But whatever the cause, this new development must be swiftly and effectively addressed. The government has proposed legislation to help protect Hong Kong's creative industry and legitimate producers. We hope it will soon become law.

Another area in which we would like to expand our efforts is one I mentioned earlier: money laundering. Unfortunately, many of the same factors which make Hong Kong attractive for carrying out legitimate financial transactions also make it attractive to criminals who want to conceal the true source of their funds. The risk for Hong Kong is that money laundering activities can sully its reputation, create distortions in its banking figures, and even risk subverting the financial and legal systems. Thus, as Hong Kong grows in importance to world finance it will need to continuously improve its laws and enforcement. The international community is prepared to work with Hong Kong to ensure that Hong Kong's attraction as a financial center is not abused.

Hong Kong has a great and well-deserved reputation as a free trader, but there are still a few important sectors in its economy which could be opened up more in order to bring it in line with your own principles and accepted international practice. I'm thinking of areas such as broadcasting, telecommunications, and air services. There have been some welcome recent developments, particularly plans to end early Hong Kong Telecom's monopoly of international voice services, the opening up of satellite services, and a new look at removing regulations on broadcasters. We hope this momentum will continue, and stand ready to cooperate and coordinate mutual efforts whenever that would be helpful.

I hope this summary has given you an idea of how deep and broad U.S.-Hong Kong relations have become and how we pursue our interests here in Hong Kong in full cooperation with the Hong Kong government. I want to remind you all that this year's American Chamber of Commerce survey of business confidence showed 96 percent favorably disposed toward Hong Kong and its future. I think this is a true indication of the affection and commitment to Hong Kong which most Americans here feel on a personal and professional level. We have been Hong Kong's partner in the past, and we will be its partner in the future.

Thank you very much.

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