Thank you Director General Law. I have the privilege of opening this round of bilateral export control discussions between the United States and Hong Kong.
There have been significant changes in the world since our two delegations met in May 2001 in Washington, D.C. The terrorist attacks of September 11 have had a profound effect on our perceptions of globalization, economic security, and threats to our national security. The attacks made clear that there are extremists in the world that reject our shared values of free and open trade, social diversity, and modernization.
Yet, the prosperity of both the United States and Hong Kong depends heavily upon continued economic integration. It is difficult to see how we will be able to reinvigorate and restore confidence in free trade and the world economy without working cooperatively to counter the instability caused by terrorism and proliferation. We are therefore natural allies in addressing these challenges. And we very much appreciate the cooperation and support that Hong Kong has provided to the multilateral efforts to defeat terrorism, including the blocking of certain assets in Hong Kong and the sharing of important investigative information.
In spite of the many changes occurring as a result of September 11, one thing that has not changed is the strong support of the United States for the values that Hong Kong represents in Asia – free trade, open markets, economic opportunity, rule of law, and modernization. The United States continues to be a strong supporter of Hong Kong’s autonomy under the "one country, two systems" model established in the Sino-British Joint Declaration and formally recognized under both U.S. and Chinese law.
Hong Kong derives significant benefits from its special status. The preservation of economic freedom and opportunity in Hong Kong since reunification has maintained Hong Kong as a major global trading and financial center with one of the wealthiest and most modern societies in Asia. Indeed, in the area of export controls, U.S. confidence in the autonomy and effectiveness of Hong Kong’s strategic trade control system permits Hong Kong to have continued access to a wide range of sensitive dual-use items and technologies.
To maintain this favorable treatment, Hong Kong must seek to ensure that its special status is not compromised and that its actions do not undermine the perception or the reality that Hong Kong is separate from China. We must work together cooperatively so that Hong Kong’s strategic trade control system is effective in preventing the diversion of sensitive items and technologies.
In light of September 11, we have increasing concerns about the potential for diversion of such items from Hong Kong to terrorists or to countries of concern. The sheer amount of commerce that passes through the port of Hong Kong in a given year is staggering. Indeed, trade flows account for greater than two and one-half times Hong Kong’s gross domestic product. The possibility that sensitive items could be diverted through Hong Kong or other major ports to unauthorized end-users has become a significant national security concern facing the United States. The United States is therefore undertaking efforts on several fronts to strengthen the administration and enforcement of both international export controls on sensitive items and technologies as well as U.S. export controls.
First, we are seeking to strengthen the multilateral nonproliferation regimes. We are pressing for adoption within the Wassenaar Arrangement of a procedure that would require bilateral consultations before one member undercuts the denial of another member for essentially the same transaction. In addition, we are pushing for adoption of a conventional weapons "catch-all" control for exports to end-users concern of items that may fall just outside the parameters of the control list but that, nonetheless, may make a major contribution to a weapons program or proliferation activities. In the other nonproliferation regimes, such as the Australia Group, we are requesting changes to the control list, so as to include items that could be beneficial for small-scale chemical or biological weapons programs. Although Hong Kong is not formally a member of any of the multilateral regimes, it adheres fully to their requirements and its implementation of the measures we are advocating to strengthen the regimes would be significant.
Second, we are taking additional concrete steps to ensure that major transshipment points in the global economy – such as Hong Kong – are not being used to circumvent export controls and contribute to weapons acquisition by terrorists or countries of concern. Our goal is to encourage major transshipment centers to establish procedures for examining cargo, to administer licensing requirements that meet the standards of the multilateral regimes, and to enforce strategic trade control laws to prevent the illegal diversion of sensitive items and technologies. We will be working closely with transshipment countries to raise the level of compliance with export control requirements and avoid a race to the bottom with respect to export control standards. Your cooperation in these efforts will be essential because many other major global trading centers look to Hong Kong as a model of balancing effective trade controls with the expansion of economic activity.
Third, we are enhancing our own export control enforcement activities – both domestically and internationally. We will continue to conduct pre-license checks and post-shipment verifications in connection with exports of sensitive items to Hong Kong and elsewhere. We appreciate Hong Kong’s cooperation on end-use checks by U.S. government agencies. Future reports of positive end-use checks and continued cooperation with respect to enforcement activities will enhance our confidence in the autonomy and effectiveness of Hong Kong’s strategic trade control system and, thus, strengthen our broader economic relationship. On the other hand, negative end-use checks could call into question the effectiveness of Hong Kong’s strategic trade control system.
Finally, I know that the status of our legislation authorizing dual-use export controls is of interest to you. The Export Administration Act of 2001 – known as Senate bill 149 – was passed by the Senate last year by a vote of 85-14. We believe that this bill advances our goals of protecting national security, countering terrorism, and promoting free trade. In other words, we believe that the bill would impose effective export controls and facilitate responsible exports. We are working closely now with the House of Representatives to resolve any remaining differences regarding the legislation. We are cautiously optimistic that we will have a new Export Administration Act in the next several months.
S.149 would preserve the special status of Hong Kong under the U.S. export control system. To the extent that the United States is confident that Hong Kong’s strategic trade control system is autonomous and effective, Hong Kong would maintain a favorable export licensing status.
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Our relationship with Hong Kong is as important as it is unique. The free trade and open markets necessary for the health of our economies cannot thrive in an environment where the threats of proliferation and terrorist attacks cause our citizens and our companies to disengage from the world economy. Our future prosperity will be tied directly to the success of our cooperative efforts to eliminate the global instability caused by terrorism and proliferation.
An important component of these efforts is our cooperation in administering and enforcing strategic trade controls. Our mutually-beneficial economic relationship can be maintained only to the extent that we are confident in the autonomy of Hong Kong system for strategic trade controls under the "one country, two systems" model. We look forward to working with you over the next few days to find ways to enhance national and multilateral protections against the diversion of sensitive items and technologies.