U.S. companies oppose any change in Hong Kong`s recognition as a sufficiently autonomous city in Washington, where large U.S. companies have access to China and Southeast Asia and where bilateral trade flourishes in different parts of the economy, from wine to financial services. Trump`s order will end Hong Kong`s special trade status – granted to it by a 1984 agreement, which was also reached between China and Hong Kong`s former colonizer, Britain, before sovereignty was restored to the city in 1997. The 1992 Hong Kong United States Special Policy Act allowed Hong Kong to reduce tariffs and establish a separate customs framework to deal with the United States. Hong Kong is a full member of several international economic organizations as an independent entity. The United States and Hong Kong are both members of the World Trade Organization, the Asia-Pacific Economic Cooperation Forum and the Financial Action Task Force. While Trump did not provide details on the broader impact of his order, the removal of Hong Kong`s special trade status could suspend Hong Kong`s exports to higher U.S. tariffs, as is the case with mainland China. These include an increase in tariffs, anti-dumping rules and additional tariffs resulting from the trade war between the United States and China.
“If there`s a new trading system, it changes the calculation for companies,” said Dr. Tim Summers, senior fellow at Chatham House, based in Hong Kong. Rising tensions around Hong Kong and coronavirus have led to the possibility that they will spread to trade relations, which threatened the thaw that took place earlier this year. This role as a gateway between the Chinese market and the rest of the world has placed Hong Kong in a unique position, but several trade agreements could change that. Hong Kong is a separate customs territory from mainland China and a full member of the World Trade Organization. Hong Kong has a broad system of strategic trade control, which follows multilateral export control systems, and our governments have worked closely together in the past to maintain and strengthen measures to prevent the illegal diversion of controlled objects. Intellectual property rights protection is relatively strong, but existing copyright laws do not adequately address online piracy. For the United States, the abolition of Hong Kong`s special status is not a win-win situation. According to the U.S. Census Bureau, Hong Kong was the source of the largest U.S. bilateral trade surplus last year, at $26.1 billion.