Free trade alive and well in SAR

Jonathan Cheng on Tuesday, December 13, 2005

For the thousands of demonstrators descending on Hong Kong to protest this week’s gathering of world trade ministers, free trade boosters have a ready reply: look around you, see how free trade has transformed this city.

As the conference opens Tuesday, bringing the globalization debate to a head, proponents of liberalization and local officials have repeatedly invoked the host city’s example as a model of the benefits of free trade.

Former US president Bill Clinton once called Hong Kong “Exhibit A in the case for global interdependence and its benefits.” It is a line that gets repeated often around here.

“Hong Kong’s economy is heavily dependent on international trade,” reads the Hong Kong Trade and Industry Department’s literature on the conference, which argues that the ministerial will “provide an excellent opportunity to raise our international profile as a bastion of free trade.”

Even some partisans on the other side of the debate won’t dispute the benefits that free trade has brought to Hong Kong.

“If not for trade, Hong Kong would not exist,” says Ken Cook, president of the Washington DC-based Environmental Working Group, a non-governmental organization protesting the conference. “I think you would be hard pressed to pick a location that made a stronger statement than Hong Kong that trade brings development.”

Free trade advocates, like Andrew Work of the Hong Kong-based Lion Rock Institute, paint an even starker image. “Hong Kong went from being a scraggly fishing village to the greatest city in Asia, and it has free trade to thank.” “For negotiators to come here and not see the example that Hong Kong provides – you’d have to be incredibly blind,” he said.

Professor Wang Guiguo, chairman of the WTO Research Institute at the City University of Hong Kong, points to a number of historical reasons for Hong Kong’s success with free trade.

Because of Hong Kong’s proximity to the mainland and its hard-working, highly-educated workforce, he says, the former colony was well positioned to take advantage of China’s opening during the late-1970s and 1980s.

These factors, combined with an emphasis on financial services and a commitment to laissez-faire policies, put the city in a unique position to connect China with the outside world.

While few question these developments and the importance of free trade to Hong Kong, a more appropriate question is whether the strategies applied here are transferrable to developing economies. For many academics and protesters, the answer is no.

“Hong Kong cannot be an example for other developing countries today,” Wang says. He argues Hong Kong’s rise is too closely tied to the opening of China for any generalizations to be made.

Professor Gu Minkang, a specialist in trade law at City university adds that because Hong Kong has almost no agriculture, its embrace of free trade never had to take into consideration the livelihood of farmers, a key dealbreaker in the agriculture deadlock the WTO is facing this week.

“The WTO’s view is that Hong Kong is the symbol of what happens when you embrace trade,” Cook said. “For many poor nations, they don’t have a chance of experiencing the pace of development Hong Kong has seen.”

But Work insists there is still a lesson to be learned – that subsidies, tariffs, and other protective measures stifle prosperity.

Regardless of whether its model can be exported, many onlookers believe Hong Kong’s reputation as a bastion and beneficiary of free trade make it an appealing venue for the WTO.

“The symbolism could not have escaped them when they chose this place,” Work said. “After the setbacks at Seattle and Doha and Cancun, they needed to get the message out about free trade, and Hong Kong is a great place to do that.”