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HONG KONG COALITION OF SERVICE INDUSTRIES
Report on the "Hong Kong Services 2000 Study
April 2000
| Stephen Ching |
| Andrew Kao |
| Wing-Fai Leung |
| Clement Wong |
| Anming Zhang |
DEPARTMENT OF ECONOMICS AND FINANCE |
| FACULTY OF BUSINESS |
CITY UNIVERSITY OF HONG KONG |
| Anming Zhang |
| DEPARTMENT OF ECONOMICS AND FINANCE |
| FACULTY OF BUSINESS |
| CITY UNIVERSITY OF HONG KONG |
EXECUTIVE SUMMARY
1. Introduction
At the end of the Uruguay Round, the World Trade Organization (WTO) decided that another round of negotiations on the liberalization of trade in services under the General Agreement on Trade in Services (GATS) be mandated to start on the 1st January 2000. This has now become known as “Services 2000.”
Hong Kong is the most service-oriented economy in the world: the services sector now accounts for 85% of Hong Kong’s gross domestic product. In his third Policy Address last October, the Hong Kong Special Administrative Region (SAR) Chief Executive C. H. Tung expressed his desire to see Hong Kong become a world-class, cosmopolitan city comparable to New York and London. Services liberalization and globalisation will play a major role in achieving this vision. Hong Kong thus has a major stake in multilateral trade policy-making in services.
To prepare better for the GATS negotiations in 2000, the Hong Kong Coalition of Service Industries (HKCSI) launched a study entitled, “Opportunities from Liberalization of Trade in Services – The Private Sector’s Interest.” The primary objectives of the project are to:
It is hoped that the project can contribute to “good” policy making in the WTO that is of commercial relevance to Hong Kong, and to enable Hong Kong better to position itself as an international trade and investment destination in services for potential investors.
To fulfil these objectives, the project was divided into four components: (1) compilation of the Handbook on Liberalization Commitments under the GATS, (2) interviews with representative members of the HKCSI, (3) a large-scale questionnaire survey, and (4) newsletters and seminars.
Two handbooks have been prepared to provide the most up-to-date information on liberalization commitments made by Hong Kong and its major trading partners. The electronic handbook provides user-friendly on-line access to the 18 economies’ full commitments. It provides a cascade menu for sector selection and allows multiple country selection and retrieval of information with any combination of market access, national treatment and modes of supply. The written handbook provides an executive summary of the economies’ commitments. It highlights positive commitments, simplifies technical terms and integrates sector-specific commitments with horizontal commitments and MFN exemptions.
During the initial phase of the study, we successfully interviewed 14 service companies that currently are members of the HKCSI: seven from the financial services sector, three from professional services, and four from other service sectors. Person-to-person interviews lasting for between 30 to 60 minutes were conducted with senior representatives from each of the companies. The questions addressed problems in accessing foreign markets, unfair national and MFN treatment, transparency and dissemination of laws and regulations, and infringements of intellectual property rights. We also asked for their wish lists and their advice to the Hong Kong SAR Government on the strategies and approaches to be presented by Hong Kong representatives at the Services 2000 negotiations.
A second round of 12 interviews was conducted after the results of the questionnaire were analysed. We focused on three sectors: information and telecommunication services, e-commerce, and transport services. These emerged as important sectors from the Services 2000 viewpoint, yet not enough information was readily available on them. The additional interviews were thus very helpful in giving a more in-depth analysis of these sectors.
The main component of our study was a large-scale questionnaire aimed at the development of a Hong Kong private sector “wish list” of the issues that related companies would like to see addressed during Services 2000. The feedback and advice collected in the first round of interviews were used as an important input in the survey design. In addition, we attempted to make the wish list compatible with the GATS structure so that the governments concerned will have no difficulty in comparing the wish list with current commitments or future liberalization plans. Thus the questionnaire follows the classifications and concepts of special terms under GATS as closely as possible. Our sector classification follows GATS classification with only minor adjustments.
The central part of the questionnaire was used to derive the wish list. We followed a systematic approach in obtaining these. First, the two service sectors which the respondents wish to see liberalized are identified. Then the respondents are asked to describe the mode(s) of supply, business volume, and use of e-commerce in the two selected sectors. The main part of the survey provides a list of 38 wishes for the respondents to choose from. The respondents indicate their wish list for the two sectors by checking the appropriate boxes next to the wishes and indicating the economies (including Hong Kong) that their wishes are directed to.
These 38 wishes are derived from consultations with business practitioners whom the research team interviewed and the team’s own research. To make the wishes relevant for Services 2000 negotiations, the wishes are organised into eight categories within the GATS framework:
The report is based on an analysis of the questionnaire results, interviews with companies based in Hong Kong, WTO/GATS commitments (the Handbooks) and our own research on the subject. The report has three purposes. First, it summarizes the private sector’s wishes for liberalization of trade in services for 2000 and beyond. Second, it discusses the possibility of business opportunities for Hong Kong service providers in the context of services deregulation and liberalization. Third, it discusses the implications of these wishes for the upcoming Services 2000 negotiations and provides recommendations. In the executive summary, we shall focus on the wish list and recommendations for Services 2000. Discussions on sector-specific wishes and business opportunities can be found in the report.
2. Cross-sector, Horizontal Wishes
A total of 9,438 wishes were recorded by the 114 companies who returned the questionnaire. Table 1 presents the breakdown of the wishes by main service sectors. Six main service sectors account for 89% of all wishes. These are, in descending order in terms of the number of wishes: financial services, business services, information technology (consisting of information services and telecommunication services), distribution services, construction and related engineering services, and transport services.
Table 1. Distribution of wishes by service sector
Notes:
- Information technology consists of information services (1,002 wishes) and telecommunication services (504 wishes).
- Environmental services, education services, health-related and social services, and tourism, travel and leisure services.
Table 2 presents the breakdown of the wishes by country. Most wishes are directed towards Asian economies. The top eight economies (including Hong Kong) for which the respondents have wishes are all located in Asia. Starting from the top, these are: China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Japan, and Thailand. Together, they account for 85% of the entire number of wishes. In particular, the first three economies (China, Hong Kong, and Taiwan) account for 59% of the wishes. China alone accounts for 37.7%, underscoring the role of Hong Kong as the gateway to China for many multinationals.
Table 2. Distribution of wishes by country
Table 3 presents the breakdown of the private sector’s wishes in terms of the eight wish categories, In general, the private sector’s wishes are quite well balanced among the eight categories. This shows that Hong Kong service providers face a wide range of problems in many aspects of trade in services. Table 4 lists the ten most frequently mentioned individual wishes. Note that three wish categories account for nine of the top 10 wishes. They are market access – establishment requirements (4 wishes), information flow and transparency (3 wishes) and national treatments (2 wishes). Major wishes are summarized as follows.
Table 3. Distribution of wishes by wish category
Table 4. Top ten individual wishes
All three wishes are among the top 10 wishes in the survey. In particular, relaxing restrictions on the scope of business activities stands out as the most popular wish in the entire survey. In an increasingly global marketplace, the ability to offer a one-stop, total solution package of services to their customers is absolutely essential for service providers so they can retain customers and realise economies of scale and scope.
(i) to set up inquiry points for dissemination of trade related laws and regulations;
Article III of GATS on transparency stipulates that “Each Member shall publish promptly and, except in emergency situations, at the latest by the time of their entry into force, all relevant measures of general applications which pertain to or affect the operation of this Agreement (i.e. GATS).” Apparently, this overriding principle has not been complied with by WTO member economies covered in this survey. (China, Taiwan and Vietnam are yet to join the WTO.) Out of the 359 wishes to set up inquiry points to disseminate trade-related laws and regulations, more than half of those wishes are directed to WTO member countries.
The wishes to improve the transparency of court rulings on business disputes underscore another hazard of running a business in foreign economies. China alone accounts for 50% of these wishes. The result is consistent with the incidences of arbitrary imprisonment of Hong Kong businessmen in the mainland. Surprisingly, Hong Kong (along with South Korea and Taiwan) is also among the most frequently-mentioned economies where respondents wished to improve the transparency of court rulings. This may reflect growing concern from the business community about the Hong Kong SAR Government’s resolve to uphold the rule of law in Hong Kong, given a number of recent high-profile court rulings.
3. Horizontal Recommendations for Services 2000
Given its open regime, Hong Kong has relatively little room to offer trade concessions to other economies. Therefore, Hong Kong should strive to strengthen the fundamental principles of GATS and schedules of specific commitments in order to enhance their clarity and effectiveness. More importantly, Hong Kong should give top priority to supporting a free and competitive market environment for e-commerce to flourish. The Hong Kong SAR Government recognises the strategic importance of e-commerce for Hong Kong to transform itself into a leading knowledge-based, world city in the 21st century. Unlike other service sectors where trade restrictions already exist, e-commerce touches on many sectors and is still largely unregulated so far. It is easier and more cost-effective to prevent trade restrictions than to remove existing ones. We recommend the following cross-sector, horizontal recommendations.
3.1. Facilitate e-commerce
1. Improve infrastructure to facilitate e-commerce
A well-functioning e-commerce market environment requires excellent infrastructure. The Hong Kong SAR government can take a more proactive role in setting up e-commerce infrastructure. Recently, the Singaporean Government set up a B2B e-commerce portal called SESAMi.NET to facilitate B2B transactions. SESAMi will be interoperable with other similar portals including Commerce One in North America, British Telecom in Europe, and NTT in Japan. It can automate procurement of products and services from on-line catalogues; users can check suppliers’ product prices and availability and perform comparison shopping. The Hong Kong SAR Government should do the same to promote e-commerce in Hong Kong.
Another infrastructure that needs to be improved is an on-line payment system. Hong Kong definitely lags behind Singapore in this area. The Hong Kong SAR Government should encourage banks in Hong Kong to develop such an on-line payment system. Our experience with the Real Time Gross Settlement system should be a good starting point. Banks can combine the e-mail capability of the Internet with their own expertise to process payments electronically through the interbank payment network to offer on-line payment services.
2. Set up regulatory framework for e-commerce
E-commerce is still at an early stage of development, and many trade-related issues are still emerging as business practice, government policies, and technology evolve. Imposing regulations on e-commerce prematurely runs the risk of stifling its growth. E-commerce should be allowed to develop and evolve on its own with minimum government regulations.
On the other hand, we do not support a do-nothing approach. First, not all regulations restrict the growth of e-commerce. The lack of a regulatory framework has been a drag on the development of e-commerce in Asia. Second, one can predict that individual countries may start to rein in their Internet activities soon, whether the WTO addresses certain issues or not. Hence, it is important for Hong Kong to take a proactive role in laying down some pro-competitive basic principles. We have two recommendations in this respect:
3. In order to avoid further complications, some criteria to differentiate between goods and services must be agreed upon. This is a medium-term solution and may not be solved immediately, but discussion should be started as soon as possible in this Round. Before such criteria are established, however, we could leave the issue to the dispute settlement mechanism. Over the longer term, when GATS converges with GATT, this issue should go away.
4. We recommend the WTO makes permanent the 20th May, 1998 Moratorium on Customs Duties on Electronic Transmissions.
5. Clarify the coverage of e-commerce under GATS
In principle, the concept of “technological neutrality” would imply that market access and national treatment commitments be extended to electronic transmission of services. However, as e-commerce is a new way of doing business, many countries would not have factored it in when they made their commitments. Therefore, there is an urgent need to clarify the coverage of e-commerce under the existing GATS commitments in order to remove any uncertainty. We recommend that all the commitments be extended to the context of electronic means of provision in accordance with the technological neutrality principle.
A number of new e-commerce-related services have developed since the Uruguay Round. For example, electronic authentication services, Internet advertising services, and Internet domain name assignment services are all new. We recommend these new services should be covered by existing commitments. If necessary, countries should undertake to make additional commitments in light of these new Internet-related services that have not existed before.
The current WTO obligations, rules and disciplines under GATS, GATT and TRIPS should be applied to e-commerce transactions, including such cardinal principles as Most-Favoured-Nation (Article II), Transparency (Article III), Domestic Regulation (Article VI), and National Treatment (Article XVII).
Access to a telecommunications network is an integral part of e-commerce. It is, therefore, crucial that Internet service providers (ISPs) be granted non-discriminatory access to telecommunications networks. Although the existing provisions in the BTAs should provide adequate safeguards, ISPs in many countries such as China and Japan are still paying very high interconnection fees to the dominant teleom providers. We strongly recommend that an explicit amendment be added to the BTAs to guarantee market access of ISP to telecommunications networks.
6. The most basic requirement of e-commerce is access to a personal computer. Expanding and accelerating implementation of the Information Technology Agreement should be a top priority in the e-commerce negotiations.
7. The WTO should extend technical assistance to developing countries to ensure their
full participation.
3.2. Strengthen GATS principles
Foreign companies can be put in a disadvantaged position vis-a-vis local companies as they are less familiar with local laws and regulations. This information disadvantage can constitute a form of protectionism and deter market entry. This problem is borne out in our survey. “Set up inquiry points to disseminate trade information” and “improve the transparency of court rulings on business disputes” are the fourth and fifth most popular wishes among the respondents (Table 4). A fair, open, and efficient court ruling procedure, in particular, helps reduce the political risks of foreign companies. From their perspective, transparency in court rulings can provide more timely and relevant assistance to their day-to-day operations than the WTO dispute settlement mechanism that only operates at the country-to-country level. We have two recommendations to improve transparency:
From a strategic point of view, requesting other countries to improve their transparency is a less demanding request than seeking a concession in market access. Hong Kong trade negotiators should try to get as much mileage in this respect as possible.
Unlike trade in goods, trade in services is intertwined with domestic regulations. Liberalization of trade in services cannot be achieved without substantial domestic regulatory reforms. Trade barriers are easily embedded in domestic regulations. From the private sector wish list, there is ample evidence to suggest that “cumbersome domestic regulations” such as complicated customs clearance procedures, unnecessary technical standards for product certification, professional qualifications, licensing requirements and foreign exchange controls on profit repatriation do constitute barriers to trade. Some domestic regulations designed to protect the incumbents against new entrants, such as regulations on marketing practices, distribution outlets and pricing, also limit trade although they do not discriminate against foreign firms.
We recommend that Hong Kong make a call for other economies to state the domestic policy objectives behind their policies to make sure that these are kept to the minimum necessary. In particular, given the importance of domestic regulations, we recommend that deepening GATS Article VI (Domestic Regulation) be treated as a priority issue in the upcoming negotiations. For example, the legitimacy of regulations on qualification of professional standards need to be demonstrated (e.g. consumer protection). We recommend that principles established for accountancy by the WTO Working Party on Professional Services be extended to other professional services.
Violation of national treatment is a major complaint in this survey. For example, wanting non-discriminatory licensing requirements is the second most mentioned wish. At present, GATS Article XVII governing national treatment does not oblige countries to state the public policy objectives behind exemptions from this principle and does not, as in the case of MFN, impose a phase-out period on such exemptions where this applies. The Hong Kong SAR Government should suggest that explicit public policy objectives served by national treatment exceptions be stated to improve transparency.
Many service sectors are intrinsically imperfectly competitive due to increasing returns to scale or information imperfection. They also tend to be highly regulated because of the key role they play in the economy. Liberalisation in these highly concentrated and regulated sectors will not be successful without accompanying sector-specific regulatory principles to ensure market access for foreign service suppliers. We recommend that similar regulatory principles to ensure competition as set out in the BTA Reference Paper be extended to other service sectors as well.
3.3. Improve GATS schedules of specific commitments
It is ironic that by their own lack of clarity, the schedules of specific commitments themselves violate the GATS transparency principle. The ambiguous and user-unfriendly design of these schedules has made them less effective and somewhat opaque to the business community. In order to improve the effectiveness of these schedules, steps must be taken to enhance the architecture of GATS Article XX (Schedules of Specific Commitments).
First, the default status of the limitations in the schedules must be clearly stated. For instance, the UK’s status of commitments on foreign direct investments in accounting services is not clearly stated in the consolidated European Communities’ Schedule of Specific Commitments.
Second, the schedules’ format must be standardised. For example, some countries do not follow the WTO services sectoral classification in the schedules (e.g. Singapore) while others fail to list the relevant sector codes (e.g. Singapore, the Philippines) without reasonable ground. These practices make it difficult to understand the schedules’ precise coverage.
Third, the WTO services sectoral classification schemes, which basically follow the United Nations Provisional Central Product Classification Code (UNCPC), do not include new emerging sectors like biotechnology, nor do they reflect the reality of different degrees of market openness for trade in some services (e.g. legal advice or representation services on host country law, third country law and international law). We recommend that the GATS scheduling guidelines and GATS sectoral classification schemes be reviewed and revised.
The degree of interdependence between alternative supply modes should be taken into account. For example, the value of a commitment in one mode of supply can be undermined by the absence of a commitment in another. This issue is becoming more important as the border between trade and investment becomes blurred, and different modes of supply have become mutually supportive means of providing services in an increasingly global marketplace.
3.4. Demand a relaxation of establishment requirements
The trends in market reform and technological innovation have prompted once-protected firms in certain sectors such as financial services and telecommunications to improve their efficiency and seek business opportunities overseas by merging with each other and teaming up with foreign companies. In Europe and Japan, financial institutions are merging or forming strategic alliances. ISPs and traditional telecommunication operators are merging. Foreign telecommunications companies are foraying into the Taiwan telecommunications market by forming joint ventures with local operators. These developments present great opportunities for Hong Kong service providers to expand their operations to overseas markets and capture economies of scale and scope. One common problem plaguing Hong Kong service providers is that the local market is too small to allow for economies of scale and scope. In the upcoming Services 2000 negotiations, Hong Kong should demand other countries lower their establishment restrictions, especially in relaxing those on the scope of business activities.
3.5. Facilitate movement of natural persons
This survey shows clearly that there is a strong demand for more relaxed immigration regimes to streamline the movement of natural persons. This is in line with the increasing globalisation of many service sectors such as financial services. The need to move professionals and managerial personnel frequently across national borders becomes an integral part of trade and investment. We strongly recommend that Hong Kong should negotiate for more liberalization in this area with other countries, particularly in the business services sector.
3.6. Encourage private sector involvement in Services 2000
One of the dangers facing the WTO forum is the waning participation and interest from the private sector. From our survey and interviews, the private sector does not seem to be well-informed about GATS and its impact on their business. As the next round of GATS negotiations could last for several years, the Hong Kong SAR Government should set up standing committees with representatives from service providers, service users and the relevant regulatory authorities. This could enhance communication between the Government and the private sector so that consensus can be reached. Such broad-based support played a vital role in the success of the telecommunications negotiations. Another form of private sector participation that should be encouraged is that between the WTO and representatives from service sectors. For example, several major banks are currently working with the WTO to draft global rules defining the parameters of electronic cross-border banking services.
4. Sector-specific Recommendations for Services 2000
4.1. Financial services
4. Hong Kong should promote the newly established Growth Enterprise Market (GEM) as the fund raising centre for the high-technology sector in the Greater China area. According to International Data Corporation, China’s information technology sector is expected to grow to US$30 billion by 2003. The impending entry of China to the WTO will further accelerate the development of this sector. A liquid stock market is becoming increasingly important in this process so that venture capitalists can cash in their investment. GEM can play a crucial role in this process. Although other Asian economies such as Singapore are forming their own second boards, there are several factors that give GEM an advantage. First, Hong Kong is the closest market to China. Second, unlike other Asian currencies, the Hong Kong dollar is pegged to the US dollar. Since the introduction of the seven-point measures by the Hong Kong Monetary Authority in late 1997, the operation of the currency board system has been strengthened. Third, GEM can accommodate Taiwan-based IT firms that have invested in China. These firms are banned from listing in both the mainland and Taiwanese stock markets. Hong Kong should seek to capitalize on this unique situation and promote itself as the financing base of the IT industry in Greater China.
We recommend the following policies:
(b) Demand WTO members relax restrictions on domestic companies seeking listing on foreign stock exchanges and simplify the approval process.
5. In view of the financial market liberalization policies pursued by many Asian economies over the past few years, some of the commitments they made in the 1997 Financial Services Agreement may now be outdated. Hong Kong should demand a review of these commitment schedules so that they can be brought in line with current practice.
4.2. Business services
1. Use of Internet to facilitate mutual recognition of professional qualifications
The most common impediments to free trade of accredited professional services are licensing and qualification requirements. Recognizing this and wanting to discourage regulatory measures that constitute unnecessary barriers to the supply of accredited professional services, the WTO has set up a Working Party on Professional Services, and the first task it completed was to produce a guideline for mutual recognition of qualifications in the accountancy sector. We suggest that the connectivity of the Internet could greatly facilitate the implementation of mutual recognition. Putting relevant regulations and information such as training requirements and accreditation conditions on the World Wide Web can enhance the operational efficiency and transparency of the licence granting procedure.
2. Set up liaison committees
Given the technical nature of many accredited professions, the Hong Kong SAR Government should consult the professional services sector adequately before reaching any new service agreements. For example, standing committees should be set up to collect opinions from the professions. The government officials responsible for regulating the professions and chairmen of the professional societies should be included in these committees. These are the people who fully understand the professions and can give useful advice to the negotiations.
4.3. Information services and telecommunication services
1. Establish an independent regulator
The most urgent challenge for the telecommunications sector negotiation is to set up a pro-competitive regulatory environment as laid down in the Telecommunications Annex and the Reference Paper. To this end, an independent telecommunications regulator with investigative power is crucial in order to implement licensing, pricing, and interconnection policies. As the experience in some Asian countries illustrates, an independent regulator with credible authority is crucial in enforcing telecom deregulation. A more proactive role for the Office of Telecommunications Authority is therefore in order.
2. Strengthen the dispute resolution mechanism
The language of the Annex on Telecommunications and the Reference Paper is rather general. As a result, these papers may not be very useful in providing proper guidance to the dispute settlement panel when disputes do arise in areas such as interconnection, pricing and allocation of resources. We recommend that these two disciplines be strengthened.
Given that the telecommunications market in many countries is still highly concentrated, business disputes are likely to occur in relation to interconnection and pricing issues. An impartial, credible and transparent dispute resolution mechanism is crucial. It would be advisable for countries to consider specialised courts for handling telecommunications disputes to expedite the process in a professional manner. An independent tribunal, as in the case of India, can be set up to balance the power of the regulator. To improve further transparency, the results of any hearing must be published. Some minimum standards of due process must be adhered to.
3. Relax the establishment requirements of Internet services.
Given the importance of e-commerce for the region, more Internet service licences should be granted. Foreign equity ownership should also be relaxed due to the particular feature of Internet. In most Asian countries, domestic venture capital is in scarce supply and bank loans are hard to come by for Internet start-ups. Since Internet investment does not depend on bricks and mortar, a typical 50-50 joint venture would impose a severe cash requirement on the local partner since fixed assets (such as land and buildings) that are typically used as local contributions are not needed in an Internet project.
4. Update the BTA Schedules
Some countries have made commitments in the BTA which are less open than those prevailing in practice. It is recommended that the market access commitments under the BTA be reviewed and revised so that they are in line with current practice.
4.4. Distribution services
1. The concerns for transparency of trade regulations and court rulings arise from the fact that a distribution services provider needs to deal with various levels of administrative bodies and comply with many local regulations. Governments should set up inquiry points to provide information on related regulations and operation restrictions, particularly for the distribution services.
2. Distribution services are closely related to flows of goods. The removal of trade barriers caused by different product technical standards and complex customs clearance procedures will help the development of the distribution services. The use of EDI by customs and traders should be encouraged to expedite and streamline customs clearance and approval processes.
4.5. Construction and engineering services
Construction services still restrict to foreign entry in many countries. Requirements of track records for local construction experience effectively set up barriers to entry for foreign firms. The complicated procedure of applying for licenses also blocks foreign firms from entering the market. The results of these protective measures harm consumers not only in terms of higher prices but also through the construction of substandard buildings. Allowing respectable international construction firms into national markets helps promote construction standards and avoid construction works being carried out by unqualified pesonnel. We recommend that these burdensome and discriminating licensing requirements be relaxed.
2. More liberal immigration policy
Restrictions on personnel movement are a major concern in the buildings and civil engineering sectors. This reflects the importance of labour inputs in construction services. Thus agreements on movement of natural persons under GATS are particularly important for the construction sector. Late liberalization on personnel movement only hurts the globalization of this sector.
3. Review of schedule of specific commitments
A large number of WTO member countries have inscribed “Unbound”, with an annotation of “not technically feasible”, in cross-border supply of their schedules of commitments. However, the recent development in Internet and telecommunications technology allow blueprints and designs to be transmitted electronically, and possibly certain pre-erection work such as site investigation may be conducted cross-border. Hence, there are rooms for the present commitments made by those WTO member countries to be revised or updated.
4.6. Transport services
1. Wishes concerning trade facilitation should be addressed in Services 2000 negotiations. Particular concerns of Hong Kong companies include simplification of customs clearance procedures, and elimination of unnecessary practices for certification and testing of products.
2. We recommend that restrictions on inter-modal and on port and airport freight handling rights be reduced or eliminated. This might be done in Services 2000 by extending GATS to these areas.
3. When the Annex on Air Transport Services is reviewed by the Council for Trade in Services, consideration should be given to improving the trade descriptions and classifications concerning the three service areas, as well as new services, if any, to be covered by GATS.
4. Hong Kong has already been very liberal in its bilateral air treaties and significant efforts are underway to make these more open. Care needs to be taken with respect to further liberalization in Hong Kong’s “fifth freedom” rights. Just as domestic routes in the US, EU, Canada, Japan and others are closed to foreign carriers, countries are very cautious in granting fifth-freedom rights. Given its superb geographical location, these rights granted by Hong Kong are very valuable commercially. As such, they may be considered as Hong Kong’s leverage in the Services 2000 negotiations. When Hong Kong gives fifth-freedom rights, it needs to ensure it receives something in return.
5. The Hong Kong maritime industry requests that the US abandon the Jones Act so that Hong Kong ships can operate in the US domestic market
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