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Global Tide of Protectionism Not Expected to Subside Soon
Hong Kong Vulnerable to Trade Protectionism: New HKTDC Report

29 October 2009 – The recent United States’ safeguard action against tire imports from the Chinese mainland is a clear signal of the protectionist undercurrent amid the global financial crisis. Although a full-scale trade war between any major trading entities is unexpected for the moment, the tide of protectionism is not likely to subside anytime soon, according to a new Hong Kong Trade Development Council (HKTDC) report, “Protectionism in the Midst of Global Recession.” 

Speaking today at a press conference introducing the new report, HKTDC Assistant Chief Economist Daniel Poon said protectionism tends to be pervasive in times of economic crisis. He emphasized, however, that it could hardly serve its purpose, as it always damages the industries and citizens that governments intend to help. 

“There seems to be no widespread resort to trade restrictions since the start of the global financial crisis in September last year,” Mr Poon said. “It does not mean, however, that we are out of the shadow of protectionism.” 

Mr Poon noted that protectionism encompasses a wide variety of tools and practices, including tariff and non-tariff barriers, to restrict trade between countries. “Although the World Trade Organisation and various multilateral frameworks seem to work well in restraining trade protectionist measures, anti-dumping measures remain a popular and handy trade-remedy tool,” he said. 

Anti-Dumping Investigations
According to the latest “Report on G20 Trade and Investment Measures,” compiled by the WTO, OECD and UNCTAD, there were 86 new anti-dumping investigations in the first seven months of 2009, slightly less than in the previous corresponding period. While the number of new investigations has fallen in the United States and the European Union, developing countries such as Argentina, India and the Chinese mainland have opened more new cases. 

Many countries have also raised tariffs and non-tariff barriers across a large number of products, according to Mr Poon. These measures covered increased tariffs duties, import licences and pre-shipment inspections, as well as procurement restrictions and investment barriers. 

Russia introduced the largest number of trade restrictive measures in the first nine months of 2009, followed by Argentina and Indonesia. Other frequent users included the US, the mainland, Brazil, Vietnam and South Korea. In terms of product, the agri-food sector was most affected. Steel and other metals, automotives, services and textiles and clothing were among other targeted sectors. 

US-China Friction
Safeguards have been increasingly used by a number of countries as another tool to protect their domestic industries. The only US case this year, against tire imports from the mainland, is expected to have a serious impact on mainland exporters as well as Hong Kong suppliers sourcing or producing across the boundary. “The US action may open the floodgates to safeguards against other products, and the Chinese government may take retaliatory action accordingly. Yet a full-scale trade war between the US and China is unlikely,” Mr Poon said. “While none could afford the cost of a possible collapse in international trade, China’s swift reaction to the tire case may prompt other trading partners to think twice before taking any protectionist action.” 

Given that Hong Kong is vulnerable to trade protectionism, Mr Poon said companies should take steps to lessen the adverse impact of protectionist measures. These include: 

  • staying abreast of trade and regulatory developments in overseas markets, by identifying and monitoring sectors open to protectionist actions
  • maintaining a diversified production base and enhancing sourcing skills to ensure that services to overseas buyers will not be hurt by any restrictive measures on mainland imports
  • working on product differentiation by upgrading quality, image and style, focusing on the medium-to-high end, as protectionist measures are more likely to target mass-market items
  • moving further toward high value-added processes, strengthening design capabilities and introducing brands to enhance your competitive edge. 

HKTDC Assistant Chief Economist Daniel Poon discusses protectionism’s looming shadow.

Media Enquiries
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Joe Kainz
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Email: joe.kainz@hktdc.org

About the HKTDC
Established in 1966, the Hong Kong Trade Development Council (HKTDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 offices worldwide, including 11 in the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China and Asia. The HKTDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and the mainland, while providing information via trade publications, research reports and online. For more information, www.hktdc.com




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