US Rejects ‘Made in Hong Kong’ Label Against WTO Ruling

A cargo ship loaded with containers is pictured near the port in Hong Kong on October 5, 2019. (ANTHONY WALLACE/AFP via Getty Images)

The United States has rejected the World Trade Organization’s (WTO) ruling against labeling products from Hong Kong as coming from China.

Since the Chinese Communist Party (CCP) enacted the Hong Kong National Security Law at the end of June 2020, the United States decided that all Hong Kong goods exported to its territories should no longer bear the “Made in Hong Kong” label but should be changed to “Made in China” instead.

The expert group in World Trade Organization (WTO) Dispute Settlement Body (DSB) ruled on Dec. 21 that the U.S. move was inconsistent with WTO rules. However, the U.S. authority strongly opposed the ruling, indicating that it had no intention of canceling relevant regulations and would not make concessions to the WTO on major security issues.

US Says WTO Has No Rights to Review National Security Issues

Adam Hodge, the United States Trade Representative (USTR) spokesperson, responded to the WTO ruling, indicating that he had no intention of canceling the marking regulations and that he would not hand over judgments or decisions on key security matters to the WTO. He said national security issues could not be reviewed by the WTO’s dispute settlement mechanism. WTO has no right to criticize afterward members’ ability to respond to threats based on facts.

Hodge also said that the United States’ actions are in response to mainland China’s erosion of Hong Kong’s autonomy, democracy, and human rights. He emphasized that the Biden administration is still committed to maintaining the national security of the United States, protecting human rights and democracy, and believes that taking actions to protect national security is an inherent right of any sovereign country. And it is reflected in the WTO agreement.

Current affairs commentator Anthony Tso Ka-chiu pointed out in his online program that Hong Kong has experienced “perfect elections” and “makes continuous threats to everybody with the National Security Law every day, even Google is not exempted.” He believes there is no way to return to the beginning. He also believes that the WTO can’t do anything about China’s alleged unfair trade practices.

The US Adopted the Regulation in 2020

After the CCP enacted the Hong Kong National Security Law in 2020, then U.S. President Donald Trump signed a presidential decree on July 14, 2020, canceling Hong Kong’s special tariff status and special economic treatment. There was also the cancelation of the opportunity to receive sensitive technology, directly implying that Hong Kong’s “one country, two systems” status is no longer recognized.

In August 2020, the U.S. applied the security exemption clause allowed by the WTO to announce that starting from Nov. 9, 2020, Hong Kong goods shipped to the United States must be labeled with “Made in China.” At that time, U.S. Customs and Border Protection issued an announcement stating that the measure was in accordance with the executive order of the “Hong Kong Autonomy Act” signed by Trump on July 14, 2020, and that Hong Kong would no longer be given special treatment for trade. A 10 percent punitive tariff would be imposed on any breach of that.

Edward Yau Tang-wah, then Secretary for Commerce and Economic Development, responded to the U.S. imposed regulations and believed that the U.S. requirements were simply an act “upending the real situation,” inconsistent with facts, and inconsistent with the WTO agreement with international regulations on the country of origin.”

At that time, a reporter asked him why the government adamantly opposed the labeling of “Made in China” on Hong Kong products and whether it contradicted “Hong Kong is part of China?” Yau said that it was simply a reflection that Hong Kong was granted its independent tariff status, indicating the special privileges granted by the motherland under the “One Country, Two Systems.”

On Aug. 13, Trump said that the United States gave Hong Kong a lot of preferential measures in the past, which were based on seeing the practice of freedom in Hong Kong. “We treasure freedom, so we gave Hong Kong a lot of economic benefits. Now, as we have canceled all these benefits, Hong Kong will not be able to compete with the U.S. anymore.” He also added that following the termination of Hong Kong’s special treatment status, Hong Kong’s status as an international financial center would undoubtedly come to an end.

On Oct. 30 of the same year, the Hong Kong government requested the WTO handle Hong Kong’s complaints against the United States according to the WTO’s dispute settlement mechanism. Yau said at that time that it was “disappointing” that the United States had no substantive or satisfactory response in the past, forcing the Hong Kong government to take further action against it.

HK Government: Exports to the US Negligible of Total Overseas Trade

At that time, Yau said that although Hong Kong’s exports to the United States accounted for less than 0.1 percent of total overseas trade, it impacted Hong Kong companies. Two years later, on Dec. 22, the current Secretary for Commerce and Economic Development, Algernon Yau Ying-wah, was asked by reporters about the impact of the two-year implementation of the US measures on Hong Kong. Algernon Yau still said that Hong Kong’s exports to the U.S. accounted for “only about 0.1 percent,” or HK$7.4 billion (US$940 million), calling it ”very minimal.“ Although the amount is small, it will still confuse consumers with the ”Made in China“ or ”Made in Hong Kong” label and cause unnecessary concerns for manufacturers.

Algernon Yau pointed out that the WTO ruling was fair to Hong Kong and criticized the obstruction of the appointment of WTO appellate body personnel.

The WTO Appeal Mechanism is Close to Being Redundant

The WTO website shows that the organization has a permanent Appellate Body to handle appeals. The United States can appeal within 60 days, but all seven members are currently vacant, and the term of the last member already ended on Nov. 30, 2020. It means all appeal applications cannot be processed, and in fact, there are already several cases in the backlog

In the dispute settlement mechanism of the WTO, after the expert panel submits a report to the Dispute Settlement Body, if there is no appeal within 20 to 60 days, the Dispute Settlement Body will pass the report and require the party in violation of the agreement to revoke the measures that do not comply with the agreement. However, once someone appeals, the agency will hold off on the report until the appeal is fully processed.

In 2018, the U.S. ruled that China had various unfair trade practices, including the theft of U.S. intellectual property (IP) rights and the forced technology transfer of U.S. companies to gain access to the Chinese market. Trump, the then U.S. president, imposed tariffs on US$200 billion of Chinese imports. In 2020, the WTO ruled that the U.S. move violated international trade rules, but the tariffs remained.