U.S. and Hong Kong (1985-1997)

UNITED STATES - HONG KONG POLICY ACT REPORT

as of March 31, 1996

As required by Section 301 of the
United States-Hong Kong Policy Act of 1992,
22 U.S.C. 5731, as amended

PREFACE

Hong Kong will become a Special Administrative Region of the People's Republic of China on July 1, 1997. Hong Kong's status after its reversion to Chinese sovereignty is defined in two documents: the 1984 Sino-British Joint Declaration and the 1990 Basic Law promulgated by the People's Republic of China.

The Joint Declaration was signed by the United Kingdom (U.K.) and the People's Republic of China (PRC) on December 19, 1984. It provides that the post-1997 Hong Kong Special Administrative Region (HKSAR) will be directly under the authority of the Central Government of the PRC. Unlike any other region of China, Hong Kong will have a high degree of autonomy except in matters relating to foreign affairs and defense. The Joint Declaration established the concept of "one country, two systems" for Hong Kong, and guaranteed that the social and economic systems, lifestyle, and rights and freedoms currently enjoyed by the Hong Kong people will remain unchanged for at least 50 years. The Joint Declaration is an international agreement and was registered with the United Nations Secretariat by the U.K. and the PRC.

The Basic Law of the HKSAR was adopted on April 4, 1990 by the Seventh National People's Congress of the PRC. It provides the fundamental governing framework for implementing the "one country, two systems" principle in Hong Kong consistent with PRC commitments in the Joint Declaration. It says that the PRC socialist system and policies will not be extended to the territory. The Basic Law reiterates the Sino-British agreement to allow the HKSAR to exercise a high degree of autonomy and to exercise separate executive, legislative, and judicial power.

With the expectation that Hong Kong's high degree of autonomy will be preserved except in the areas of foreign affairs and defense, the United States will continue to accord Hong Kong a special status distinct from the rest of the PRC after 1997. While recognizing that Hong Kong will become a part of the PRC, we have sought to lend support to Hong Kong's promised autonomy by strengthening bilateral ties: concluding bilateral agreements; promoting trade and investment; arranging high-level visits; broadening law enforcement cooperation; and bolstering educational, academic, and cultural links.

The United States has also stressed, both privately and publicly, the importance of handling controversial transition issues with sensitivity, honoring both the letter and the spirit of the Joint Declaration. Although most Hong Kong people are guardedly optimistic about their future after 1997, there are significant anxieties. Some worry about whether the promised high degree of autonomy will be fully realized and whether political liberties and civil rights currently enjoyed in Hong Kong will be preserved. In the remaining months before reversion, clear signals from Beijing will be increasingly important to ensure Hong Kong's continued stability and prosperity after 1997 under the Joint Declaration principles.

I. SIGNIFICANT DEVELOPMENTS IN UNITED STATES RELATIONS WITH HONG KONG, INCLUDING A DESCRIPTION OF AGREEMENTS THAT HAVE ENTERED INTO FORCE BETWEEN THE UNITED STATES AND HONG KONG

A. Economic and Commercial

Hong Kong is an active member of the World Trade Organization and the Asia Pacific Economic Cooperation forum. Hong Kong's policy makers represent one of the world's most open economies, a trade-dependent entity whose future economic and commercial autonomy is guaranteed under the Joint Declaration. The Hong Kong Government (HKG) has placed special emphasis on participation in multilateral economic institutions, believing they offer the best way to protect Hong Kong's long-term economic and commercial rights and interests. Hong Kong is a strong advocate of open markets and non-discrimination, including most-favored-nation treatment for all.

Hong Kong is the thirteenth largest trading partner of the United States. In 1995, two-way merchandise trade surpassed US $24 billion. United States exports to Hong Kong reached US $14.2 billion, while U.S. imports of Hong Kong-produced goods totaled US $10.3 billion; this amount excludes Hong Kong re-exports of PRC-made goods, which provide substantial indirect income to the territory as well. Principal Hong Kong imports from the U.S. include computers, telecommunications equipment, and foodstuffs. Major Hong Kong exports to the U.S. include clothing and apparel, office machines and electrical machinery, photographic apparatus, watches and clocks.

Hong Kong has one of the most liberal trade and investment regimes in the world. There are no import tariffs. Hong Kong levies taxes on alcohol, autos, fuel and some luxury goods, but otherwise does not tax consumption. U.S. and foreign firms are free to invest and establish busi- nesses with minimal government interference. In early 1995, U.S. direct investment in Hong Kong on a historical cost basis was US $12 billion, primarily in wholesale trade, banking and finance, and manufacturing.

Although there are no non-tariff barriers in Hong Kong, certain restrictions apply in professional service sectors (e.g., medicine and law), in the aviation sector, and in certification services. Moreover, while Hong Kong justifiably prides itself on supporting competition, the absence of anti-trust laws has led to domination of some businesses by major local companies, called "hongs." In certain sectors, such as aviation general services, franchising, and retail distribution, the hongs sometimes act to restrict competition from foreign firms, including those from the United States.

Also on the trade front, pirated movie, audio, and software compact discs became increasingly available in Hong Kong in 1995; this has aroused concern among some American software and entertainment firms. Hong Kong Government officials expect that stiff fines legislated last year and additional resources for police and customs will pay off in arrests of some of the ring leaders. Hong Kong officials have also pledged to expand cooperation with PRC officials in the joint effort to combat piracy of intellectual property.

Hong Kong is the commercial gateway to China. Almost 45 percent of all trade with the PRC passes through the territory. Over 2,000 foreign companies maintain regional headquarters or offices in Hong Kong. There are over 1,000 U.S. businesses represented in Hong Kong, including 198 regional headquarters and 228 regional offices. The American Chamber of Commerce in Hong Kong has over 1,200 members, the largest business organization of its kind overseas. Many factors attract U.S. firms to Hong Kong: its excellent telecommunications and port infrastructure; the sanctity of contracts and respect for the rule of law; a high quality of life; transparency of government regulations; the use of English in commerce and government; a non-interventionist economic policy; and unsurpassed expertise of Hong Kong entrepreneurs in accessing the mainland market.

U.S. companies have a favorable view of Hong Kong's business environment. The American Chamber of Commerce's annual business confidence survey, conducted in mid-1995, reported that 97 percent of U.S. firms responding consider their Hong Kong operations over the next three years to have "good" or "satisfactory" performance prospects. Most of the 553 respondents plan to either maintain or expand their investments. Only eight percent indicated a plan for gradual reduction of Hong Kong activities, and only one percent indicated plans to leave. The rising cost of doing business in Hong Kong was singled out as an area in which U.S. firms were least satisfied with Hong Kong's business environment.

American companies have had limited success in winning contracts for the design and construction of Hong Kong's US $21 billion Chek Lap Kok Airport and its associated projects. U.S. strengths in the service sector and high technology have made U.S. bidders more competitive as construction proceeds and more contracts for equipment and franchises are awarded. In May 1995, Hughes was awarded a US $42 million contract for master systems integration. Ramp International also won a US $23 million subcontract to supply loading bridges. U.S. companies have won nearly every contract for air traffic control equipment, including US $48 million in sales for Raytheon and additional sales by Unisys, Cardion, and Wilcox.

Following formation of the airport authority in 1995, several franchise agreements have been signed with United States companies or consortia including U.S. firms. Fedex is part of a consortium that won an air cargo franchise, United Airlines is part of a consortium approved for line services and aircraft maintenance, and Mobil is a member of a franchise for fuel services. U.S. companies are also expected to compete for design and engineering services contracts with the mass transit and Kowloon-Canton railways, both of which plan multi-billion dollar expansions.

B. High-Level Visits

The United States encourages high-level visits to Hong Kong as evidence of our close bilateral ties and the importance of Hong Kong to United States interests. Senior U.S. Government (USG) officials from the executive, legislative, and judicial branches have regularly visited Hong Kong; in the past year, high level U.S. Administration and Congressional visitors spent approximately 320 days in Hong Kong on official visits.

Since the time of the last report in March 1995, four cabinet members (Secretary of the Treasury Rubin, Secretary of Commerce Brown, Secretary of Agriculture Glickman, and Secretary of Transportation Pena) have visited Hong Kong. Other official visitors have included the following: the Under Secretary of State for Political Affairs; the Assistant Secretary of State for East Asian and Pacific Affairs (two visits); the Assistant Secretary of State for Intelligence and Research; the Assistant Secretary of State for Consular Affairs; the Deputy Assistant Secretary of State for Democracy, Human Rights and Labor; the Deputy Assistant Secretary of State for East Asian and Pacific Affairs; the Under Secretary of the Navy; the Deputy U.S. Trade Representative; White House Senior Advisor; Vice Admiral of the Coast Guard; Chairman and Deputy Chair of the International Trade Commission; Chairman of the Securities and Exchange Commission; Deputy Assistant to the President for Economic Policy; and Vice President of EximBank.

Hong Kong also hosted visits from the following groups and organizations: OPIC; FAA; NASA; FDA; Center for Disease Control; U.S. Geological Survey; National War College; National Geographic Society; U.S. Mint; Department of Commerce; NOAA; Department of Energy; Department of the Treasury; Agency for International Development; the Fulbright Scholar Program; the Smithsonian National Science Foundation; Federal Reserve Bank; Federal Transit Administration; Secret Service; General Accounting Office; and the Internal Revenue Service. The Consulate General in Hong Kong, also provided assistance and support to numerous Congressional and Congressional staff delegations, as well as to several state governors.

C. Law Enforcement Cooperation

United States law enforcement agencies enjoy excellent cooperation with their Hong Kong counterparts. The U.S. Government is broadening its cooperative liaison and operational relationship with Hong Kong Government agencies, particularly to combat international drug trafficking, counterfeiting, credit card fraud, money laundering, illegal textile transshipment, Asian organized crime, violations of intellectual property rights, and alien smuggling.

The U.S. is expanding its law enforcement presence at the Consulate General in Hong Kong. In 1995, we added another FBI representative and we expect to open an office of the U.S. Secret Service in 1996 to work on credit card fraud and U.S. banknote counterfeiting. Other U.S. agencies with law enforcement responsibilities present include the Department of State, U.S. Customs, Drug Enforcement Administration, and the Immigration and Naturalization Service.

The Hong Kong Government cooperates fully with U.S. agencies in combating narcotics activity. As one of Asia's most important financial centers, Hong Kong is used by regional and local drug traffickers to launder drug-related proceeds. In July 1995, Hong Kong's Drug Trafficking and Recovery of Proceeds Ordinance and the Organized and Serious Crimes Ordinance were amended to enhance the authorities' ability to recover drug- related proceeds and punish traffickers. In a bilateral agreement signed in 1991, Hong Kong and the United States agreed to "grant to each other assistance in the freezing, restraining, seizure, forfeiture, and confiscation of the proceeds and instrumentalities of drug trafficking." Through February 1996, the Hong Kong Government has seized close to US $30 million in drug-related assets, and an additional US $20 million in forfeitures is pending.

In 1995, Hong Kong and U.S. investigators cooperated to provide testimony and physical evidence in five drug trials, and there was cooperation as well in over two dozen major drug and/or money laundering trials. As a result of United States extradition requests, more than 125 individuals have been returned to the U.S. since 1980, over 80 of which have been in drug-related cases. U.S. law enforcement agencies continue to provide training to their Hong Kong counterparts in many areas, ranging from conducting financial investigations to the control of precursor chemicals. U.S. law enforcement authorities continue to work with the Hong Kong Government to adopt mandatory rather than voluntary financial transaction reporting requirements and to explore options for discouraging the use of non-bank remittance centers by money launderers.

Hong Kong Government authorities, in particular the immigration and police departments, have worked closely with the U.S. Immigration and Naturalization Service (INS) to counter attempts to smuggle Chinese nationals to the United States. Several joint U.S.-Hong Kong alien smuggling investigations were completed in 1995, including two cases which disclosed a hierarchy of alien smuggling organizations and resulted in criminal prosecutions. INS, in close liaison with the Hong Kong Government, also intercepted over 300 mainland Chinese attempting to enter the U.S. illegally via Hong Kong's Kai Tak Airport in 1995.

D. Bilateral Agreements

There are more than a dozen principal U.S. bilateral agreements that currently apply to Hong Kong. Most of these are agreements with the U.K. that extend to the territory. Others have been concluded directly with Hong Kong under "entrustment" from the United Kingdom. Under international law, the U.K.-U.S. agreements will lapse with respect to Hong Kong in 1997 unless special arrangements are made with Hong Kong and/or the PRC as circumstances warrant for their continuation in force. The U.S. and Hong Kong are discussing various agreements to replace those of interest to both sides.

In July 1994, the U.S. and Hong Kong initialed a new extradition treaty to apply to the HKSAR Post-1997; it awaits final approval by the Sino-British Joint Liaison Group (JLG). The treaty will then be submitted to the U.S. Senate for its advice and consent to ratification. In December 1994, the JLG approved a model text for Hong Kong to use in negotiating bilateral mutual legal assistance (MLA) agreements. Negotiations between Hong Kong and the United States on an MLA agreement began in May 1995 and are continuing. Separate discussions on a possible bilateral prisoner transfer agreement are expected to take place in 1996.

In September 1995, the U.S. and Hong Kong concluded a stand-alone Air Services Agreement (ASA) to govern air relations and traffic rights between our two economies; it also awaits final approval by the JLG. The U.S. has been given no indication as to when the Agreement might be approved, but the expanded traffic rights are already in effect as an adjunct to the U.S.-U.K. Agreement. According to recent press reports, the JLG has reached a breakthrough compromise on Air Services Agreements in general, and we are hopeful for swift approval in 1996 of the U.S.-Hong Kong Agreement.

There has been mixed success with another important commercial issue, the negotiation of an Investment Protection Agreement. A round of expert consultations was held in February. Although the early stages of talks saw little progress, continuing discussions have recently achieved consensus on the basic framework for an Agreement. The two sides have committed to reengaging promptly.

II. OTHER MATTERS, INCLUDING DEVELOPMENTS RELATED TO THE CHANGE IN THE EXERCISE OF SOVEREIGNTY OVER HONG KONG AFFECTING UNITED STATES INTERESTS IN HONG KONG OR UNITED STATES RELATIONS WITH HONG KONG

A. United States Interests in Hong Kong

United States interests in Hong Kong are substantial. U.S. trade, investment, and business with Hong Kong flourish in a virtually barrier- free environment. Last year's exports to Hong Kong, many of which are reexported to China, totaled over US $14 billion. We have US $12 billion investment in Hong Kong. Some 1,000 resident U.S. firms employ 250,000 Hong Kong workers (10% of the workforce), and Hong Kong's open society and attractive living environment are home to over 36,000 American citizens. Cooperation between the HKG and the FBI, DEA, INS, Customs, and the U.S. Navy is broad, effective, and mutually beneficial. And we enjoy strong educational and cultural relations, including the very large flow of tourists and students in both directions. Thus, we have a significant interest in promoting economic and business relationships; preserving civil liberties and the rule of law; maintaining a cooperative law enforcement relationship; and preserving access to Hong Kong as a routine port of call for Navy ships.

Protection of these interests would be enhanced by Hong Kong's future stability and prosperity; the continued operation of a full-service Consulate General; the steady development of open, accountable, and democratic institutions; the protection of civil liberties; and the preservation of Hong Kong's legal system. The United States works closely with and communicates our views to the present sovereign (the U.K.), the future sovereign (the PRC), and the people of Hong Kong. We also continue to lend official support to private efforts and programs designed to achieve our goals.

B. Developments Affecting U.S. Interests in and Relations with Hong Kong

Hong Kong continues to be a dynamic, prosperous, and stable territory. It welcomes interaction with foreigners and it is friendly to American and international business interests. Its economy continues to grow at over five percent a year. Due to its highly educated and skilled work force, efficient services, and predictable legal climate, Hong Kong has remained an attractive place for Americans to live, work, and visit. Over the past year, however, developments in Hong Kong have sent mixed signals about some aspects of the change in sovereignty, leading to a variable combination of anxiety and reassurance.

Preparatory Committee

In December 1995, Beijing announced the formation of the Preparatory Committee (PC), a group of 150 representatives -- 57 from China and 93 from Hong Kong. As stipulated by the PRC, the Preparatory Committee will "prescribe the specific method for forming . . . the first Legislative Council" and will prepare for "the establishment of the Selection Committee for the First Government." All PC members were chosen by Beijing without open deliberations or formal consultations with Hong Kong. China did not include any members of the Democratic Party on the PC, although the Democratic Party represents the largest political party in the legislature and has demonstrated broad popular support among Hong Kong residents.

The Electoral System

The Sino-British controversy over Hong Kong's system of representative institutions has continued, especially with respect to the Legislative Council (Legco) -- the legislative branch of the Hong Kong Government. The conflict has persisted since 1992 when Hong Kong Governor Patten proposed reform of the electoral procedures for Legco and the lower level District Boards and Municipal Councils. After a series of unsuccessful negotiations with Beijing, and in the wake of legislative action supporting the Patten proposals, the HKG enacted the Governor's electoral reforms without PRC agreement.

The PRC National Peoples Congress (NPC) thereafter decided that it would disband Legco, the District Boards, and the Municipal Councils after June 30, 1997. In March 1996, the Preparatory Committee announced that a provisional legislature, which may include members of the current Legco, would be formed after selection of the Chief Executive (expected during the fall of 1996). Although the details are not yet clear, there is concern that the provisional legislature will begin functioning before June 30, 1997, thereby undermining the authority of the present Hong Kong Government. Further review of Hong Kong's electoral system is included in Section VII(B).

Adaptation of Laws

Progress in the Joint Liaison Group continues to be slow in several important areas. The PRC has not accepted British proposals on the modalities of adapting current Hong Kong laws to the "constitutional" provisions of the Basic Law for the post-1997 period. Continued delays in cooperation could result in significant gaps or uncertainties in the legal system after 1997; this increases anxiety among some companies that rely on various commercial laws, including intellectual property laws.

The Civil Service

Hong Kong's professional and efficient civil service will be a key force in ensuring its smooth transition and beyond 1997. Beijing's public demands for personnel records of senior civil servants caused anxiety among senior officials. Some civil servants reportedly were worried they would face retribution for supporting or being closely identified with the HKG/British policies opposed in Beijing. In 1995, the PRC scaled back its demand to review personnel records and held a series of successful "informal" exchanges with Hong Kong civil servants.

In March 1996, however, a PRC official told reporters that Hong Kong civil servants who opposed the idea of a provisional Legco would be barred from serving after reversion. Although Beijing thereafter qualified its position, calling the initial hard-line statements only "personal opinions," civil service confidence suffered some damage. A substantial number of senior civil servants are eligible to retire in 1996, and it will be important for the HKG to avoid large numbers of destabilizing retirements prior to the transition. The modalities of sharing civil service records and information with the PRC continues to be discussed in JLG channels.

Agreements in the Joint Liaison Group

As of February 1996, the Joint Liaison Group (JLG) had approved extension of close to 200 multilateral treaties currently applied to Hong Kong through the United Kingdom. It also approved Hong Kong's continued participation in 30 international organizations The U.S. is currently reviewing all such agreements to determine U.S. interests in their continued applicability to Hong Kong. There has also been good progress in the JLG on the approval of Hong Kong's bilateral agreements with other countries. As of March 1996, the Hong Kong Government has signed 20 bilateral agreements on air services, investment protection, and extradition.

HKSAR Passports

Significant progress has been made with respect to the design, production, control, and issuance of the future HKSAR passport. The PRC has distributed pre-production samples of the new passport that demonstrate security features that are close to state of the art. British Foreign Secretary Rifkind and PRC Foreign Minister Qian agreed in January 1996 that only holders of permanent Hong Kong identity cards would be eligible for the HKSAR passport (essentially, those who are presently eligible to hold British travel documents or Hong Kong Certificates of Identity). Production and distribution of the passport will be under strict safeguards, and only the HKSAR Immigration Department will have authority for issuance.

In late 1995, the PRC sent a diplomatic note inviting negotiations on the question of visa-free entry to the future HKSAR to countries currently enjoying such an arrangement The United States is currently considering its response. Our ability to reciprocate -- that is, to offer visa-free entry to the United States to holders of the future HKSAR passport -- is limited and governed by section 217 of the Immigration and Nationality Act. At present, the United States issues ten-year multiple entry visas to those who obtain visitor visas; this is the maximum now available to Hong Kong residents under U.S. law.

The PRC has confirmed that the British National Overseas (BNO) passport will continue to be honored after 1997. In keeping with its position on dual nationality, however, China will recognize the BNO as a travel document only, and not as dispositive evidence of the bearer's citizenship.

Chek Lap Kok Airport

During 1995, Britain and the PRC agreed on financial terms for the amount of debt and equity for the new Chek Lap Kok Airport and connecting railway. Agreement on financing removed the last major obstacle to completion of the US $21 billion project. Chek Lap Kok is expected to open in April 1998.

Container Terminal 9

Construction of Container Terminal 9 (CT-9), a much-needed expansion to Hong Kong's port, remains on hold. A major U.S. company and Hong Kong terminal operator, Sea-Land, has a large stake in the project. China had complained about the method of government tender for CT-9, but most observers agree it was the participation of a specific British company that led Beijing to balk at the outcome. In late 1995, Foreign Secretary Rifkind and Foreign Minister Qian reportedly reached a compromise, which appears to allow the consortium members themselves to decide how to reorganize the terminal operations.

III. THE NATURE AND EXTENT OF UNITED STATES-HONG KONG CULTURAL, EDUCATION, SCIENTIFIC AND ACADEMIC EXCHANGES, BOTH OFFICIAL AND UNOFFICIAL

The United States, largely through programs of the U.S. Information Agency (USIA), has developed and institutionalized a wide spectrum of cultural, educational, scientific and academic exchanges in Hong Kong. Reduced USIA budgets have required program cutbacks in 1995, and reductions in foreign national staffing levels and program funds for Hong Kong may force future decreases in the level of USIA-sponsored exchange activities. Major programs and activities are summarized below.

A. Hong Kong-America Center

The Hong Kong-America Center has been in operation since April 1993 with support from three Hong Kong universities: Chinese University of Hong Kong, Baptist University, and Hong Kong University. A major mission of the Center is to increase mutual understanding between Hong Kong and the United States. USIA provides a Fulbright Scholar each year to serve as a co- director of the Center and has provided support for its programs and activities. The Center's Board of Governors is comprised of prominent American and Hong Kong leaders from the business and academic communities.

The Center includes the American Studies Library, which includes a USIA donation of 7,000 books. The Center has developed a focus on American Studies and issues related to Hong Kong-U.S. relations. It will support American Studies in the immediate area (Hong Kong, Macao, south China) and, to a lesser extent, throughout Southeast Asia. Each year, the Center hosts a number of scholars in residence from the U.S. and provides facilities for fellows from the PRC to pursue work in the field of American Studies.

USIA provided a grant to start the Hong Kong-America Center. The Center is no longer a recipient of direct funding support from USIA, but it is actively engaged in fund-raising among local and American sponsors. Developing an endowment adequate to guarantee programming through the year 2000 is an urgent priority to ensure functioning after 1997.

Highlights of Center activities include the following:

In 1995, the Center obtained an NGO grant ($60,000) from the Lingnan Foundation in support of a visiting professor to the American Studies program at Hong Kong University.

In 1995, the Center was selected to receive the USIA America Studies Libraries in Foreign Countries initiative collection. This 1,000-volume collection will greatly enhance the Center's capability-as a regional resource.

With a USIA grant, the Center organized a regional conference: "Intellectual Property Rights, the Role of NGOs" in June 1995. Forty-six specialists from east Asia and the United States attended. The Center later published a paper summarizing the proceedings.

With USIA grants, the Center and the Yale-China Association organized a highly-successful Hong Kong Summer Institute in American Studies in July 1995. Twenty-five graduate-level participants from Taiwan, Hong Kong, the PRC, Vietnam, Japan, South Korea, Philippines, Thailand and Pakistan studied "Regions and the Nation in the Making of America."

To support the continued development of higher education in Hong Kong and to encourage private-sector participation in its funding, USIA hosted an academic specialist on philanthropy and fund-raising to give workshops at several local universities. He also assisted in setting up a philanthropy/fundraising resource and advisory unit at the Center. The unit has now been funded by the Asia Pacific Philanthropy Consortium and the Henry Luce Foundation.

A USIA grant will enable the Center to organize a collaborative session for local American Studies leaders and their counterparts in Beijing, Shanghai and Guangzhou. The Center also received a USIA grant to organize a regional summer institute in American Studies.

B. Advisory Services for Study in the United States

An important part of the Hong Kong-America Center is the Office of the Institute of International Education (IIE). The IIE provides educational advisory services to thousands of Hong Kong students wishing to pursue studies in the U.S. It also organizes academic fairs and briefs American educators on opportunities in Hong Kong. IIE's operations are partially supported by an annual grant from USIA.

In addition to publishing information sheets on higher education opportunities in the U.S., IIE conducts workshops for student advisers of local schools and universities. The University Fair held at the Hong Kong Convention and Exhibition Center in 1995 included participation by 146 U.S. colleges and approximately 2,300 visitors. In addition, with local corporate support, IIE published and distributed a Hong Kong Employment Guide for Hong Kong graduates of U.S. institutions.

USIA has worked with the Department of Commerce's Foreign Commercial Service to promote U.S. education and training. Through this joint effort, a United States pavilion was set up at Hong Kong's Education and Career Expo in late 1995.

C. The Fulbright Program

The Hong Kong Fulbright Program has had separate status from the United Kingdom' for many years. The program has three lecturers and six to eight students each year from the United States. It is an important part of official American access to Hong Kong's institutes of higher education. For the first time in the history of the program, two Hong Kong graduate students and one scholar were funded by USIA to study and do research in American Studies in the U.S. in 1995. The Hong Kong Government has agreed to fund a Hong Kong scholar to lecture in the U.S. as a distinguished Fulbright Fellow in honor of the 50th anniversary of the program. This will make the program a' two-way exchange for the first time, without increasing U.S. government costs. We hope that this initiative will continue to receive Hong Kong Government support.

D. Artistic and Intellectual Exchanges

To strengthen official American links to the cultural and artistic community, USIA sponsored the residency of two American performing artists in 1995 for workshops and faculty development at the Hong Kong Academy for Performing Arts. An academic specialist from the Design Management Institute in Boston visited the Hong Kong Polytechnic University School of Design to assist in the development of a masters program. In 1995, USIA also supported presentations of American artists and lecturers to foster professional links between American and local cultural institutions. To develop links among museums, USIA also sponsored a curator exchange under the International Partnership Among Museums Program that included the Hong Kong Space Museum and the Pacific Science Center in Seattle.

E. Support for Democracy and Freedom of the Press

To better equip local media with the tools needed to address self- censorship concerns in Hong Kong, USIA awarded two grants worth a total of US $173,421 to the University of South Carolina and the International Center for Community Journalism (ICCJ) in Iowa for professional journalism exchange programs. USIA worked with the Hong Kong Journalists Association and the journalism departments at both the Chinese University of Hong Kong and the Hong Kong Baptist University to select six experienced Hong Kong journalists for the March-April 1996 program in South Carolina. The second part of the exchange will bring U.S. journalism faculty to Hong Kong in June 1996 for a week of seminars and workshops of free press issues and professional standards. A similar two-way exchange with ICCJ will take place in the fall of 1996.

In 1995, two journalists participated in USIA's International Visitor (IV) programs to study U.S. media and free press practices. In September 1995, USIA brought an award-winning American journalist to Hong Kong for a series of presentations on journalistic ethics and professionalism. Her well-received programs with journalism students and faculty included intensive discussion of self-censorship and other factors affecting press freedom in Hong Kong. In addition, to further strengthen ties with Hong Kong's Legislative Council, USIA proposed to repeat a successful exchange in 1994 that sent eight Legco members to the United States to study the legislative process on both the national and state levels. Through the IV program, members of Hong Kong's developing political parties participated in visits aimed at developing understanding of American democratic institutions.

The U.S. private sector in Hong Kong also plays a constructive role in support of democracy and press freedom. Of particular interest is the Hong Kong office of the Freedom Forum, which conducts a program of seminars, conferences and symposia examining issues facing journalists in Hong Kong and throughout the region. The American Chamber of Commerce in Hong Kong also has an active public information program, which included a series of distinguished speakers in 1995 to address press freedom in Hong Kong up to and beyond 1997. All presentations were advertised and open to the public.

USIA also maintains close liaison with the Foreign Correspondents Club and the News Executives Association, both formally and informally, to keep abreast of developments in the local media climate and to look for ways in which the U.S. could provide further support for press freedom in Hong Kong. In addition, USIA has a constructive professional relationship with the Xinhua News Agency, Beijing's de facto representative in Hong Kong. Xinhua and other pro-PRC media organizations are regularly included in official U.S. press events.

USIA also cooperates regularly with Hong Kong Government information services on public affairs matters. The Hong Kong Government successfully launched two World Wide Web (WWW) sites on the Internet, one of which is devoted to freedom of information. During the development of these projects, USIA arranged a voluntary visitor program for the project officer to study USG use of the Internet and WWW home page design.

F. Promoting American Studies in Hong Kong

For several years, the U.S. has sought to obtain a secure place for American Studies in the curriculum of Hong Kong universities. In 1992- 1993, an American Studies program was initiated at Hong Kong University (HKU). The degree-granting program is supported by USIA contributions, a Fulbright Scholar each year, and a three year (1994-1997) USIA grant between HKU and the University of Kansas. HKU is developing a new Center of American Studies to enhance its research capacity in the area and to develop exchanges with other institutions in East Asia, Europe and the U.S. USIA is applying on its behalf for a USIA American Studies Libraries in Foreign Countries initiative collection of around 1,000 volumes.

In 1994, the College of William and Mary began an exchange program in American Studies with HKU through the Hong Kong-America Center, and has applied for a three-year university affiliation grant with the Center to support the program. William and Mary will represent a consortium of small colleges, including historically black colleges in its vicinity, and the Hong Kong-America Center will represent all seven colleges and universities in Hong Kong.

G. International Visitor Exchanges

The USIA International Visitor Program supports a wide variety of professional exchanges for mission-sponsored candidates; it sent 13 individuals to the United States in 1995. International visitors included two politicians, four government officials, two journalists, two grassroots NGO workers, one art critic, and two academics (one from Macao). The International Visitor Program has supported professional study tours in the U.S. for NGOs like the society for community organizations. Democratic initiatives have also been supported through USIA exchange programs, which sent representatives of newly-formed political parties and newly-elected legislative bodies to the U.S. The professional programs were aimed at developing greater understanding and appreciation for American democratic initiatives, party building, conduct of political campaigns, and legislative research support.

H. Unofficial Academic Exchanges

Exchanges between Hong Kong and U.S. universities have grown over the last ten years. There are regular exchanges between Yale, Columbia, Johns Hopkins, UCLA, Princeton, the University of Alabama and many other large and small American colleges and universities. Exchanges range from short- term visits by American faculty and summer programs for students to ambitious multi-year exchanges of faculty and staff. Joint degrees and collaborative research projects are also growing in number. In general, universities in Hong Kong view academic linkages with the U.S. as profitable exercises involving a practical interchange of ideas and sharing of resources and experiences, as well as a potential deterrent against possible interference in their academic freedom after 1997.

Five to six thousand Hong Kong students go to the United States each year for graduate and undergraduate study. In 1995, the Consulate General issued 3,508 visas for study in the United States and 517 visas for exchange visitors. We estimate that 14,000 Hong Kong students now study in the U.S., and that approximately 60,000 graduates of U.S. institutions live and work in Hong Kong. The Consulate General actively supports student exchanges by supporting student counseling, arranging programs for visiting American faculty and board members, continuing liaison with alumni groups in Hong Kong, supporting educational fairs, and advising on U.S. visa requirements

I. Unofficial Exchanges -- Tourism and Business Travel

In 1995, the U.S. Consulate General issued over 150,000 nonimmigrant visas to residents of Hong Kong, twenty percent over the previous all-time record level. An average of almost 2,000 Americans enter Hong Kong for business or pleasure every day, contributing to an annual tourist influx from the U.S. of over 700,000 people. Although accurate statistics are unavailable, we estimate that close to 500,000 Hong Kong residents visited the United States in 1995.

J. Library

Budget cuts at USIA forced the termination of the USIA Information Resource Center's (IRC) lease and required its move into the Consulate General building. In its new location, the IRC is no longer open to walk- in clients; the bulk of its services, however, has for some time been provided through telephone, fax, and electronic communication. USIA's stated goal for Hong Kong's IRC is to develop a state-of-the-art facility that could serve as a model for USIA information services worldwide.

IV. THE LAWS OF THE UNITED STATES WITH RESPECT TO WHICH THE APPLICATION OF SECTION 201(A) HAS BEEN SUSPENDED PURSUANT TO SECTION 202(A) OR WITH RESPECT TO WHICH SUCH A SUSPENSION HAS BEEN TERMINATED PURSUANT TO SECTION 202(D), AND THE REASONS FOR THE SUSPENSION OF TERMINATION AS THE CASE MAY BE

This section does not apply until on or after July 1, 1997.

V. TREATIES AND OTHER INTERNATIONAL AGREEMENTS WITH RESPECT TO WHICH THE PRESIDENT HAS MADE A DETERMINATION DESCRIBED IN THE LAST SENTENCE OF SECTION 201(B), AND THE REASONS FOR EACH SUCH DETERMINATION

This section does not apply until on or after July 1, 1997.

VI. SIGNIFICANT PROBLEMS IN COOPERATION BETWEEN HONG KONG AND THE UNITED STATES IN THE AREA OF EXPORT CONTROLS

There are no significant problems between Hong Kong and the United States in export control cooperation. Hong Kong has a long history of strategic export controls; it first began licensing trade in sensitive goods in 1950. Since 1992, Hong Kong has maintained an effective export control regime, and has thus benefited from the license-free import of most controlled high technology dual-use items under section 5(k) of the U.S. Export Control Act. Officials from the Hong Kong and United States governments continue to exchange information, ranging from routine items subject to export controls to more serious cases where diversion has been suspected; tripartite export control consultations with the HKG and the U.K. are scheduled for May 1996 in Hong Kong. In addition, Hong Kong export control authorities engage in ongoing training to enhance their technical expertise and enforcement capability. A training course for Hong Kong export control officials in the U.S. is tentatively scheduled for early June 1996.

The legal basis of Hong Kong's export control regime is the 1955 Import and Export (Strategic Commodities) Ordinance, which governs imports or exports of weapons or military-related equipment, nuclear, chemical, or dual-use items. Thus, while not a signatory itself because it is not a state, Hong Kong controls strategic commodities according to the various non-proliferation regimes: the Nuclear Nonproliferation Treaty, the Missile Technology Control Regime, the Australia Group, the Nuclear Suppliers' Group, and the control lists of the former COCOM. The Hong Kong Import and Export Ordinance is regularly reviewed and amended as necessary to incorporate the most up-to-date provisions agreed by the different regimes.

Hong Kong's export licensing procedures are two-phased. In the first phase, a technical assessment of the product is made by Hong Kong Government engineers to determine if the item is controlled and to evaluate its technical capabilities. This technical assessment is followed by a risk assessment that, in the case of particularly sensitive goods or items going to sensitive markets, requires detailed end-user inquiries. These end-user statements are then evaluated in light of the technical capabilities of the goods. A computerized "watch list" is also employed to guard against exports to countries or individuals of special proliferation concern.

Hong Kong's Customs and Excise Department carries out preventive controls that include routine checks at entry/exit points and searches of vehicles and vessels to ensure that all strategic trade shipments have been approved by the Hong Kong Government. Both random and targeted searches are conducted, during which cargo manifests are scrutinized. HKG officials also conduct pre- and post-shipment checks at various locations to verify that strategic goods are actually delivered to the proper destinations and used for the purposes described.

Under provisions of the Joint Declaration and the Basic Law, Hong Kong will remain a separate customs territory after 1997. Hong Kong authorities expect that this autonomy will extend to trade in strategic goods as well. To date, however, the U.K. and PRC have not yet agreed whether the Import and Export Ordinance will be adapted into the body of HKSAR laws after 1997. The U.S. will continue to press for an effective legal framework for export controls in Hong Kong past 1997.

VII. THE DEVELOPMENT OF DEMOCRATIC INSTITUTIONS IN HONG KONG, INCLUDING DETAILED INFORMATION ON THE STATUS OF, AND OTHER DEVELOPMENTS AFFECTING, IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION ON THE QUESTION OF HONG KONG

Hong Kong is a free society with most individual freedoms and rights protected by law and custom. Hong Kong people do not have the right to choose their Governor; the number of District, Municipal and Legislative Council seats open to direct election has been expanded, however, since the first direct elections were held in 1991. Hong Kong's constitutional arrangements are defined by the Letters Patent and Royal Instructions. The Governor is appointed by and serves at the pleasure of the British Crown. He is advised on policy by an Executive Council, which he appoints. The Governor has ultimate control of the administration of Hong Kong but, by convention, rarely exercises his full powers. Although basic oversight responsibilities rest with the British Parliament, Hong Kong largely controls its own internal affairs in practice and enjoys broad autonomy in its international relations.

A. The Basic Law and its Consistency with the Joint Declaration

The Joint Declaration is a bilateral agreement between two sovereign nations, the United Kingdom and the People's Republic of China. Neither of the parties has indicated its opinion of whether the Basic Law, or any of its provisions, is consistent with the Joint Declaration, although some critics in Hong Kong argue that certain elements of the Basic Law violate the Joint Declaration. As a practice, the United States Government does not offer legal interpretations of agreements to which it is not a party. Especially where, as here, the parties themselves have not spoken, speculative or premature U.S. pronouncements could be inconsistent with the interpretations shared by the contracting parties themselves. Accordingly, any U.S. judgment regarding consistency of the Joint Declaration and the Basic Law should await implementation of the Basic Law on July 1, 1997, and the statements and actions of the parties themselves.

B. Openness and Fairness of Elections to the Legislature

Prior to 1991, all seats in the Legislative Council (Legco) were appointed rather than elected. In 1992, Governor Patten proposed measures toward a more accountable and democratic political system. In June 1994, following seventeen rounds of unsuccessful talks between the U.K. and the PRC, and over Beijing's strong objections, the Legco approved proposals to: lower the voting age from 21 to 18; open all District and Municipal Board seats to direct election; and significantly increase the number of voters selecting Legco seats through indirect elections. In addition, the Hong Kong Government implemented legislation abolishing all appointed Legco seats for the 1995 election. The 1994 and 1995 elections for District, Municipal and Legco seats were conducted on the basis of Governor Patten's reform package.

The September 1995 Legco elections were fair, open, and resulted in the most representative and democratic legislative body in Hong Kong's history. Even pro-Beijing politicians disputed early charges in the local Beijing- controlled press that the elections had been unfair. Legislative Council members were chosen in three groups in the September elections:

20 seats from geographic constituencies -- 920,000 of the 2.57 million registered voters cast ballots, a 36 percent turnout. Reflecting the popularity of the Democratic Party, 12 Democrats were elected from the geographic constituencies. Although pro-Beijing candidates won only two seats, they received close to 16 percent of the votes cast.

30 seats from "functional" constituencies -- 460,694 of the 1.15 million registered voters cast ballots, a 40 percent turnout. The functional constituencies are filled by representatives chosen by large sectors of the Hong Kong populace divided by occupation or industry sector.

10 seats from the electoral college -- a group composed of 283 elected District Board members.

The present Legco consists of 29 "pro-democracy members," primarily from the Democratic Party; 8 "Pro-Beijing" members from the Democratic Alliance for the Betterment of Hong Kong (DAB); 18 members from the "pro-business" Liberal Party; and 7 independents. The pro-democracy legislators fell two seats short of securing a majority in Legco in the 1995 elections.

Although the Patten reforms did not envision a fully representative, democratically elected government, recent elections reflect a representative government through universal franchise at the local District Board and Municipal Council levels. Since the Basic Law stipulates that the "ultimate aim" of gradual and orderly political change in Hong Kong is the election of all members of the Legislative Council by universal suffrage, the Legco is slated to become a more democratically representative body some years after reversion than it is today.

China has, however, continued its strong opposition to Governor Patten's election reforms. The PRC insists the crux of its disagreement is not the pace of democratization, but the failure of the British to reach a mutually acceptable position on Hong Kong's electoral system changes before unilaterally making the reform package public. Beijing accuses Governor Patten of violating the Joint Declaration and past agreements and understandings on the question of elections in Hong Kong. It points to the Joint Declaration's assurance that "the laws currently in force in Hong Kong will remain basically unchanged," and the confidential exchanges between London and Beijing in 1991 in which then Foreign Secretary Hurd agreed to accept electoral procedures for the 1995 Legco elections that were acceptable to the PRC, but more modest than the proposals Governor Patten and the Hong Kong Government later enacted.

Due to its disagreements with Governor Patten's reforms, Beijing has repeatedly stated that the Legco elected in 1995 does not have a mandate to serve beyond June 30, 1997. The Preparatory Committee announced in March 1996 that a provisional legislature will be formed after the selection of the first Chief Executive. The provisional legislature is expected to serve until the first HKSAR legislature is elected under as-yet unspecified rules sometime before June 30, 1998. There is real concern that these processes, particularly those for choosing a provisional legislature, will not be based on a free and fair election, will lack transparency, and that groups or individuals critical of Beijing will be excluded.

The United States continues to urge that all concerned with the transition work assiduously to forestall any action that could arouse political uncertainties and have a deleterious impact upon confidence in Hong Kong. We have expressed regret, both publicly and privately, that Britain and China have been unable to reach agreement on arrangements for the transition between the current and HKSAR legislatures. And we continue to encourage serious dialogue between the PRC and the broad spectrum of political opinion in Hong Kong, including those individuals and groups critical of Beijing. Because of our support for the development of open, accountable, and democratic institutions, and for the sake of continuity and stability in Hong Kong, the United States believes current Legco members should be allowed to serve through the transition.

C. The Openness and Fairness of the Election of the Chief Executive and the Executive's Accountability to the Legislature

Like the present Governor of Hong Kong, the first HKSAR Chief Executive will be appointed by the sovereign rather than elected. Unlike previous colonial governors, however, the Basic Law provides that the Chief Executive must be a resident of Hong Kong, and will be named by Beijing from candidates nominated by the Hong Kong people. Thus, the HKSAR Chief Executive selection is, in principle, more open to influence from Hong Kong residents than was the selection of colonial governors. All agree, however, that the nomination process will not present Beijing with a candidate for the first Chief Executive it could not accept. The Basic Law states that "the ultimate aim is the selection of the Chief Executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures."

According to the Basic Law, the Preparatory Committee (PC) shall oversee the selection of the first Chief Executive and other transition-related matters. In January 1996, Beijing named 33 members of the PC to serve as a "first SAR Chief Executive panel" and consider the timing, method, and procedure for choosing the first Chief Executive. The Chief Executive panel held its first meeting in Beijing in February 1996.

Although details and modalities of the selection process are not yet complete, the general-parameters appear to be set. The Chief Executive will be chosen by Beijing from nominees picked by a 400-person "Selection Committee." The PC is responsible for establishing the Selection Committee, which is to be composed entirely of representatives from Hong Kong professional, social, and business groups. Selection Committee nominees will likely be put forward by the groups they represent; two teachers, lawyers, hospital workers, farmers. The final choice of the Selection Committee members will be Beijing's, although the procedure for its approval is not yet clear. Due to the role of Hong Kong people in the nomination process, it is possible that Selection Committee members will include those critical of Beijing's policies. A PRC official recently stated, however, that the one Preparatory Committee member who voted against a provisional legislature would not be allowed to serve on the Selection Committee; Beijing thereafter qualified the statement as reflecting only "personal opinion."

Since the HKSAR will be an executive-led rather than a parliamentary system, the Chief Executive will not be fully accountable to the legislature. The Basic Law does, however, give the legislature power to pass a bill opposed by the Chief Executive. If the Chief Executive dissolves the legislature (which may be done only once during a term of office), calls new elections, and loses a vote on the original bill by a two-thirds majority, the Basic Law requires the Chief Executive to resign. The Basic Law also allows the legislature to impeach the Chief Executive for "serious breach of law or dereliction of duty."

D. The Treatment of Political Parties

The Hong Kong Government's decision in 1991 to allow direct elections for local District Board and some Legco seats was a major impetus for the growth of political parties in Hong Kong, which had been forbidden by the colonial government until the late 1980's. Three major parties -- the Democratic Party, the Democratic Alliance for the Betterment of Hong Kong, and the Liberal party -- actively participate in the election process.

There are no limitations in the Joint Declaration and the Basic Law on political parties, although the formation of overseas political associations is prohibited under the Basic Law. All of Hong Kong's existing parties intend to remain active, contest elections, and continue to play a role in the expansion of representative institutions in Hong Kong after 1997. Some in Hong Kong have expressed concern that China may use a broad definition of "subversive" activities to bar certain parties or individuals critical of Beijing from participating in elections. As yet, however, there has not been definitive action by Beijing to verify these fears.

We continue to encourage leaders of Hong Kong political parties to meet with visiting members of Congress, participate in the International Visitors program, and maintain contacts with NGOs to provide international recognition of and support for local party development. The Consulate General in Hong Kong maintains good contacts with the full spectrum of public and political opinion in Hong Kong.

E. The Independence of the Judiciary and its Ability to Exercise the Power of Final Judgment over Hong Kong Law

Hong Kong's independent judiciary operates according to the precepts of Common Law, with certain variations. In general, Hong Kong's statutory laws and Common Law traditions provide substantial and effective legal protection against arbitrary arrest or detention and respect the right to a fair public trial. The Joint Declaration and Basic Law specify that the current judicial system will continue after 1997.

In 1991, China and the U.K. agreed in principle to establish a Court of Final Appeal (CFA) before reversion to replace the British Privy Council as the highest final arbiter of cases brought in Hong Kong courts. After lengthy and difficult negotiation, China and Britain agreed in June 1995 to establish the Court on the date of reversion instead. After heated debate in July 1995, Legco approved the Court of Final Appeal Ordinance. In accordance with the Basic Law and the CFA ordinance, the Court will be established on July 1, 1997.

After Hong Kong's reversion, the Court of Final Appeal will have power of final judgment over Hong Kong law. Under the Basic Law, however, HKSAR courts will have "no jurisdiction over acts of State such as defense and foreign affairs." Moreover, the Basic Law vests the National People's Congress in Beijing with the power to interpret the Basic Law in matters which are the "responsibility of the Central People's Government" or concern "the relationship between the Central authorities and the (HKSAR)." Thus, if broadly applied and loosely interpreted, these exceptions to the Court of Final Appeal's power of final jurisdiction could be used to limit the independence of Hong Kong's judiciary after 1997.

The continuation of Hong Kong laws and legal system beyond 1997 is a key factor in Hong Kong's ability to maintain its promised high degree of autonomy. Hong Kong's transparent legal system and predict able regulatory climate have been important factors in attracting the international businesses that have fueled Hong Kong's success and prosperity We believe the establishment of the CFA in July 1997 and the continuation of Hong Kong's independent judiciary are essential in maintaining broad international confidence in Hong Kong.

F. The Bill of Rights

The Hong Kong Bill of Rights Ordinance (BOR) was enacted in June 1991 to codify the rights elaborated in the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social, and Cultural Rights (ICESAR). These two human rights treaties were adopted by the United Nations in 1966 to obligate signatories to adopt the general principles in the Universal Declaration of Human Rights. The United States believes the BOR institutionalizes internationally recognized human rights standards and, if not annulled, will contribute to the protection of civil rights, the continued rule of law, and the stability of Hong Kong.

Before the enactment of the Bill of Rights Ordinance, the ICCPR and the ICESAR were implemented in Hong Kong, as in the U.K., through a combination of Common Law, legislation, and administrative measures (Britain had, however, reserved the right not to apply certain provisions of the covenants to Hong Kong). But, the 1989 military assault on Tiananmen Square had a profound effect on many Hong Kong residents -- a million of whom marched to protest the killings in Beijing. It provided the impetus to institutionalize Hong Kong's body of human rights law in a comprehensive statute that would unambiguously establish the primacy of basic human rights guarantees.

The Joint Declaration provides that the ICCPR and the ICESAR as applied to Hong Kong will remain in force. Although the PRC is not a signatory to either covenant, the Basic Law reiterated this assurance with the condition that the covenants would be implemented through the laws of the HKSAR. Beijing has not agreed, however, to submit the reports required by the ICCPR and ICESAR on the human rights situation in Hong Kong. In its view, while the covenants will apply in Hong Kong after 1997, the PRC is not obliged to file the required reports as it is not a signatory to the covenants themselves. Beijing's refusal to continue reporting to the United Nations on human rights has caused widespread concern in Hong Kong.

The PRC is also concerned about certain parts of the BOR, in particular the provisions requiring repeal of all laws which contravene it or are inconsistent with it. Beijing argues that the Basic Law is the supreme law of the HKSAR and cannot be subordinate to the Bill of Rights. It also maintains that the Basic Law adequately protects human rights, thereby making the broad pronouncements of the BOR unnecessary. In October 1995, the Preliminary Working Committee (an advisory group appointed by Beijing to work on transition issues before the Preparatory Committee was named) proposed a selective repeal of portions of the BOR. This proposal gen- erated a strong negative reaction in Hong Kong outside the Beijing-control press.

G. Freedom of Expression

Hong Kong has a tradition of free speech and free press political debate is dynamic and raucous, and a wide range of political opinion and commentary is well represented in the media. Diverse viewpoints were freely expressed, for example, during the Legislative Council election campaigns in September 1995. While the candidates were challenging each other in open forums, the Hong Kong media were allocating equal air time and press coverage of different political philosophies. The election reporting was generally objective and fair.

Hong Kong people continue to speak freely to the press, and there are no taboo subjects in the media. Although there is talk of self-censorship, even astute and well-connected observers of the Hong Kong media scene find it difficult to cite specific instances in which self-censorship has killed a story. Rather, the pressure appears to be more subtle; not a direct order to refrain from writing, but a subjective attitude of special care toward topics of particular sensitivity such as PRC leadership dynamics, corruption, or military activity. Chinese language journalists in Hong Kong report a pervasive if tacit understanding that editors expect those reporting on China to be particularly sure of their facts and careful in their wording.

But, Hong Kong press coverage of the PRC continues to be extensive and is frequently critical. Although there has been neither a sharp increase nor decrease of critical coverage over the past year, Hong Kong journalists based in or traveling to China face certain risks. Beijing requires journalists to apply for permission to do any reporting in China. Those who bypass official channels -- which many feel they must do to get the stories they want -- run a risk of violating regulations.

There continue to be commemorations of journalist Xi Yang's imprisonment on the anniversary of his September 1993 arrest by Chinese authorities; there was a massive march on the offices of the New China News Agency (Xinhua) in Hong Kong this year. A PRC national, Xi Yang was working for Hong Kong's Ming Pao Daily when taken into custody for reporting economic data Beijing considered to be State secrets. Though his arrest was widely cited as having had a chilling effect on Hong Kong media, Hong Kong reporters nevertheless continue to enter the PRC to cover sensitive stories related to Hong Kong, Taiwan, or the PRC itself.

Next Magazine's owner, Hong Kong businessman Jimmy Lai, launched a new market-oriented paper, the Apple Daily, in June 1995. The paper has brought a new element into the newspaper business in Hong Kong: its layout is more lively, with a more colorful presentation and a heavy emphasis on investigative stories. The PRC, whether due to past negative comments by Jimmy Lai about the Chinese leadership or for other reasons, has refused permission for Apple Daily reporters to cover official meetings in China. By the end of 1995, Apple Daily's readership had risen sharply to become second in Hong Kong. This phenomenal rise ultimately set off a price war, as the Oriental Daily News, the most popular daily in Hong Kong for the past 20 years, lowered its retail price in an attempt to woo readers away from Apple Daily.

Since December 1995, the newspaper price war has closed four daily newspapers, a weekly entertainment periodical, and a newspaper supplement magazine. While some commentators feared the closures might lead to less diversified opinions or even diminished press freedoms, the immediate effect has been a jump in the number of unemployed journalists. Rough estimates indicate that more than 600 media-related workers lost their jobs; some have been forced to pursue other careers.

The decline in the number of media jobs and questions over the freedom of the press after 1997 have had an effect on Hong Kong's college journalism programs. In a recent issue of a journalism magazine published at the Chinese University, the "Editor's Note" column reported on the PRC's method of dealing with the press gleaned from an interview with the Xinhua Deputy Director in Hong Kong. Xinhua, which had been shown an advance copy of the issue, tried without success to change the story. After the story was published, Xinhua contacted the student who had conducted the interview and hinted that it would be "hard for the reporter to stay in the journalism field in the future if that attitude did not change."

VIII. THE NATURE AND EXTENT OF HONG KONG'S PARTICIPATION IN MULTILATERAL FORUMS

A. International Organizations in which Hong Kong's Continued Participation has been Agreed in the JLG

Asian Development Bank (ADB)
Asian and Pacific Development Centre (APDC)
Asia-Pacific Postal Union (APPU)
Asia-Pacific Telecommunity (APT)
Customs Cooperation Council (CCC)
Economic and Social Commission for Asia and the Pacific (ESCAP)
Food and Agriculture Organization (FAO)
General Agreement on Tariffs and Trade (GATT)
Intergovernmental Typhoon Committee (ITC)
International Atomic Energy Agency (IAEA)
International Bank for Reconstruction and Development (IBRD)
International Criminal Police Organization (INTERPOL)
International Development Association (IDA)
International Finance Corporation (IFC)
International Hydrographic Organization (IHO)
International Labor Organization (ILO)
International Maritime Organization (IMO)
International Maritime Satellite Organization (INMARSAT)
International Monetary Fund (IMF)
International Telecommunications Satellite Organization (INTELSAT)
International Telecommunication Union (ITU)
Network of Aquaculture Centres in Asia and the Pacific (NACA)
Statistical Institute for Asia and the Pacific (SlAP)
United Nations Commission on Narcotic Drugs (UNCND)
United Nations Conference on Trade and Development (UNCTAD)
Universal Postal Union (UPU)
World Health Organization (WHO)
World Intellectual Property Organization (WIPO)
World Meteorological Organization (WMO)
World Trade Organization (WTO)

B. International Organizations in which Hong Kong Currently Participates, but JLG Approval for Post-1997 Participation Remains Pending

Asian Productivity Organization (APO)
International Civil Aviation Organization (ICAO)
Multilateral Investment Guarantee Agency (MIGA)*

* The JLG has agreed that the MIGA Convention will apply to Hong Kong after 1997, but no decision has yet been reached on Hong Kong's participation as a MIGA member after 1997

C. Other Organizations in which Hong Kong Currently Participates, and which JLG Agreement is not Required for Hong Kong's Continued Participation

Asia Pacific Economic Cooperation Forum (APEC)
Asia-Pacific Metrology Program
International Association of Lighthouse Authorities
International Association of Ports and Harbors
International Organization for Standardization
National Conference of Standards Laboratories
United Nations Development Program
United Nations Environment Program
United National Fund for Drug Abuse Control
United Nations Fund for Population Activities

D. Organizations in which the HKSAR will be a Full Member

Asian Development Bank (ADB)
Asian Productivity Organization (APO)**
Customs Cooperation Council (CCC)
General Agreements on Tariff and Trade (GATT)
Network of Aquaculture Centres in Asia and the Pacific (NACA)
World Meteorological Organization (WMO)
World Trade Organization (WTO)

** JLG approval for Hong Kong's participation is pending

E. Organizations in which the HKSAR will participate as part of the PRC Delegation

Asia-Pacific Postal Union (APPU)
Food and Agriculture Organization (FAO)
International Atomic Energy Agency (IAEA)
International Bank for Reconstruction and Development (IBRD)
International Civil Aviation Organization (ICAO) ***
International Criminal Police Organization (INTERPOL)
International Development Association (IDA)
International Finance Corporation (IFC)
International Hydrographic Organization (IHO)
International Labor Organisation (ILO)
International Maritime Satellite Organization (INMARSAT)
International Telecommunications Satellite Organization (INTELSAT)
International Telecommunication Union (ITU)
United Nations Commission on Narcotic Drugs (UNCND)
United Nations Conference on Trade and Development (UNCTAD)
Universal Postal Union (UPU)
World Intellectual Property Organization (WIPO)

*** JLG approval for Hong Kong's participation is pending

F. Organizations in which the HKSAR will be an Associate Member:

Asian and Pacific Development Centre (APDC)
Asia-Pacific Telecommunity (APT)
Economic and Social Commission for Asia and the Pacific (ESCAP)
Intergovernmental Typhoon Committee (ITC)
International Maritime Organization (IMO)
Statistical Institute for Asia and the Pacific (SlAP)
World Health Organization (WHO)

NOTE: It has not yet been determined in what capacity Hong Kong will participate in organizations listed in Section C.