WTO rules against US in Hong Kong labelling dispute

The United States is flouting international trade rules by labelling imports from Hong Kong as those from China, the World Trade Organization has ruled.

The WTO ruling on Wednesday addressed a decision by former US President Donald Trump’s administration to revoke special trading privileges for the Chinese-ruled city.

Trump made the decision – which meant goods made in the city could no longer be stamped “Made in Hong Kong” – after Beijing imposed a sweeping security law on the financial hub in 2020 to stamp out dissent.

Until 2020, the US had treated Hong Kong, which is semi-autonomous and a separate WTO member, in the same manner as before it passed from British control in July 1997.

A three-person WTO panel found that the US violated an obligation towards Hong Kong by giving it less favourable treatment than other WTO members in terms of marks of origin on its products.

The US said it had applied an exception allowing for measures to protect a country’s “essential security interests”.

The panel acknowledged that tensions had increased between the US and Hong Kong, but said it had not risen to an “emergency in international relations”, the threshold required to apply the exception.

The panel concluded its 96-page report by saying the US should bring its measure into conformity with global trading rules.

The ruling drew a sharp rebuke from Washington on Wednesday, with US Trade Representative spokesman Adam Hodge saying the country “strongly rejects the flawed interpretation and conclusions” of the panel report.

The US was responding to China’s “highly concerning actions”, threatening US national security interests, Hodge said.

He added that the US does not plan to remove the marking requirement as a result of the latest report.

“Issues of national security cannot be reviewed in WTO dispute settlement, and the WTO has no authority to second-guess the ability of a WTO Member to respond to what it considers a threat,” Hodge said.

Hong Kong’s secretary for commerce and economic development praised the WTO ruling and called on Washington to reverse course.

“It was discriminatory and totally unreasonable and a serious breach of the WTO’s rules,” Algernon Yau told reporters, adding the change had “confused customers”.