MNI INTERVIEW: Trump's Hong Kong Plan Rings Hollow: Ex-USTR

--Washington's Efforts Will Do Little to Stall Hong Kong's Loss

By Ryan Hauser

     WASHINGTON (MNI) - The White House's announcement last week that it would

end the U.S.'s special relationship with Hong Kong is largely symbolic and won't

greatly impede trade flows in the short-run, a former top USTR official told MNI

Wednesday.

     "Nothing has changed so far" and no timeline has yet been laid out, even as

President Trump's response to China's looming takeover of Hong Kong "placed

everything on the table," said Jeff Moon, the former Assistant U.S. Trade

Representative for China, Hong Kong, and Taiwan from 2016-17.

     Rather than creating a sharp reduction in U.S.-Hong Kong trade, Trump will

likely roll out his proposed policies slowly, and these actions will largely be

ineffective at persuading Beijing to back off tightening controls on the former

British colony, said Moon. 

     --CHINA WON'T TURN

     The President's strategy of threatening catastrophic consequences to gain

leverage was unsuccessful during the initial U.S.-China trade war and is

unlikely to work again, Moon said, adding that Trump's actions will have little

effect on Beijing's Hong Kong policy. 

     Symbolic gestures like a State Department advisory or muted sanctions

against Chinese officials are "the easiest things for him to do," said Moon.

More concrete measures like extending export controls to Hong Kong or revising

the extradition treaty will have a negative though not a severe effect on Hong

Kong, said Moon, who now runs an international trade consultancy. Cutting off

trade benefits altogether "would probably be towards the end of the road." 

     For Chinese leaders, reasserting sovereignty over Hong Kong is "much more

important than any relationship with Trump," said Moon, and the repatriation of

Hong Kong also plays into Xi Jinping's consolidation of power on the mainland.

"Every Chinese child is taught from the age of negative-one about the 'Century

of Humiliation' that began with the takeover of Hong Kong," Moon said. 

     Hong Kong's contribution to Chinese GDP is about one-tenth of what it was

in 1997, Moon said, and the Chinese are willing to absorb any punishment. While

about half of China's foreign direct investment goes through Hong Kong, the city

no longer plays the "crucial role" it did in the past, and it's now being folded

into China's greater development plans for the bay area.

     --DEEPER DECOUPLING

     "If Trump is reelected, then the world economy will bifurcate," Moon

predicted. "There will be a Chinese bloc and an American bloc." 

     Former Vice President Biden, however, would likely take a more multilateral

approach were he elected President but would also be tougher on China by

reengaging in global treaties and by declining to attack U.S. allies, as Trump

has done.

     Outside of the elections, Moon sees several "known black swans" that could

disrupt what many former officials have described as the lowest point in

US-China relations since Tiananmen Square.

     Moon pointed to persistent security threats from a possible Chinese

invasion of Taiwan, to an aggressive or unstable North Korea, to military

engagement in the South China Sea -- all of which could threaten the fragile

relationship between Washington and Beijing.

     "The economic conflict is throwing more tinder on the ground," said Moon.

"So when the match falls, there's all the more reason for the fire to rage

higher."

--MNI Washington Bureau; +1 202 371 2121; email: ryan.hauser@marketnews.com

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