Excerpt from Statement by Richard H. Solomon to the Subcommittee on East Asian and Pacific Affairs, Senate Foreign Relations Committee, April 2, 1992.
Sino-United Kingdom Joint Declaration
In 1984, China and the U.K. settled the future status of Hong Kong and detailed the basic policies of the PRC [People's Republic of China] regarding Hong Kong in the Joint Declaration, a formal international agreement. China will resume the exercise of sovereignty over Hong Kong, which will be governed as a Special Administrative Region of China until, at least, the year 2047. The Chinese Government will be responsible for Hong Kong's foreign affairs and defense, just as the U.K. Government has those responsibilities now.
Under the agreement, Hong Kong will enjoy a high degree of autonomy in all other matters. The Special Administrative Region will have its own government and legislature composed of local residents. The fundamental rights and freedoms of its residents are to be ensured by law, and independent courts will enforce these laws. China's socialist system will not be imposed in Hong Kong. Hong Kong will continue to participate after 1997 in international agreements and organizations which are open to non-states, such as the GATT [General Agreement on Tariffs and Trade] and APEC [Asia-Pacific Economic Cooperation].
The United States is not a party to the Joint Declaration, nor are we in any sense a guarantor. The United States has no special standing in regard to the agreement. Ordinarily in international law, states do not take formal positions on bilateral agreements to which they are not a party.
However, the United States strongly supports the Sino-U.K. Joint Declaration and its objectives. We believe that the Joint Declaration provides the basis for maintaining Hong Kong's separate--and increasingly democratized--political system and private enterprise economy for, at least, the next fifty years.
Our interest over the next few years is that the transition from U.K. to Chinese sovereignty be smooth, that Hong Kong's current prosperity and favorable human rights situation continue, that democratization advance, and that the U.S. relationship with Hong Kong be preserved and strengthened. Before 1997, it is primarily incumbent on the PRC and the U.K. Governments to take the necessary steps to preserve Hong Kong's essential character; after 1997, that task will be China's alone. Obviously, how China exercises its sovereignty over Hong Kong will affect American attitudes toward China.
Hong Kong-China Economic Relations
China has substantial interests and compelling incentives to respect its obligations and seek to preserve the conditions that have allowed Hong Kong to prosper. China's stake in Hong Kong's success is considerable.
-- China has a clear and growing economic stake in Hong Kong's continued prosperity: the PRC is the largest foreign investor in Hong Kong, and Hong Kong is the largest source of foreign investment in China and an important economic and financial entrepot to the outside world.
-- The economic integration of South China with Hong Kong has been key to the remarkable success of the Special Economic Zones adjacent to Hong Kong and the Pearl River delta, which has made South China an engine of Chinese economic growth.
-- China views its success in Hong Kong as something that may have a bearing on its future relations with Taiwan.
The symbiotic economic relationship between southern China and Hong Kong grew out of China's policies of modernization and opening to the outside in 1979. These trends accelerated dramatically after the 1984 Joint Declaration. Lured by investment opportunities, Hong Kong businesses spread into China, relocating factories processing goods for export. Today, more than 20,000 Hong Kong companies employ some 3 million PRC workers in these plants. Many more workers depend indirectly on these enterprises for their livelihood.
Foreign investment, much of it from Hong Kong, has generated economic development and wealth in China. This has led Chinese companies to invest in Hong Kong, strengthening ties between the two economies. Chinese-owned firms participate in infrastructure projects; invest in the property market and stock exchange; and operate taxi fleets, hotels, and restaurants. China has very substantial interests in Hong Kong's banking sector. Chinese provincial and municipal traders and construction and manufacturing units have also set up companies in Hong Kong. These interests offer China compelling incentives not to tamper with Hong Kong's economic system.
After 1997, the world will continue to engage in economic relations with China through Hong Kong. By that time, mainland firms will have had more than eighteen years of on-the-job training in how to do business the Hong Kong way. They will use Hong Kong as a base to increase their trade investment, and financial interchange with the rest of the world just as foreign firms now use Hong Kong as a bridge to China.
Deng Xiaoping's January visit to Guangdong Province and particularly to Shenzhen, the Special Economic Zone on the Sino-Hong Kong border, was symbolic of South China's success and the importance attached to it for China's future. Subsequent to Deng's visit, China's Politburo publicly issued an endorsement of Deng's policies of economic openness and reform which, it stated, should be followed for the next 100 years. These developments should reenforce the positive trends which have created an integrated and rapidly growing market-oriented economy in southern China. Continued prosperity of this economy, which also involves investments from the United States, South Korea, and Taiwan, offers perhaps the best guarantee that Hong Kong will remain a financial, manufacturing and communication center.
Hong Kong's Political Future
In its last years under U.K. rule, Hong Kong is developing its own unique political identity. Since the signing of the Joint Declaration, a process of democratization has begun in Hong Kong and brought the partial realization of China's stated intention that the Hong Kong people themselves will rule the territory after 1997. China's commitment in the Joint Declaration to a high degree of autonomy for Hong Kong offers hope for continuation of this process after 1997.
As I noted in my departure statement during my visit to Hong Kong last month, a fully successful transition must safeguard human rights, even as a basis for continued economic prosperity. Therefore, we view with some concern China's criticism of Hong Kong's Bill of Rights. In our view, this legislation ensures that the Hong Kong Government, and the Hong Kong Special Administrative Region, which is to follow it, has in place a systematic process to protect human rights.
In this regard, we would also note with concern China's media attacks on Hong Kong's democratically elected Legislative Council members and its appointment of 44 "Hong Kong advisers," both of which suggest unease with the democratic process that bears watching. I would also note that, since 1984, some of the activities of the New China News Agency, Beijing's de facto representative office in Hong Kong, have periodically fueled controversy that has affected confidence. We believe that it is in China's best interests to respect the expressed will of the people of Hong Kong and to refrain from any action which would call into question the future protection of internationally recognized human rights and fundamental freedoms in Hong Kong.
In the next few years, the trends of economic symbiosis and growth in political awareness will emerge more clearly. What will be visible is a Hong Kong more highly integrated with China but no less integrated with the rest of the world, a Hong Kong which still functions as an open society with an independent legal system and where civil liberties continue to be respected. That is what the Joint Declaration intends, and that is what the people of Hong Kong expect.
U.S.-Hong Kong Relations
The United States has significant interests in Hong Kong which warrant concern for the success of the 1997 transition to Chinese rule. Our close attention is in keeping with the admiration and respect which Hong Kong's residents have won over the years by creating one of the most vibrant and productive societies on earth.
Our economic stake in Hong Kong's future is substantial. The United States has more than $7 billion in investments in Hong Kong. Over 900 U.S. firms have offices, and over 21,000 Americans reside there. The United States is Hong Kong's largest market. Hong Kong is our 14th largest trading partner. In 1991, U.S. exports to Hong Kong amounted to $8.1 billion, and U.S. imports were worth $9.3 billion. Put another way, each Hong Kong resident bought a staggering $1,300 worth of U.S. products last year. American business has a great deal to contribute to Hong Kong's future. U.S. companies are competing for contracts in the project to develop the new airport and container facilities in Hong Kong.
The United States also has a deep interest in protecting human rights in Hong Kong, as we do throughout the world. Because Hong Kong residents have long enjoyed respect for their basic human rights, this aspect of the transition merits the special attention of the United States and the world.
U.S. Trade, Cultural and Legal Activities
We are not here today to discuss MFN [most-favored-nation status] for China, but I would be remiss if I did not point out that this is the single most important U.S. trade policy measure affecting Hong Kong. In view of the increasingly close economic integration of Hong Kong and southern China, the United States cannot impose prohibitive tariffs on Chinese goods and imagine that Hong Kong would escape the inevitable serious economic consequences. Tens of thousands of Hong Kong workers would lose their jobs, and business confidence would sustain tremendous damage. Such a step would be inconsistent with Congress' concern for Hong Kong.
That concern has, before today, manifested itself in congressional passage, with Administration support, of provisions in the immigration act of 1990, which were specifically directed at Hong Kong. These measures ensured that Hong Kong would not be amalgamated into China's immigration quota in 1997. The provision assisted in creating an immigration "safety net" for Hong Kong by allowing most immigrant visa recipients to delay decisions on leaving Hong Kong until as late as 2002. These provisions have started to make a small but noticeable contribution to giving talented Hong Kong residents the confidence to stay in the territory.
Many of Hong Kong's talented residents have been educated in the United States, more than 55,000, in fact. Currently, 12,000 Hong Kong residents are enrolled in American universities. In recognition of these increasing cultural ties, the U.S. Information Agency is helping establish a Center for Hong Kong- U.S. Educational Exchanges at the Chinese University of Hong Kong. We are also working hard to establish a Fulbright program for Hong Kong residents to come to the United States for academic studies, as Americans have gone to Hong Kong for years. This would add yet another dimension to the flourishing existing network of public and private exchanges.
The Administration has also reviewed U.S. export control regulations with a view toward facilitating export of high- technology goods to Hong Kong. Our desire is to meet the needs of Hong Kong's increasingly advanced economy for high-technology goods and to make sure that American companies are competitive in the Hong Kong market. Once we have fulfilled procedural requirements, we hope to announce new regulations taking positive steps in this area.
We have also begun the process of negotiating agreements with the Hong Kong Government, which we expect to extend beyond 1997. At present, from civil aviation to extradition, almost every U.S. agreement which relates to Hong Kong is actually a U.S.-U.K. agreement applied to Hong Kong. Under international legal principles, such agreements will lapse with the change of sovereignty in 1997, absent any specific arrangement otherwise with the new sovereign.
By building a new framework of agreements in advance of reversion--a framework more specifically adapted to Hong Kong's circumstances--to replace existing U.S.-U.K. agreements, the United States is lending practical support to the Joint Declaration's goal of preserving Hong Kong's position as a leading center of international commerce and finance.
McConnell Bill
It is in this context that we support the goal of Senator [Mitch] McConnell's bill of revising U.S. law to ensure that U.S. legal requirements enable the United States to continue to interact with Hong Kong after it becomes a special administrative region of the PRC. In the Sino-U.K. Joint Declaration, and its own basic law for Hong Kong, China has enunciated a policy of "one country, two systems" that it will follow with respect to Hong Kong. However, if left unchanged, our own law might force us to operate on a "one country, one system" basis, to the disadvantage of Hong Kong after 1997.
The extensive commercial, cultural, transportation, communication, and other relations that U.S. citizens and companies now maintain with Hong Kong and its people are possible because, for most purposes, Hong Kong is treated as a part of the United Kingdom under U.S. law. In a few important areas, notably the rights and obligations accorded under the GATT and related agreements, Hong Kong participates and receives favorable treatment (e.g. most-favored-nation tariff rates) in its own rights. Finally, for a few purposes--notably immigration and textile quotas--U.S. law now treats Hong Kong as a separate territory.
The result of this treatment is that Hong Kong receives most of the advantages under U.S. law of being part of the United Kingdom, with a few advantageous modifications that give effect to the territory's economic autonomy and cultural distinctiveness from the United Kingdom. Most important, Hong Kong is subject to none of the U.S. domestic legal constraints that limit our commercial, cultural, and other relations with the PRC. Statutes now in force set forth mandatory rules that apply to China by name, or to "states," "countries," or similar terms. These statues, which include the Jackson-Vanik provisions and the current China sanctions legislation, could require the imposition on Hong Kong of restrictions and disabilities that would be inconsistent with our desire to respect Hong Kong's promised autonomy from the PRC.
We, therefore, would welcome a bill that establishes the authority of the U.S. Government to treat Hong Kong, where appropriate, as a nonsovereign entity which is distinct from the PRC for purposes of U.S. domestic law. Such a bill would be in full keeping with our intent as a major partner of Hong Kong to assist the United Kingdom and China in achieving the goals of the Joint Declaration.
(The complete transcript of the hearings will be published by the committee and will be available from the Superintendent of Documents, U.S. Goverment Printing Office, Washington, D.C. 20420)