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Lord Strathclyde: My Lords, at a convenient moment after 3.30 p.m., my noble friend Lord Mackay of Ardbrecknish will, with the leave of the House, repeat a Statement that is to be made in another place on EMU regulations.

25 Nov 1996 : Column 12

Hong Kong Economic and Trade Office Bill

3.9 p.m.

The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, I beg to move that this Bill be now read a second time.

The purpose of this Bill is to provide the future Hong Kong special administrative region's London economic and trade office with a limited range of privileges and immunities. At present the Hong Kong Government operate a number of economic and trade offices around the world. They have offices in Brussels, Geneva, Washington, New York, San Francisco, Tokyo, Sydney, Toronto and Singapore. The main function of the offices is to promote trade with Hong Kong and to provide assistance to companies which are considering investing in Hong Kong. Their office in Brussels maintains close links with the European Commission, and the one in Geneva is responsible for handling Hong Kong's relations with the World Trade Organisation.

The Sino-British Joint Declaration of 1984 provides that Hong Kong should, after 30th June 1997, have a high degree of autonomy from China, particularly in the conduct of its trade and commercial affairs. For example, the future Hong Kong Special Administrative Region Government will be responsible for Hong Kong's trade policy and Hong Kong will continue to be a member in its own right of the World Trade Organisation and the Customs Co-operation Council.

The Joint Declaration provides for Hong Kong on its own to maintain and develop economic and trade relations with all states and regions, and for it to establish official and semi-official economic and trade missions in foreign countries. Thus Hong Kong will be able to maintain and further expand its network of economic and trade offices after 30th June 1997.

The Hong Kong Government office in London is in a slightly different position from Hong Kong's other overseas offices, reflecting the fact that Hong Kong is a British dependent territory until 1st July 1997. While the London office performs a valuable trade and investment role, it also promotes Hong Kong in other ways; for example, by maintaining contacts with noble Lords who have an interest in Hong Kong affairs, and with the press and business.

After 30th June 1997, the London office will become an economic and trade office. Its main function will be to promote trade and investment links between Hong Kong and the United Kingdom. These links are already extensive and are growing. Our exports to Hong Kong--our second largest market in Asia--were worth nearly £3 billion in 1995. There are around 1,000 British companies based in Hong Kong which also operate from there into China. In 1995 the United Kingdom received nearly £300 million in inward investment from Hong Kong.

The Hong Kong Government are concerned that their economic and trade offices should be given a suitable status by host governments, including a limited range of privileges and immunities. Some of the privileges and

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immunities, such as exemption from Customs duties and taxes, will be of practical benefit to the London economic and trade office. Others, such as inviolability of the official premises, will help to reinforce the fact that Hong Kong has, and will continue to have, autonomy in the conduct of its trade relations. The offices in Brussels and Geneva have enjoyed such privileges and immunities for a number of years. The Canadian and Australian Governments have enacted specific legislation to grant privileges and immunities to sub-state entities in order to provide a range of such privileges and immunities to the economic and trade offices in Toronto and Sydney. The Japanese have provided a range of non-statutory privileges and immunities to the economic and trade office in Tokyo and are considering enacting legislation to provide these on a statutory basis. The American Government have also undertaken to enact legislation so that Hong Kong's three economic and trade offices in the United States can receive privileges and immunities.

The Hong Kong Government look to the British Government, as the sovereign power until 1st July 1997 and as a co-signatory to the Joint Declaration, to help support Hong Kong's future autonomy. The Prime Minister made clear when he visited Hong Kong earlier this year that our obligation to the people of Hong Kong would not end at midnight on 30th June 1997. It is against this background, and the steps which other Governments have taken to give Hong Kong's economic and trade offices a suitable status, that the British Government have put forward the Hong Kong Economic and Trade Office Bill.

The Chinese Government have welcomed our intention to legislate to grant a limited range of privileges and immunities to the future London economic and trade office.

The privileges and immunities set out in the schedule to the Bill are taken mainly from the Vienna Convention on Consular Relations. However, they are not as extensive as those found in the convention as Hong Kong's economic and trade office will not be a consular mission. I believe that it is only right that the British Government assist Hong Kong in this way.

Moved, That the Bill be now read a second time.--(Baroness Chalker of Wallasey.)

3.15 p.m.

Lord Archer of Sandwell: My Lords, it is not every government Bill brought to your Lordships' House which receives a welcome from these Benches. Today, the Government have presented us with a Bill to which we can offer an unreserved welcome. Indeed, our criticism would have been if the Government had not produced the Bill. I like to think that they may enjoy the experience and that they will do it more often; but I am content to savour the moment while it lasts.

There is no division of opinion in your Lordships' House in wishing Hong Kong a happy and successful future. It is good to know that July next year will not see the end of Hong Kong's autonomy over its trade and commercial affairs. As the noble Baroness said a few moments ago, that is reserved to the people of Hong Kong by the Sino-British Declaration 1984.

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One beneficial consequence of that is that there will continue to be a Hong Kong presence in London. It will no longer be a dependent territory convention, but as the noble Baroness said, it will continue to supply Members of both Houses with information as well as, one hopes, to all those who seek information.

I also understand that London will continue to enjoy the presence of Sir David Ford, who has done so much to maintain good will between our peoples. The privileges and immunities set out in the Bill are no more than we would be likely to accord to the office of any friendly nation and no more than are set out in the Vienna convention or those accorded to Hong Kong's ETOs by a number of other countries and international agencies. I fully understand that that is because no purpose would be served by further gilding that lily. But I hope that that will not preclude the continuance of a special relationship which reflects our joint history. I shall be surprised if the Chinese Government find anything offensive to them in such a relationship.

There are still some questions over the future of Hong Kong. The future status of the Bill of Rights ordinance is not fully resolved; neither is the question of the future of the legislative council nor the final court of appeal. But this is not the occasion to pursue those themes.

With an expanding economy, the eighth largest stock market in the world, the fifth largest foreign currency exchange, with reserves of about 150 billion Hong Kong dollars and every inducement for China to encourage expansion, the future of Hong Kong in the new millennium promises well. We on these Benches look forward to seeing those hopes fulfilled.

3.19 p.m.

Lord Thomas of Gresford: My Lords, we on these Benches greatly welcome the Bill, particularly since it is presented with the agreement of the Government of the People's Republic of China. It augurs well for the future prosperity of Hong Kong that there should be set up a network of similar offices with Hong Kong's other trading partners, as outlined by the noble Baroness, Lady Chalker, a moment ago.

I am sure that it is the hope of the whole international community that the Hong Kong Special Administrative Region succeeds and remains prosperous. Some developments are very encouraging; others perhaps less so. First--I hope I do not stray too far from the subject matter of the Bill--the election of the chief executive by the nominated selection committee of 400 has its critics, although Britain can hardly complain about the system that has been adopted. But it has produced three candidates of outstanding quality, each of whom has committed himself to standing up for the interests of Hong Kong. Their sincerity is beyond doubt. Not one of them can be regarded as Beijing's puppet. All three are internationalist in outlook. Currently, their campaigns are being fought not simply for the votes of the 400 nominees who form the selection committee but openly for the hearts and minds of the Hong Kong people. They are setting out publicly clear policy decisions. I am sure that your Lordships will wish each of those candidates well.

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The future of Hong Kong depends upon confidence. This is not the moment to debate whether the provisional legislature breaches the Joint Declaration. The Foreign Secretary made clear the Government's position on that matter in a debate in another place on 14th November. A nominated legislature that has no place for dissent and fails to include places for representatives of the Democratic Party, which secured 16 of the 20 directly elected seats in LegCo in the September 1995 elections, will not attract the legitimacy, confidence and respect for its deliberations for which the international community looks. The noble and learned Lord, Lord Archer, referred to a special relationship between the United Kingdom and Hong Kong's Special Administrative Region. I hope that that has the opportunity to grow.

Perhaps I may focus upon the legal system as an essential ingredient in ensuring Hong Kong's future economic prosperity. If the next century is ever to be the Pacific century--an aim to which the People's Republic of China no doubt aspires--the rule of law must be paramount. It is no coincidence that the natural flair, energy and commitment of Chinese people has achieved its greatest success in economic and trade terms in Singapore, Hong Kong and Malaysia. Taiwan with its own well developed system of commercial law is another example of their success. The greatest legacy of this country to Asia has been stable administration, the lack of corruption and the rule of law. These are great traditions which this country should be proud to have passed to Asia.

In June I was concerned to discover that, following a decision of the State Council of the People's Republic of China, foreign businessmen engaged in China, whether in commercial trade or joint ventures, will no longer have the option as of right to settle commercial disputes with their Chinese partners in the long established and well respected China International Economic and Trade Arbitration Commission. What is now proposed is that if the local partner in China does not agree to go to the international commission, any dispute will be referred to the newly-established local arbitration bodies in 90 or so cities or to local Chinese courts. The fear is that this will open the door to local protectionism or even local political intermeddling. Certainly, the same expertise in international trade and investment cannot be expected of these local arbitration bodies.

For Hong Kong to maintain its position as a funnel for investment into China and its traditional middleman trading role, it must preserve its legal system based upon its British traditions as a strong and incorruptible framework, independent of political influence, and free of corruption. If that is permitted to remain in place we need have no fears that Hong Kong will ever lose its foremost place in the Far East. As Chief Secretary Anson Chan recently said:

    "We can justifiably call ourselves [in Hong Kong] the single biggest storehouse of knowledge and experience pertinent to doing business in mainland China".

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Long may that be the case. The converse is that if that legal framework is weakened, a penalty will be paid by the Hong Kong business community. My information is that trade within China may be considered a higher risk because of the lack of legal enforcement procedures. That means added cost to the businessman in terms of higher interest rates to fund his trade and higher insurance premiums.

I hope that I have not strayed too far from the subject matter of this Bill. I am sure all noble Lords hope that the excellent work of the existing Hong Kong Office under Sir David Ford will continue, and that there is a smooth transition on a through train at least for this side of the Hong Kong Government's activities.

3.25 p.m.

Baroness Dunn: My Lords, I wholeheartedly support the Second Reading of this Bill. In doing so, I should like to make three brief points. First, the foundation of the Sino-British Joint Declaration is that Hong Kong will enjoy a high degree of autonomy under the unique concept of one country two systems when sovereignty reverts to China in 1997. The conversion of the Hong Kong Government Office in London to the Hong Kong Economic and Trade Office in 1997 and the granting of limited privileges and immunities to its staff will reinforce the important principle of Hong Kong's future autonomy. This will be greatly appreciated by the people of Hong Kong.

Secondly, I pay warm tribute to the Hong Kong Government Office and all its commissioners and staff through the years, particularly the present energetic Commissioner, Sir David Ford, and all his colleagues, for their sterling efforts. They have helped to foster understanding about Hong Kong here in Britain. They have built up for Hong Kong a large number of well informed friends in many sectors of the British community who take a deep interest in Hong Kong's well being. We owe them a debt of gratitude.

Thirdly, this is perhaps a good moment to reflect on the economic and trade opportunities that Hong Kong continues to offer Britain and the rest of the world. Inevitably, economic prospects receive much less attention than short-term political prospects. With less than eight months to go before Britain relinquishes its constitutional ties with Hong Kong, we should focus on the immense potential for Britain of its economic relationship with Hong Kong and, through Hong Kong, with China and the rest of Asia.

The World Bank estimates that East Asia will grow at an annual rate of 7.7 per cent. during the period 1995 to 2004--more than twice as fast as the rest of the world. By the year 2000, the bank estimates that half the growth in global trade will be generated in East and Southern Asia, and that, by the year 2010, Asia's combined economy will be larger than that of Europe or North America.

Hong Kong is at the heart of spectacular developments. In addition, it enjoys unrivalled geographical and political links with China. It accounts for over 60 per cent. of foreign investment into China and one-third of its foreign exchange. It is China's

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window on the world. Hong Kong, despite its size, is an important market in its own right. As the noble and learned Lord, Lord Archer, stated, it is the world's fifth largest exchange market, the eighth largest stock market and the second most competitive economy. Its GDP per capita, at 25,000 US dollars, is the third in the world behind the United States and Switzerland.

Whatever measure one chooses, Hong Kong's economic and trading opportunities are truly impressive. I have no doubt that British businessmen will continue in ever increasing numbers to beat a path to the doors of this office in London, the future of which will be secured by the Bill.

3.32 p.m.

Lord Marlesford: My Lords, in rising to welcome the Bill, I am privileged to be able to declare a business link with Hong Kong stretching back to 1961.

Of all the jewels in the British Crown none shines more brightly than Hong Kong. What an example to the world it is. I need use only one figure to demonstrate that fact. The entire GDP of India is 262 billion dollars. The GDP of Hong Kong is 132 billion dollars. Hong Kong, with 6 million people, has an economy half the size of that of India, with over 900 million people. I believe that the reason for that is that poor India has suffered from 50 years of strife and socialism whereas Hong Kong has benefited from 50 years of stability and capitalism. It is the continuation of that remarkable combination which the Joint Declaration of 1984 sought to underwrite and we have a very important continuing role in helping, in a friendly manner, to guide that future. For three years after next year Britain has a particular remit under the Joint Declaration with the continuation of the Joint Liaison Group between Britain and China. It is wholly appropriate that special arrangements should be made for the continuance of the Hong Kong office in London. It is served as Commissioner at present by Sir David Ford, whom I have been privileged to know for 20 years. He is one of those most distinguished Hong Kong public servants who have made a huge contribution, within that capitalist system, to the prosperity and stability of Hong Kong.

I am sure that China would wish that situation to continue. I am very optimistic for the future. We must do everything we can to maintain these close links. The Bill provides for one of those links.

3.35 p.m.

Lord Wilson of Tillyorn: My Lords, I join other noble Lords in welcoming the Bill. A key part of the strength of Hong Kong which was so dramatically described by the noble Lord, Lord Marlesford, has been its autonomy in trade and economic affairs. It is in keeping with the pragmatic way in which Hong Kong has run its affairs, and in which it has been allowed to run its affairs, that it has had under the benevolent umbrella of British missions around the world offices in separate buildings looking after Hong Kong's interests. Those offices have promoted Hong Kong policies even when on some occasions they have not been entirely in accord with the policies of Her Majesty's Government.

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This is a good opportunity to pay tribute to all the Hong Kong government servants who have worked in those offices over the years. They did not join the Hong Kong Government to act as quasi diplomats around the world and it is typical of the ready way in which the Hong Kong Civil Service has taken up any job thrown at it that they have taken up those tasks so effectively. Those of us who have benefited from the services of Hong Kong Government offices around the world, particularly perhaps my noble friend Lady Dunn and myself, have learned that it is sometimes an advantage to have people who do not come straight out of the formal apparatus of the Diplomatic Service. They are an extraordinary, flexible bunch of people.

London was the biggest and most important of those offices. It is interesting to recall that, in its heyday in the 1970s, that office employed 120 people; it had regional offices in Manchester and Edinburgh; and, apart from looking after trade and investment, it managed recruitment and training for the Hong Kong Civil Service. It looked after Hong Kong residents in the United Kingdom. It ran a centre for 50 Hong Kong students and carried out very effective liaison with Members of both Houses of Parliament, with the press and with leading businessmen.

I join noble Lords who have paid tribute to those who have been commissioners in the London Office. There have been nine such commissioners since 1969, when the office was set up in its present form. It is particularly apt to pay tribute to Sir David Ford because he has twice been commissioner and is due to retire after an extremely distinguished period of service to the government and people of Hong Kong.

We have heard many impressive statistics. Hong Kong is the eighth largest trading territory in the world, and continued autonomy in the management of its foreign trade and economic affairs is one of the vital provisions of the Joint Declaration of 1984. That Joint Declaration goes into an immense amount of detail, much of which is now neglected because it was drawn up in 1984, but it includes specific provision for official or semi-official economic and trade missions abroad.

I welcome the arrangements put in place around the world and here in London for this key part of the transitional process. It must be in Hong Kong's interests that the arrangements for the transition from a highly autonomous British dependent territory to a highly autonomous special administrative region of the People's Republic of China should be as smooth as possible. There are many aspects to that smooth transition and we cannot go into all the other parts today. However minor and technical the Bill may seem, it is a significant and very welcome step in ensuring the necessary change within the framework of continuity.

3.39 p.m.

Baroness Chalker of Wallasey: My Lords, I am delighted that the Hong Kong Economic and Trade Office Bill has received such a warm welcome from noble Lords.

It is a practical measure that has limited expenditure implications. It adds very little to the amount that has already been spent for very good purpose with the

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existing office. I am particularly grateful to noble Lords who have spoken in this debate for giving the Bill their full support, none more so than the noble and learned Lord, Lord Archer of Sandwell, who gave it such a generous welcome.

There are a few matters that arise, but it is important that we note these fascinating and important statistics given by the noble Baroness, Lady Dunn, my noble friend Lord Marlesford and the noble Lord, Lord Wilson of Tillyorn. Hong Kong has always been a thriving centre. The figures are dramatic indeed when one considers that 6 million people create half as much wealth in Hong Kong as do 900 million people in India.

The people of Hong Kong will be greatly heartened by the reservoir of goodwill towards Hong Kong that has always existed, and will continue to exist, in your Lordships' House. I have no doubt that they will see the Bill as evidence of the British Government's determination to do all that we can to ensure that Hong Kong continues to enjoy a full autonomy in the conduct of its economic and commercial affairs.

Many tributes have been paid to Sir David Ford during this short debate. I should like to pay my own. I well remember the briefings that I have had from the Hong Kong Office here in London and from Sir David and others while on visits. It has been an extraordinarily successful relationship, and one which we shall always value.

I was fascinated to hear the noble Lord, Lord Wilson of Tillyorn, talk of the size of the Hong Kong Office in the UK. It may be a reassurance if I merely say that the Bill provides that if Hong Kong wanted to have further offices elsewhere in the UK, the privileges and immunities under the Bill can, with the consent of the Secretary of State, be made available to them. I know, and greatly value, the contribution of the Hong Kong Chinese people in Manchester. I know that is true in many other places around the country.

The noble Lord, Lord Thomas of Gresford, spoke about the chief executive. While that matter is somewhat outside the terms of the Bill, I am glad to say that the choice is imminent. I believe it is to be made on 11th December. There are three good candidates. The members of the selection committee have a great responsibility. As soon as the choice is made, there will be one less uncertainty on the frame ahead.

There is no doubt that this Government and the Hong Kong Government are fully committed to co-operating with the chief executive designate, to help him in his preparations for a smooth and successful handover. That is essential, because the economic success of which your Lordships have spoken must continue.

I am sure that noble Lords will continue to have dealings on trade and commercial matters with the London Hong Kong office after the summer of next year. I am sure that it will continue to perform its functions as efficiently and effectively as it now does. In that, it will be playing a most valuable role in promoting trade and investment between the UK and the future Hong Kong special administrative region.

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I commend the Bill's Second Reading to the House. I hope that it will complete its passage through this House as smoothly as today's debate has gone.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

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