VZCZCXRO7718
PP RUEHCN RUEHGH
DE RUEHHK #0012/01 0030945
ZNR UUUUU ZZH
P 030945Z JAN 07
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 9986
RUCPDOC/USDOC WASHDC PRIORITY
INFO RUEHBJ/AMEMBASSY BEIJING 0005
RUEHCN/AMCONSUL CHENGDU 1008
RUEHGZ/AMCONSUL GUANGZHOU 0301
RUEHGH/AMCONSUL SHANGHAI
RUEHSH/AMCONSUL SHENYANG 3475
RUEHIN/AIT TAIPEI 4318
RUEHGV/USMISSION GENEVA 1089

UNCLAS SECTION 01 OF 03 HONG KONG 000012 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
STATE FOR EB/TPP 
STATE PASS USTR BHATIA/STRATFORD/WINTERS/CELICO 
USDOC ITA LAVIN/MACQUEEN 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: EAIR ECON ETRD EINV KIPR WTO HK
SUBJECT: U/S LAVIN AND CITB SECRETARY WONG DISCUSS TRADE 
ISSUES 
 
¶1.  (SBU) SUMMARY:  Franklin L. Lavin, Under Secretary of 
Commerce for International Trade, met with Joseph Wong, Hong 
Kong Commerce, Industry, and Technology Secretary on December 
8 to discuss the Doha Round, the Secure Freight Initiative, 
anti-dumping, intellectual property rights (IPR), aviation 
services, and the U.S.-China Strategic Economic Dialogue 
(SED).  Wong stated that the Hong Kong government (HKG) has 
three trade priorities:  the success of Doha, Hong Kong's 
continuing economic integration with the mainland, and 
ensuring Hong Kong companies benefit from the Closer Economic 
Partnership Agreement (CEPA) with the mainland.  Lavin 
encouraged the HKG to join the Secure Freight Initiative, to 
open its aviation services market and to reconsider 
provisions in the new Copyright Amendment that have the 
potential to create dangerous loopholes in Hong Kong's IPR 
regime.  Lavin forecast increased U.S.-Chinese trade friction 
in 2007, citing the slowdown of economic reform in China, the 
shift in power in the U.S. Congress and public concerns in 
the U.S. over the trade deficits.  Wong acknowledged the 
trade deficit, but stated that U.S. export control measures 
contribute to the trade imbalance.  END SUMMARY. 
 
¶2. (SBU) Wong opened by citing Hong Kong's top three trade 
priorities.  The first is to see the Doha Round succeed.  The 
multi-lateral trading system must not breakdown and must 
remain able to resolve trade disputes, Wong stated.  The 
second priority is to continue Hong Kong's economic 
integration with the mainland, while maintaining autonomous 
WTO and APEC status. Third, the HKG wants to ensure that 
Hong Kong companies continue to benefit from the Closer 
Economic Partnership Agreement (CEPA) between Hong Kong and 
the mainland by gaining preferential access to the mainland 
market.  Wong explained that companies registered in Hong 
Kong from twenty-seven service sectors can take advantage of 
CEPA and that Hong Kong registration, not ownership, is the 
key to obtaining CEPA benefits.  Wong expressed interest in 
the Strategic Economic Dialogue, noting that Hong Kong 
benefits from improved U.S.-China relations. 
 
¶3. (SBU) Lavin stated that the United States remains 
committed to the Doha Development Round and thanked the HKG 
for its continued support.  He also noted that Hong Kong has 
done a superb job with the CEPA; at least two U.S. companies 
in Hong Kong, Crown and UPS, have obtained increased access 
to mainland China through CEPA. 
 
¶4. (SBU) Lavin told Wong that Hong Kong's WTO negotiator in 
Geneva, a member of the "Friends of Anti-Dumping Negotiations 
Group," has expressed unhelpful views on anti-dumping 
regulations that could hurt the multi-lateral trading system. 
Lavin underscored that anti-dumping regulations give 
countries the ability to prevent abusive trade practices, 
engender more confidence in the multi-lateral trading system 
and promote even greater trade flows.  Wong responded that 
Hong Kong is not against anti-dumping as an instrument, but 
wants to avoid abuses of anti-dumping measures.  He 
acknowledged that the multi-lateral trading system needs 
anti-dumping regulations, but suggested that the rules need 
clarification.  Lavin said the USG appreciates Wong's 
explanation, but the Hong Kong's negotiator has expressed 
much more radical views. 
 
¶5. (SBU) Lavin then praised Hong Kong for developing and 
implementing an integrated container security system in its 
seaport.  The United States recognizes that integrated 
container scanning systems must effectively scan containers 
while not burdening port operators nor restricting the free 
flow of trade.  Lavin urged the HKG to join the U.S. Secure 
Freight Initiative (SFI).  Wong responded that the HKG hopes 
to reach an agreement with the USG on HKG's participation in 
the SFI, but that the agreement should facilitate the flow of 
Hong Kong goods through U.S. ports. 
 
¶6. (SBU) Moving to intellectual property rights, Lavin 
acknowledged the progress Hong Kong has made on the IP front. 
 Noting U.S. stakeholder concerns regarding Hong Kong's 
proposed Copyright Amendment, Lavin questioned why the HKG 
 
HONG KONG 00000012  002 OF 003 
 
 
appeared to want to take a step backward in allowing the use 
of devices that circumvent technological protection measures. 
  Wong replied that the CITB-proposed amendment does not 
permit selling of or dealing in copyrighted materials, but 
provides a defense that allows a circumventor to absolve 
liability if he can establish that the circumvention is done 
for the purpose of carrying out a non-infringing act.  Lavin 
stated that this provision could be abused and proposed that 
Wong meet with U.S. IP stakeholders to discuss this and other 
IP concerns. 
 
¶7. (SBU) Lavin then asked why Hong Kong had not yet fully 
opened its aviation services sector, particularly considering 
that HKG policies of opening its seaport to all vessels and 
its telecom sector to foreign operators have resulted in Hong 
Kong becoming a world leader in these two fields.  Wong 
replied that CITB does not directly deal with aviation 
negotiations, which falls under the Economic Development and 
Labor Bureau's purview, and as such did not wish to comment. 
Lavin commented that aviation services do not exist in a 
vacuum, but have wide-ranging impact across the commercial 
spectrum, including job creation/retention, the movement of 
goods and services, and other issues that clearly involve 
CITB.  Still, Wong deferred and did not offer any substantive 
comment on this issue. 
 
¶8. (SBU) In response to Wong's questions regarding the 
U.S.-China Strategic Economic Dialogue (SED), Lavin stated 
that he anticipates some increased trade friction between the 
U.S. and China in 2007 due to the slowdown of the economic 
reform in China, the shift in the U.S. political landscape 
due to the mid-term election results, and public concerns in 
the United States over the trade deficit.  He noted that the 
PRC has not yet responded to a number of pressing U.S. trade 
concerns, so the SED may provide an opportunity for the two 
sides to discuss the future of our economic/trade 
relationship and for the United States to convince the PRC to 
be more responsive.  Wong stated that the PRC's 11th 
Five-year Plan emphasizes measures aimed at increasing 
consumer demand and greater markets for products, which may 
improve the current trade deficit.  Additionally, he noted 
that the United States appears fearful of relaxing overly 
restrictive export controls that limit the PRC's ability to 
import U.S. products.  Lavin accepted that the PRC is 
focusing on improving consumer buying power; he stressed, 
however, that the possible long-term improvement in China's 
buying power does not mitigate the perception in the United 
States of an unfair trade relationship. Lavin cited two 
examples: the PRC's slow rate of approval for U.S. retailers 
to operate in China and the lack of foreign credit cards in 
China.  Regarding export controls, Lavin responded that all 
countries utilize export controls and that the PRC's frequent 
citation of export controls  -- which affect a minute 
percentage of traded goods -- as a key reason for the trade 
deficit indicates that the PRC is not willing to address 
trade problems seriously. 
 
¶9. (U) U.S. Participants 
 
Under Secretary Frank Lavin 
Acting Consul General Marlene Sakaue 
FCS Chief Stewart Ballard 
Economic Officer Craig Reilly 
 
¶10. (U) Hong Kong Participants 
 
CITB Secretary Joseph Wong 
Deputy Secretary for CITB Christopher Wong 
Assistant Director General for Trade and Industry Joyce Tam 
 
 
¶11. (U) During his visit to Hong Kong Lavin participated in 
the following press related activities: 
 
-Off-the-record meetings with the following journalists: 
Keith Bradsher, Bureau Chief, New York Times Hong Kong; Guy 
de Jonquires, Asia columnist, Financial Times, Hong Kong; 
 
HONG KONG 00000012  003 OF 003 
 
 
Mary Kissel, Asian Editor, Asian Wall Street Journal. 
 
-Anthony Yuen, Editor and Anchor of Hong Kong's Phoenix TV 
interviewed Lavin. 
 
-U/S Lavin gave "on-the-record" remarks on the future of 
U.S.-China trade relations to a group of business people at a 
luncheon hosted by the American Chamber of Commerce in Hong 
Kong.  The event was well attended with approximately 30 
business people and over 15 print and TV journalists. 
 
-U/S Lavin completed his day of press meetings with a live 
appearance on Bloomberg TV's "Asia Business Tonight," 
interviewed by Susan Li. 
 
¶12.  This report was cleared by U/S Lavin's staff. 
 
 
 
 
Sakaue