REGIONAL ARCHITECTURE: HK VIEWS APEC AS "DEFINING

C O N F I D E N T I A L SECTION 01 OF 02 HONG KONG 000290

SIPDIS

STATE FOR EAP/CM, EAP/EP, EAP/RSP, EAP/FO FOR PATEL AND S/P
FOR GREEN, NSC FOR BADER

E.O. 12958: DECL: 02/11/2025
TAGS: ECIN PREL APECO ECON HK
SUBJECT: REGIONAL ARCHITECTURE: HK VIEWS APEC AS "DEFINING
REGIONAL ORGANIZATION"

REF: A. STATE 2965

B. 09 STATE 128770

HONG KONG 00000290 001.2 OF 002


Classified By: Acting Consul General Christopher Marut, Reasons 1.4 (b/
d)


1. (C) Summary and Comment: A senior Hong Kong official
welcomed Secretary Clinton's January 12 speech on U.S. views
toward Asia Pacific Regional Architecture and applauded clear
administration statements on the importance of U.S.
commitments in Asia. Despite its status as a Special
Administrative Region (SAR) of China, Hong Kong protects its
policy independence in numerous multilateral organizations
that do not require sovereignty as a condition of membership.
APEC's broad membership and cooperative nature make it Hong
Kong's organization of choice for regional economic
engagement. Recent proposals to create other large regional
groupings are interesting to Hong Kong, but are unlikely to
get much support until questions about membership,
obligations, and focus are answered. Asian multilateral
organizations' diverse membership makes achieving concrete
results difficult, but Hong Kong officials believe any forum
without active U.S. participation would be unlikely to
produce meaningful outcomes. Hong Kong's own APEC
priorities, trade facilitation and support for Small and
Medium Enterprises (SMEs),are a good fit with U.S. APEC
goals. Hong Kong's expertise in health and pandemic
preparedness, as well as concerns about food and product
safety, could make it a potential APEC partner for the U.S.
on these issues. End summary and comment.


2. (C) Econ Unit Chief met with Trade and Industry
Department (TID) Deputy Director General (DDG) Leonia Tai
Shuk-yiu February 10 to discuss Hong Kong's agenda in those
multilateral organizations in which it is a member and hear
her views on Secretary Clinton's January 12 speech at the
East West Center in Honolulu. DDG Tai oversees the offices
that support Hong Kong's participation in trade-oriented
multilateral organizations, including APEC, the OECD and the
WTO, and reports directly to Hong Kong's APEC Senior
Official, TID Director General Maria Kwan Sik-ning.

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Hong Kong an Independent Actor in Multilateral Fora
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3. (C) Although the U.S. and Hong Kong cooperate bilaterally
on a very wide range of issues, Hong Kong's SAR status limits
its participation in multilateral organizations to those that
do not require sovereignty as a condition of membership and
those that do not deal with national security issues. These
restrictions, however, do not prevent Hong Kong from being an
active and independent member of numerous international
organizations including the WTO, APEC, the OECD, the
Financial Stability Board, the Financial Action Task Force,
and many others. In other organizations that are limited to
sovereign states, Hong Kong may participate as an observer or
as part of the PRC delegation. Tai lamented that Hong Kong
officials often had to combat the misperception that they
took their marching orders from Beijing. In fact, she said,
Hong Kong TID officials rarely met their PRC counterparts
outside of official meetings and did not coordinate policy
positions in APEC and the WTO with them. (Note: Other Hong
Kong Government departments that participate in international
fora tell us they meet their PRC counterparts more
frequently, but Hong Kong officials insist they do not
coordinate policy positions with Beijing in organizations in
which Hong Kong is an independent member. End Note.)


4. (C) Hong Kong leaders appreciated the United States'
important economic and security role in the region, said Tai.
Secretary Clinton's January 12 speech and regular visits to
the region were a welcome indication of the level of
attention Asia would receive from the Obama administration.
For Hong Kong, APEC was the defining vehicle for regional
economic cooperation. Hong Kong shared U.S. views on the
need to promote prosperity in the region, she said, a goal
best met through facilitating trade. APEC's broad membership
and cooperative structure made it best placed among existing
regional organizations to achieve that aim. She acknowledged
that APEC's inability to enforce compliance with proposed
rules allowed critics to dismiss it as a "talk shop" but
argued that APEC's model allowed a wide range of economies
with different political and economic systems to participate.
She pointed to successful efforts to lower tariff and
non-tariff barriers in the region as concrete results of APEC
initiatives.


HONG KONG 00000290 002 OF 002


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Asian Multilateralism Values Consensus over Results
============================================= ======


5. (C) Efforts to re-orient existing regional groups to
focus on results would be a serious challenge, said Tai.
ASEAN 1 and ASEAN 3 demonstrated the difficulty of
marshaling large groups to achieve concrete collective action
in Asia. The China/ASEAN Free Trade Agreement was supposed
to go into effect this year, but some members were already
looking for ways to back out of agreed commitments in order
to protect domestic industry from Chinese competition, she
said. Large new proposed bodies like the East Asia Community
(EAC) or Asia Pacific Community (APC) were interesting but
were unlikely get much support until questions about
membership, mission, and obligations were answered. Asian
multilateral organizations with broad membership had not
traditionally had results-driven cultures, said Tai.


6. (C) It would be difficult for many Asian economies to
agree to a proposal to create an Asian Free Trade Area (AFTA)
that would codify obligations and set penalties, said Tai.
Different political systems and levels of economic
development argued for smaller and more focused agreements.
The Trans-Pacific Partnership (TPP) was a step in the right
direction, but Vietnam's bid to join the group could make it
unworkable, she predicted, given that other TPP signatories
are at a significantly higher level of economic development.
Hong Kong might consider applying to join the TPP in the
future, said Tai, but the SAR currently had little experience
with bilateral or regional trade agreements. Hong Kong had
only one Free Trade Agreement (FTA),the Closer Economic
Partnership Arrangement (CEPA) with the PRC, although it
finished negotiations with New Zealand on its first
international FTA in November 2009. The Hong Kong-New
Zealand FTA should be approved and go into effect early in
2010, said Tai. TID was also in negotiations with the
European Free Trade Association (EFTA members are Iceland,
Liechtenstein, Norway, and Switzerland) with an agreement
expected this year, she offered.

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APEC: Hong Kong Supports SMEs,
Possibly Health and Product Safety
===================================


7. (C) Hong Kong's own multilateral priorities and liberal
economic philosophy made it a natural partner for some U.S.
initiatives in APEC. Trade facilitation, particularly for
SMEs, was a key objective for Hong Kong and the SAR would be
willing to support U.S. proposals that promoted greater
access to international markets for SMEs, said Tai. Hong
Kong had a world-class pandemic preparedness regime and might
also be a useful partner in health-related initiatives.
Finally, Hong Kong-based companies with factories in mainland
China have been at the forefront of product safety compliance
efforts. This experience might also make Hong Kong an ally
on U.S.-sponsored food and product safety initiatives.
MARUT