Hong Kong's Reliance on Free Trade
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Here, in Hong Kong, the possibility of adopting the apparently
soft policy option of import restrictions to maintain the level of
employment, and correct balance of payments disequilibrium, simply does
not exist. This is because of the exceptional degree of external
dependence of this economy. That is to say, it is based on the import of
foodstuffs, raw materials, capital equipment, semi-manufactures and many
consumer goods to pay for which we have to export manufactured goods and
financial and mercantile services and sell our tourist facilities. This
means that we have to maintain a cost/price structure which is flexible
downwards so that our price level continually adjusts to the external
price level; and we have to ensure that labour and capital are sufficiently
mobile to enable us to respond quickly to changing market circumstances.
The Hong Kong Government seeks to pursue policies which have
at lease a neutral impact on the flexibility and mobility of our economy.
But there are limits to the extent to which even our economy, with its
free enterprise-based private sector (which, as a matter of deliberate
policy, is neither helped to make profits nor protected from making losses),
can cope with trade policy decisions which arbitrarily, and even, sometimes,
illegally, erode our GATT most-favoured-nation rights of access to overseas
markets.
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And I would add that, as a matter of fact, the scope for
retaliatory import substitution is very limited indeed here. So, whatever
temporary devices that may be available to us to ameliorate the income
and employment effects of protectionism, such as the running down of
foreign exchange reserves and the financing ef part of the public
sector's capital works programmes with debt, the fact is that the growth
/rate of