A version of this article appeared in the South China Morning Post, 26 September 2013.



“One Country, Two Systems” Is Not Working

Beijing loathes it. The Hong Kong government rejects it. And the US Congress has all but forgotten about it. Its last appearance was in 2008, but it is in need of a comeback. Its sparse 10 pages were prescient, its optimism tempered by caution and circumspection.

The U.S.-Hong Kong Policy Act, passed in 1992 by the US Congress, gave Hong Kong its legal status in US law after 1997. Its mission was to safeguard US business interests. But its guiding light was the overarching principle that America’s support for democracy would drive its policy toward Hong Kong.

While its exhortations tracked China’s stated policies for the new SAR, it believed that Hong Kong could not survive the goals of the Joint Declaration without active support from the international community.

Passage of the Act meant that trade and financial relations would be business as usual, and that the US would continue to support Hong Kong’s participation in international organizations and recognize its agreements. It would treat Hong Kong as “fully autonomous from the People’s Republic of China with respect to economic and trade matters.”

A key provision enabled the US to continue, as it does today, to give Hong Kong access to the most sensitive technologies, provided they were “protected from improper use or export.” This has enabled Hong Kong to source much of its high tech from the US, in some categories one-third to one-half of its imports.

But the Act also contemplated a day when Hong Kong might no longer be “sufficiently autonomous” to justify continued differential treatment under US law. In such an eventuality, the US President could terminate Hong Kong’s special status “until it regained sufficient autonomy.”

The Act required the US government to send an annual report to Congress on the state of Hong Kong’s autonomy, its democratic development, and its participation in multilateral forums. That requirement lapsed in 2007.

Critics howl that the Act is another instance of “US meddling in Hong Kong affairs” and that “Hong Kong is ours to govern.” But such overreactions ignore Hong Kong’s international status in a globalized world, its deep network of economic and intergovernmental relations, and the effects its policies have on other countries’ interests.

Take trade, for example, where Hong Kong was once a global leader who hosted and chaired the WTO Ministerial in 2005. Curiously, it has opted out of negotiations for the most cutting-edge regional free trade agreement, the Transpacific Partnership, which brings together a dozen countries, two-fifths of the world economy and one-third of all trade. As a service economy, Hong Kong is a natural fit for the TPP, and its business sector would gain enormously. In many ways, the trade pact was tailor-made for Hong Kong. Yet, it has completely ignored the TPP and is about to begin negotiations with ASEAN on a less ambitious free trade arrangement in the shadow of China’s similar deal.

Hong Kong is a full member of APEC and the WTO, but its independent voice is becoming a rare commodity. In recent years, Hong Kong’s positions on key trade issues have seemed muted or deferential to China, whose own interests in trade negotiations do not necessarily advance those of a developed service economy like Hong Kong’s.

If current trends continue in the years ahead, Hong Kong’s trading partners might wish to start asking some hard questions about its role in international trade and economics. Does Hong Kong still have an independent trade policy? Does it have a unique role in international organizations as a SAR? Are its imports of sensitive technologies safe from diversion?

Immigration is another area where Hong Kong’s autonomy may be less than meets the eye. Hong Kong has been lobbying hard for “visa waiver” status for its travelers to the US, but critics say its denial of entry to certain “sensitive” individuals in recent years, some of whom have been US citizens or residents, raises concerns about whether Hong Kong is fully in control of its own borders.

As any good investor hedges his bets, Hong Kong’s international partners will need to stay alert in the years ahead to these and other challenges to its autonomy, particularly if nascent political strife and social instability become a ground swell, resulting in policies or reactions that undermine business confidence.

For years, the international community has extolled the virtues of “one-country two-systems,” and on balance, it has met expectations. But while such praise may be fine for polite conversation, as a national policy it may be time to start taking a closer look at the fine print. Everyone wants “one-country, two systems” to succeed, but shouldn’t it do so in practice not just in name?

The author is a former US diplomat and was head of the Economic-Political Section at the US Consulate in Hong Kong from 2009-2012.