Hong Kong will formally challenge a US demand that it changes the way it labels its exports as the city grapples with the international fallout from Beijing’s imposition of a tough national security law on the territory.
The territory’s government said that new US rules — which require that products exported from Hong Kong to the US are labelled “Made in China” — breached World Trade Organization rules and that it “will take action” as a result.
Through the WTO dispute settlement system, members typically seek to resolve issues through bilateral consultations. If these fail, disputes proceed to a panel.
“US’s new rule on origin marking of Hong Kong products disregards Hong Kong’s status as a separate WTO member and violates WTO rules,” a spokesperson for Hong Kong’s commerce and economic development bureau said in this week.
The controversy over the US rules underlines the dilemma facing the Hong Kong government, which needs to support the security legislation or risk looking disloyal to Beijing. But it is also keen to maintain its image as a dynamic financial and international export hub.
Hong Kong has already been hit by a trade war between China and the US, which has led to the imposition of tariffs, because the bulk of its exports flowing to the US originate on the mainland.
The restriction on labelling products made within its borders has symbolic undertones for a territory that has operated under a semi-autonomous government since it was handed over to China from Britain in 1997.
The financial and trade hub has been buffeted by US-China tensions, which have deteriorated rapidly this year following the introduction of a national security law in Hong Kong in June. This month, the US unveiled sanctions on 11 mainland and Hong Kong individuals, including Luo Huining, Beijing’s top official in the territory, and Carrie Lam, its chief executive.
The Hong Kong government’s statement on exports came after Ms Lam said on Tuesday that would also take up the issue of US sanctions with the WTO.
The dispute over the labelling of exports follows a new announcement from the US government on Wednesday in which it said that it was suspending three bilateral agreements it had with the Hong Kong government, including those on the transfer of sentenced individuals and fugitive offenders.
The announcement also suspended an agreement that allowed for tax exemptions for shipping companies. The Hong Kong government said this would increase operating costs and “hamper the development of the shipping sector between Hong Kong and the US”.
“This certainly is a step backwards,” said Roberto Giannetta, chairman of the Hong Kong Liner Shipping Association. “We hope that the Hong Kong government and US government can sort out the differences as soon as possible so we can return to the previous status. This is not something that is helping global trade.”
The Hong Kong Shipowners Association said: “We believe keeping the tax exemption agreement would be in the interest of both the US and Hong Kong shipping sectors.”