Implications of the American labeling of Hong Kong’s Exports as ‘Made in China’


BY SHASWAT KUMAR

Establishing regime and supremacy has always been a culture of independent America, Russia, China and many Western European countries.  And to promote that they have sometimes initiated cold wars and trade wars. 

America and Republic of China are having a trade war from 2018, especially after the Donald trump government has taken charge of Washington. From the beginning itself, Trump has not liked Xi Jinping’s rule over Communist party led China. Specifically, U.S is not liking China’s habit of interference in Indo-Pacific and South China Sea region where U.S navy has been navigating from decades. And to become perfect rivals, both of them have put many sanctions on each other where America has always accused Chinese companies for spying and exchanging the data of their natives to CCP.

 But Hong Kong which holds a special status in China just like J&K held in India till the abolition of Article 370,  always had good relations with U.S since 1992 as part of Hong Kong policy act .

Now what is Hong Kong policy act 1992?

 It is a trade agreement between U.S and Hong Kong which states that U.S doesn’t consider latter as part of mainland China and will allow them to export goods to America . Even Hong Kong enjoys good tax exemptions from U.S under WTO agreements   and the 1992 act.

Hong Kong had a large share of its exports to U.S than to other countries till the completion of half of this year. From then it is continuously declining and has now fell by 22.3% in volume from a year earlier. The recent setback to ever-growing Hong Kong’s industries came after the announcement of Mr. Pompeo from New York this very month.

What is the announcement?

The statement from Washington proclaimed that both the countries now won’t have same trade relations and moreover no tax exemptions would be given to Hong Kong exporters . Also, they have to now label their goods ‘made in china’ even after knowing the fact that they are independent from mainland china since 1997 and would be till 2047 as a part of 50 years agreement.  Now we need to understand the reasons behind Trumps’ decision. Firstly, the rivalry between U.S and China is at its peak and secondly, they feel that Hong Kong is no more independent from China as Chinese communist party had recently stood in the way of Hong Kong’s elections in month of July this year. US alone has not put restrictions on Hong Kong, rather Australia and United Kingdom have also  joined this revolution against China and its likes by boycotting their goods and companies .

What is the impact of such a statement ?

Already the ongoing pandemic has put every other economy in the world to an unprecedented halt. And after such a harsh decision, Hong Kong’s foreign currency and exports would subsequently fall. If we talk about Hong Kong’s exports to U.S, half of the share is taken by jewelleries and most of the rest half by edible products . Now after the ‘Made in China label’, less people would buy such products in U.S and most saliently with a high trade tariff, the profit level would come down and the industrialists would feel helpless to survive in such a hard time.  Reviving such an economy will become much more difficult than usual to the native government. 

Moreover indexes currently including Hong Kong shares , hedge shares may be impacted . So this also gives inferences about the fact that there may be hindrance in capital flows into Hong Kong as a result of sanction activity undertaken by the Trump administration.

Next basics that would follow would be the suffering of people of Hong Kong as businesses there would not work properly and to cut down expenses ,the owners would thresh out many of its employees leading to mass unemployment. Everything mentioned above would lead to fall in balance of payments and country’s GDP which would ultimately lead to less development activities in the local boundary.

Finally, a new era of trade war is being set up where China is finding less space and the results are also being borne by Hong Kong. This has led to an end to U.S- Hong Kong relations currently at least. This is a complete violation of WTO rules which establishes a fair trade between countries, but America as of now is not adhering to the workings of WTO and WHO. The only ray of hope to Hong Kong is the change of government if and when Joe Biden takes the charge of Washington this late winter.

Categories: Economy

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