HONG KONG AS A PARTNER IN WORLD TRADE
Trade in Services
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No survey of Hong Kong's trade would be complete without some mention of trade in services. In 1985, total imports and exports of goods came to almost $467 billion, while trade in services amounted to about $80 billion, or some 17 per cent of the trade in goods. In contrast to the trade in goods, however, where imports almost always exceed exports, it is the other way round with services. Exports always exceed imports, usually by a significant margin. Trade in services is concentrated around Hong Kong's position as a commercial, communications and financial centre and as a tourist destination. Thus, shipping and aviation services, travel, and banking, financial and insurance services together account for as much as 90 per cent of total exports of services. In recent years the surplus on trade in services has ranged between $10 billion and $15 billion and this has gone a long way towards offsetting the deficit on trade in goods. In 1985 there was, exceptionally, also a small surplus on trade in goods and in 1984 only a small deficit. These two years, therefore, registered significant surpluses on total trade in goods and services of $11 billion in 1984 and $17 billion in 1985. In overall balance of payments terms they must have been offset by a net outward movement of capital.
Protectionism and the Multi-Fibre Arrangement (MFA)
Over the last 40 years there has, on balance, been a very significant reduction in barriers to international trade, largely as a result of the seven rounds of multilateral trade negotiations conducted since the late 1940s under the auspices of the GATT. In particular, import tariffs on manufactured goods in almost all developed countries have, for the most part, been reduced to low levels. This, coupled with improvements in transport and communications over the period, has led to an unprecedented expansion in world trade and in production and standards of living in many countries. It is no accident that expanding trade has gone together with growing prosperity because the two are intimately linked. As we have seen with Hong Kong, a country gains by lowering its own barriers to imported products because this induces it to use its internal resources more efficiently and to concentrate on what it does best.
Unfortunately, following the heady days of rapid expansion in the sixties and early seventies, the world economy has been going through rather choppy waters during the last decade and more and this has led to a resurgence of protectionist pressures. In particular, there has been a marked reluctance on the part of whole economies and their electorates willingly to adapt to rapid and accelerating changes in technology and in market con- ditions. This has led to excessive rigidities in both product and labour markets and, in some cases, to high and growing levels of unemployment.
Hong Kong has been fortunate in these circumstances because the flexibility of its economy and its complete exposure to world market forces has enabled it to adjust rapidly to all changes, whether externally or internally generated. As a result, its economy has continued to expand and full employment has been maintained.
A particular manifestation of market rigidity in some developed countries has been the reluctance of certain declining and uncompetitive industries to adjust to market forces, particularly from import competition. Instead, these industries and their supporters have exerted pressure, through the political process and otherwise, to call for increased pro- tection against imports. This has notoriously been the case with the textile and clothing industries, but other industries - steel, vehicles, machine tools, advanced electronics among them - are now also joining the queue for protection. Indeed, there are even pressures, particularly in the United States, for attacking its trade deficit through a more general
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