Hong Kong hits out at free-trade pacts


Hong Kong Convention Centre, venue of the talks

By Alex Frew McMillan CNN Hong Kong

HONG KONG, China (CNN) -- Hong Kong's Commerce Secretary, Chau Tak Hay, had harsh words for bilateral trade agreements and regional free-trade pacts on Wednesday.

Free-trade agreements, or FTAs, "undermine the efficiency of the WTO," Chau said.

Such trade deals just increase the cost of doing business by creating more groupings and pacts to understand, he said.

The World Trade Organization meets in a little over a week in Doha, Qatar, a session that is expected to lead to a new round of global free-trade talks.

But a host of one-on-one trade deals - bilaterals - and free trade pacts such as the Association of South East Asian Nations (ASEAN) have already sought to lower trade and tariff barriers on a smaller scale.

Diplomats from Asia Pacific countries scurried at recent meetings in Shanghai to line up new deals.

Chau says Hong Kong, as a free and open market, has nothing to offer prospective partners when it comes to striking free-trade deals, Chau added, so it cannot bring other countries to the negotiating table.

It is committed to free trade but would rather see those aims tackled as quickly as possible under the World Trade Organization, he told a panel at the World Economic Forum's East Asia Economic Summit here.

A complete contradiction

Chau's comments contradicted entirely the sentiments of the future head of the WTO, who spoke immediately before him on the same panel.

"While we're working on multilateral arrangements, we shouldn't lose track of Asia free trade agreements," said Supachai Panitchpakdi, who will take over as director general of the 142-member WTO next year.

Bilateral deals and small-group pacts pave the way toward greater integration on a multinational scale, he added.

Still, Supachai said the WTO will have to decide at its upcoming meeting in Doha, Qatar, how smaller-scale regional trade agreements (RTAs) should be handled in the future.

"The WTO should be looking at ways and means to give some guidelines so that these RTAs can be building blocks not stumbling blocks for multinational agreements," he said.

Singapore's success at odds with Hong Kong

Chau's comments seemed to stem in part from the success of Singapore in lining up free-trade deals. Singapore and Hong Kong often compete for capital and trade.

Singapore has recently successfully negotiated a host of free-trade bilateral deals. It has nailed down deals with the United States, Japan, New Zealand and is working on one with Australia.

Like Hong Kong, Singapore is a relatively small economy that is very open regarding trade. So its partners have little to gain in opening up their own markets -- their companies can already do business in and with Singapore.

For instance, Mexico recently scrapped talks for a free-trade deal with Singapore when legislators realized they had nothing to gain, Chau said.

Chau said that the only motives he could see for those countries to strike deals with Singapore are "geopolitical."

The United States, for instance, is keen to keep an ally in South East Asia, one that can smooth sometimes tense relations with Singapore's Muslim neighbors, Malaysia and Indonesia.

Hong Kong, which has a separate economic system from China but a shared foreign policy, doesn't attract trade deals for political reasons, he said.

Chau's main objection to the regional trade deals is that they are unnecessary in a broader framework of free trade. When asked why his views contradicted those of the future head of the WTO, he said he would lift a quote from Somerset Maugham.

"The fine mind is distinguished from the fustian by a noble disrespect for apparent inconsistencies," he said. "I guess we are both correct."

Strangely, neither Chau nor Supachai were able to respond to each others' comments on trade pacts, though they spoke at the same session.

Supachai left by plane for another engagement before Chau spoke. Chau missed the beginning of Supachai's comments because he was delayed while addressing Hong Kong's legislative council.