Mainland China About to Snuff out Hong Kong’s Successful System



Daniel Griswold | Mercatus Research Center

One of humankind’s most dazzling and successful experiments in political economy is coming to an end. For the second half of the 20th century, Hong Kong prospered as an enclave of economic and civil freedom under the benign administration of the United Kingdom, but that freedom may soon expire under the increasingly malign shadow of mainland China.

Spooked by anti-government protests in Hong Kong, Chinese authorities approved a “national security” law this week that would assert the mainland’s direct control over the special administrative region. The new law would allow Beijing to crackdown on demonstrations, criticism of the communist regime, and even the booing of the People’s Republic of China’s (PRC) national anthem at public events. The authorities have already arrested hundreds of Hong Kong residents, including prominent protest leaders.

In response, US Secretary of State Mike Pompeo declared that, in accordance with a 1992 US law, Hong Kong is no longer “sufficiently autonomous” to be treated as a separate administrative zone by the United States. The pronouncement by the Trump administration certifies what has becoming increasingly evident—the “one country, two systems” treatment of Hong Kong that China pledged to maintain until 2047 has come to an end.

This is a sad moment for those who value human liberty and economic progress. Beginning in the 1950s, under the guidance of UK-appointed finance minister John Cowperthwaite, Hong Kong adopted an economic model of unfettered free trade and a low-tax, lightly regulated domestic market. The result was rapid growth, rising prosperity, and arguably the world’s most dazzling skyline.

Today Hong Kong’s 7.5 million residents enjoy a higher per capita GDP than do people in most Western nations. And while the citizens of the territory could not elect their own sovereign leaders, they did enjoy full civil rights to speak, assemble, and worship freely.

In 1984, then PRC Premier Zhao Ziyang and UK Prime Minister Margaret Thatcher signed the Sino-British Joint Declaration in Beijing. Under the accord, the UK agreed to cede sovereignty over the territory to China in 1997 in exchange for a pledge from Beijing that the people of Hong Kong would “enjoy a high degree of autonomy” and that its basic laws as then enforced “will remain unchanged for 50 years.“

The Joint Declaration left little wiggle room for mainland China. In Section 3(5), its government agreed:

The current social and economic systems in Hong Kong will remain unchanged, and so will the life-style. Rights and freedoms, including those of the person, of speech, of the press, of assembly, of association, of travel, of movement, of correspondence, of strike, of choice of occupation, of academic research and of religious belief will be ensured by law in the Hong Kong Special Administrative Region.

With its grab for direct control, Beijing is clearly violating the plain language of the 1984 Joint Declaration. When compounded with its mishandling the coronavirus outbreak in Wuhan, China’s reputation as a reliable international partner has taken another hit. It has now become clear that the regime in Beijing cannot be trusted to follow the plain language of agreements it has signed. Indeed, it cannot make it even halfway through its 50-year commitment to respect Hong Kong’s system.

Like Milton Friedman and many others, I’ve long admired the success of the Hong Kong system. In two visits there, I enjoyed the pulse of a thriving city with its great restaurants and that amazing skyline. More importantly, however, I respected the city’s commitment to a free press, freedom of assembly, and the freedom of religious groups to worship without fear. In 2005, while attending the World Trade Organization ministerial meeting that year, I joined a spirited lunch gathering at the home of Jimmy Lai, the media entrepreneur and supporter of democracy for Hong Kong. Even though he recently was arrested for taking part in demonstrations, Lai refuses to mute his criticism of the authoritarian regime in Beijing.

What can the United States do in response to the Beijing crackdown that would be in the best interest of the United States and also Jimmy Lai and his fellow Hong Kong residents?

The United States-Hong Kong Policy Act of 1992 invoked by Secretary Pompeo allows the president to revoke Hong Kong’s special administrative status, but it’s not clear what that would mean for the US relationship with Hong Kong.

As a separate administrative area with its own tariff schedule, Hong Kong has not been subject to the Section 301 tariffs the Trump administration has levied on imports from mainland China. Hong Kong has also been excluded from export controls aimed at limiting China’s access to American technology. And the United States has supported Hong Kong’s separate membership in such international organizations the Asian Development Bank and the World Health Organization.

Extending technology export controls to cover Hong Kong would be a judgment call based on national security concerns.  The stakes on whether to support Hong Kong’s membership in global organizations seem quite low.

It would be a huge mistake, however, to extend the Section 301 tariffs to the $46 billion in goods that Americans buy directly from Hong Kong each year. The two principal victims of those additional tariffs would be American citizens and businesses and the freedom-loving people of Hong Kong—not the government in Beijing.

A better approach would be to direct “smart sanctions” against officials and agencies connected with mainland China who are most responsible for suppressing basic rights in Hong Kong.  A US law passed last year empowers the president to freeze American-based assets of individuals responsible for abducting and torturing demonstrators in Hong Kong and to deny them entry into the United States. As a positive follow-up, US senators are now crafting a bipartisan bill to expand sanctions to include Chinese officials and entities that enforce the new national security laws in Hong Kong. The bill would also penalize banks that do business with the offending entities.

Despite claims by China’s foreign ministry that “Hong Kong is purely China’s internal affair,” the fate of the territory’s residents is a legitimate concern of freedom-loving people everywhere. The government in Beijing has a moral obligation to respect the liberties of all its citizens, especially when it has pledged in writing to do so for decades to come.

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