24 March 2016
For the past few decades, Hong Kong’s business networks with mainland China and neighboring countries have positioned it advantageously for intraregional trade and investment activities. A low tax regime, a wealth of financial, logistics, legal, and accounting professionals, a transparent legal environment, and a commitment to the rule of law have enticed transnational companies to locate their headquarters in the territory, defining Hong Kong as the “Gateway to the East.” Confident in the longevity of this role, in 2001 Hong Kong designated itself as “Asia’s World City.” However, three recent events have marked a tipping point in the geopolitical relevance of Hong Kong.
Strike One: The TPP
The first of these events took place on February 4, 2016 with the signing of the Trans-Pacific Partnership. The 12 nations that are party to the TPP — Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam — have reached an ambitious new trade agreement. Significantly for Hong Kong, China is not a signatory. While the TPP will eliminate trade restrictions, tariffs, and barriers in order to facilitate trade and foreign direct investment between signatory states, it is also likely to disrupt existing patterns of trade and investment in Asia Pacific for non-signatory states in the region. As such, the TPP represents a strategic play by the U.S. government to assert its influence in the region by shifting flows of foreign direct investment and trade away from China.
Part of TPP’s approach is to achieve its aims by raising labor standards across the Asia-Pacific region, rather than by taking advantage of a pool of cheap labor at the expense of minimal labor protections, as has been the net impact of many foreign trade agreements. In this way, TPP’s architects hope not only to avoid a “race to the bottom” by improving the conditions of workers in the Asia Pacific region, but also to level the playing field for American businesses... Click here to read the full article.