Hong Kong Warns Against Revoking China Trade Status

THE threat by US lawmakers to revoke special trade status for Beijing has rudely reminded the free-wheeling capitalists in Hong Kong of their vital dependence on socialist China. The Hong Kong economy would badly suffer if the United States were to drop most-favored nation (MFN) trade status granting China billions of dollars worth of tariff exemptions, officials and industry leaders say.

If Washington rescinds China's MFN treatment, Hong Kong would see its trade in Chinese goods to the US fall 44 percent and its total trade shrink 7 percent, according to the territory's government. The Hong Kong Chamber of Commerce estimates that Hong Kong handles 70 percent of the goods shipped from China to the US.

In addition, 43,000 workers in Hong Kong would lose their jobs, and the growth of the free port's economy would be halved, the chamber says.

The loss of MFN for China ``would be a very severe blow to Hong Kong,'' says Ian Christie, director of the chamber.

President Bush agreed that revocation of MFN ``would deal a body blow to Hong Kong, the bastion of freedom and free trade in the Far East.'' He announced last week he intends to formally ask Congress to extend the preferential treatment.

Nevertheless, several US legislators have threatened to revoke China's trading privilege because of its persistent disregard for human rights.

The MFN issue has forced Hong Kong to choose between sustaining its current prosperity or making sacrifices in trade and industry in a risky attempt to safeguard basic freedoms in the future.

Hong Kong residents have reason to want to see Washington goad China into halting its human rights abuses: They will come under the rule of the mainland government in 1997. But the immediate bread-and-butter matters of industry, jobs, and trade have prompted leaders in the territory to join the mainland's call for a continuation of the status quo.

Revocation of MFN, which provides the lowest tariff treatment available, would effectively close the US market to billions of dollars of China-made products.

For instance, tariffs on some textiles - China's most lucrative category of exports to the US - would jump tenfold, from 6 percent to 60 percent. Duties China would have to pay would increase about five times, according to government statistics.

The denial of special trading rights for China would hurt Hong Kong's industrial leaders as well as its merchants. Since China began opening to foreign investment in the late 1970s, Hong Kong manufacturers have invested billions of dollars in export industries throughout southeastern China.

The executives have also bound the livelihood of millions of workers across the border to stable Sino-US trade. By undercutting that enriching commerce, the US would betray the mainlanders who are at the vanguard of reform, say Hong Kong officials and executives.

``If Americans want to delay the development of human rights in China, the best way to do it would be to revoke MFN or put forward conditions to it,'' says Mr. Christie.