ENG-1986 — Page 16

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HONG KONG AS A PARTNER IN WORLD TRADE

contracting party to the General Agreement on Tariffs and Trade (GATT), which sets the rules for, and acts as the forum for negotiations on, the conduct of international trade.

The latter months of 1986, also, saw the start of a new round of multilateral trade negotiations under the auspices of the GATT, the eighth such round since the agreement entered into force in 1947. This will be a crucial negotiation whose main task will be to stem, and hopefully to push back, the protectionist forces which have been growing stronger in recent years in the current state of the world economy. Hong Kong will, for the first time, be participating fully in its own right in these negotiations and, given the overwhelming importance of trade for its economy, its overall aim must clearly be to support the forces working towards a further freeing of the channels of world trade.

History

It is important to recognise, first, that Hong Kong has always been a mart of trade. When it came under British administration almost 150 years ago, it was declared a free port, that is, with no duties or other impediments to the free movement of imports and exports, and this has been the keystone of its economic policy ever since. Taking advantage of its location and the possession of one of the best natural harbours in the world, certainly the best by far on the long stretch of the South China coast, Hong Kong quickly established itself as one of the focal points for the conduct of trade between China and the outside world, a true entrepôt port. And along with the trade came the essential backup services: communications, commercial links and finance, necessary to strengthen and lubricate the channels of trade. Regular shipping services were established, commercial houses were formed, and banking, insurance and other financial services quickly followed. In due course, ancillary activities associated with a busy port, such as ship repair facilities, were added.

The steady growth of the population from its tiny beginnings and, indeed, the expansion of the territory with the acquisition of the Kowloon Peninsula in 1860 and the 99-year lease of the New Territories in 1898, did little fundamentally to alter the nature of these activities, centred as they were on the port and the entrepôt trade flowing through it. Certainly, there was a very considerable expansion of trade in terms of size, composition and destinations and the built up area of the territory grew and spread out. But, essentially, Hong Kong remained an entrepôt centre for 100 years until the Second World War.

Early Post-War Years

The 1940s and early 1950s were undoubtedly one of the most traumatic periods in the whole history of Hong Kong. There were times when the very existence of the territory, both politically and economically, was at stake. The end of the Pacific War and the Japanese occupation in 1945 found Hong Kong battered, looted and run down, with its population reduced to little more than 500 000. The pre-war population rapidly returned, however, and valiant efforts were made to reconstruct and to re-establish normal business and trade. But this was quickly followed by the final stages of the Chinese civil war and the closing of the border and then, almost immediately after, by the Korean War and the United Nations embargo on trade with China. This was a hatchet blow to what had been the central engine of Hong Kong's economy for more than a century, its role as a conduit for trade between China and the outside world. At the same time, the population of the territory had been swelled by refugees fleeing from the civil war in China which raised numbers to well over two million by the early fifties. The future seemed to be bleak in the

extreme.