The only area in which Hong Kong has had preferential treatment is in relation to the US’s export controls on so-called sensitive technology. Up to now, Hong Kong has been able to satisfy the US that it has adequate controls in place to prevent leakage of such technology and so it has had access to some of these products. But this is a matter which has always been entirely within the gift of the US and it is not covered by WTO rules.
Hong Kong’s exports to the US are in the region of US$4 billion, which is 3 percent of its total exports, according to Observatory of Economic Complexity figures for 2017. The main items are machinery, precious metals, textiles and clothing, and toys.
Over the course of the last two years the US has imposed unilateral additional tariffs of up to 25 percent on almost all imports from China. These higher tariffs exceed the US’s ceilings under its WTO obligations. The US justifies them under the WTO’s security exception (Article XXI of the General Agreement on Tariffs and Trade, or GATT) but China is challenging this. The question now is whether the US will extend these additional tariffs to Hong Kong, which is recognized in the WTO as a separate customs territory from China.
Trade in services is more complicated. The barriers are not at the border but in a labyrinth of domestic regulations. Moreover, market access commitments at the WTO usually lag well behind the actual situation on the ground. The US does have a general obligation to treat Hong Kong services and service suppliers no less favorably than it treats those of other economies. But beneath this level of generality, regulations can be tweaked to obtain the desired effect.
There are other areas beyond the realm of the WTO in which the US could also act against Hong Kong. For example, Hong Kong has an agreement with the US on the Container Security Initiative, a Washington-led maritime security program launched in the wake of the September 2001 terrorist attacks. Hong Kong participates in other initiatives against terrorism and money laundering. The US would need to consider the point at which punishing Hong Kong might become counter-productive.
If the US does impose additional tariffs beyond its WTO ceilings on Hong Kong goods, or discriminates against Hong Kong in trade in services, the Hong Kong government will have a choice to make – whether to challenge such measures at the WTO. Hong Kong has exactly the same rights in the WTO as any other member, including a right to complain to its Dispute Settlement Body and to ask for a panel to be established to examine its complaints.