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Hong Kong at the
Crossroads:
An Interview With LaVerne E. Brabant
A major milestone in the course of world events occurred on June 30, 1997, when the former British crown colony of Hong Kong became a Special Administrative Region of the People's Republic of China. Among observers, few were better positioned to comment on that transition than LaVerne E. Brabant, U.S. Agricultural Trade Officer in Hong Kong. On the eve of that occasion, Brabant shared his broad insights with a worldwide audience via USDA's Radio News Line and the Voice of America. We've adapted those remarks to share with AgExporter's readership.
AgExporter: Even with its
6.3 million people, Hong Kong is a very small place. Why has the
world's attention been so riveted on this area that's not even a
country?
Brabant: Hong Kong is now a special administrative region of the People's Republic of China. But remember that it is the world's fifth largest trading entity and actually the eighth largest market for U.S. agriculture. Perhaps even more important, it's the fourth largest market for high-value agricultural products.
Hong Kong happens to be the largest port in the world by volume and so a lot of economic activity takes place. It's a major trading center unlike almost any other place in the world. Minimal government intervention, a very laissez faire economy, low taxes, no capital gains taxes have meant trade, trade, trade.
AgExporter: As the Agricultural Trade Officer in Hong Kong, do you expect significant agricultural trade?
Brabant: None of us has a crystal ball, but the way it appears, there'll be few changes.
Hong Kong will continue to be recognized as a separate international customs territory. So when, for example, agricultural products leave the United States, they will be declared for shipment to Hong Kong and not to China. And that's important because Hong Kong currently is, and will continue to be, a founding member of the World Trade Organization (WTO). Which means, currently, Hong Kong has zero tariff rates on all agricultural products with the exception of wine and tobacco. And that remains the same.
You may have heard the expression, "One country, two systems." What's really guaranteed is a basic law, which is a Chinese law. It's kind of the mini-Constitution of Hong Kong. That's guaranteed until the year 2047, or for the next 50 years from July 1, 1997. And that much, people are pretty sure of.
Hong Kong continues to have a border with China, so people in China will need to have travel documents to come south and people in Hong Kong will need travel documents to go north. In essence, Hong Kong stays much the way that it was before.
Although the Chinese flag went up on June 30 at the stroke of midnight, Hong Kong also has its own flag, its own autonomy, its own government and will maintain its currency, the Hong Kong dollar, which is linked to the U.S. dollar.
AgExporter: So what do you foresee happening?
Brabant: Hong Kong has a great future, in my opinion, because it plays a very important trading role. Eighty-five percent of the jobs are really in the trade service sector. Much of the trade in China is being financed in Hong Kong. People can get loans in Hong Kong in a couple of hours whereas, in most countries, it would take a couple of weeks or a couple of months. We really don't see that changing.
Some local companies that are big players in Hong Kong expect trade to improve even more because they'll have greater access to the greater China market.
AgExporter: What does the trade outlook look like with China for major commodities--corn, wheat, cotton--and also for high-value products?
Brabant: Think long term--that's the way you have to look at the China market. Many people would say that China is a market of a billion people, but I think that's incorrect. There probably isn't a single market for any particular commodity. But there certainly are many markets of several hundred million people each for a number of different products, particularly on the high-value side.
I think you also have to look at Chinese culture--food has traditionally played an important part. It's more than just feeding yourself. It's status, it's breaking bread with your family or sharing your rice bowl. And I think that's an area where the United States is going to do very well over the longer term.
For bulk commodities--corn, oilseeds, grains, and cotton--there's been volatility in the past because China is itself a major producer of many of these products.
One of the trends that you can certainly see is that China exports a lot of high-value products. For example, they export high-value soybeans to Japan for food production and consumption. They also import tons of soybeans from the United States and other suppliers for domestic use, either in animal feed or in crushing, where the oil goes to humans and the meal goes to fuel the livestock industry.
Hong Kong has been the largest export market for U.S. poultry in the world. And many of the products that are coming here are unique items like chicken feet--a product with very little value in the United States but a great deal of value in Hong Kong and in China.
It's a winning situation for producers in the United States; animal parts that we don't generally consume are highly popular in China. If they can get them on a weekly basis through Hong Kong instead of on a monthly basis or a couple of times a year, Chinese consumers will be delighted. And U.S. producers are of course very happy to send them to China.
So I think if you look at the longer term, China is going to be a very important market. Some people have said it's the epicenter of all the markets in Asia, and that's probably true. China is both a producer and a consumer. But I think the real success story there will be in high-value processed food products.
AgExporter: Right now, China means $4 billion a year in agricultural trade for the United States. What about the future?
Brabant: I think we can look at anywhere from 10 to 20 percent growth annually over the course of the next five to 10 years. We may take a few hits here and there, but it's going to be go, go, go. And anybody who's anybody who wants to be somebody in the future needs to be in the Greater China markets.
We've had requests and inquiries as to what's in the future. Are things going to be okay? Should we still be trading with Hong Kong? Well, USDA gives a vote of confidence for agricultural trade interests in Hong Kong. I hope folks will not be scared away and will continue to come.
There are lots of people in Hong Kong who want to do business. They're doing business now. And if the United States doesn't do it, our competitors will, so we need to make sure we keep on doing what we've been doing in this and other markets in Asia. Because that's really the future for U.S. agriculture.
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