LegCo Paper No. CB(1)1773/95-96
(These minutes have been seen by the Administration)
Ref : CB1/PL/TI/1
LegCo Panel on Trade and Industry
Minutes of Meeting
held on Thursday, 9 May 1996 at 2:30 p.m.
in Conference Room B of the Legislative Council Building
Members Present :
Hon NGAI Shiu-kit, OBE, JP (Chairman)
Hon CHIM Pui-chung (Deputy Chairman)
Dr Hon HUANG Chen-ya, MBE
Hon Henry TANG Ying-yen, JP
Hon James TIEN Pei-chun, OBE, JP
Hon Paul CHENG Ming-fun
Dr Hon LAW Cheung-kwok
Members Absent :
Hon Martin LEE Chu-ming, QC, JP
Dr Hon Philip WONG Yu-hong
Hon Christine LOH Kung-wai
Hon CHAN Kam-lam
Hon LAU Hon-chuen, JP
Hon SIN Chung-kai
Members Attending :
Hon Mrs Selina CHOW, OBE, JP
Hon CHAN Yuen-han
Public Officers Attending :
- Items III to VI
- Miss Denise YUE, JP
- Secretary for Trade and Industry
- Items III and V
- Mr Patrick T K NIP
- Principal Assistant Secretary for Trade and Industry
- Item IV
- Mr Patrick CHUNG
- Electronic Data Interchange Co-ordinator
- Item V
- Mr Stephen Selby, JP
- Director of Intellectual Property
Miss A C Waters, JP
- Deputy Director of Intellectual Property
Staff in Attendance :
Ms Sarah YUEN, SAS(1)1
Ms Connie SZE-TO, SAS(1)5
(LegCo Paper No. CB(1)1368/95-96)
The minutes of the meeting held on 15 April 1996 were confirmed.
2. Members agreed to hold the next Panel meeting on 4 June 1996 at 10:45 a.m. to discuss the following items :
- Update on Rice Control Scheme;
- Progress report on Most Favoured Nation (MFN) status lobbying; and
- Sino-US trade relations and their implications on Hong Kong.
(Appendix I to LegCo Paper No. CB(1)1340/95-96 and Appendix I to LegCo Paper No. CB(1)1365/95-96)
3. Members expressed strong objection to the US Trade Representative (USTR)s move to place Hong Kong under the section of Other Observations in the US Special 301 Report (the Report) this year. The Report listed countries/territories which, in the USs view, offered inadequate intellectual property rights (IPR) protection to US IPR investments. Members pointed out that the USTRs allegation was totally unfounded since Hong Kong was firmly committed to implementing IPR protection, had tightened laws in this regard, and stepped up relevant enforcement actions. A member opined that the US Government should be urged to give concrete evidence to support its claims, otherwise it was unnecessary for Hong Kong to take note of such accusation or respond to any US requirement to enhance IPR protection in Hong Kong. Some members also pointed out that putting Hong Kong on the Other Observations list had damaged its image as an international trade centre, and urged the Administration to write to the US Government to convey their grave concern about and objection to the irresponsible act.
4. In response to members comments, Miss Denise YUE made the following points :
- The US Special 301 law was a domestic law and a unilateral trade weapon used by the US Administration to pressurise its trading partners into improving protection to IPR investments of the US in their countries.
- The USTR named nearly 70 countries/territories in the Report. Hong Kong was placed under the Other Observations section, which was the lowest of the four categories in terms of severity of IPR violation. In fact, Hong Kongs position compared well with other trading partners. Developed economic entities like Japan, which had achieved certain success in combating piracy, were listed in categories higher than that of Hong Kong. Except for countries named in the highest category, namely, the Priority Foreign Country List, the US law did not require the US Administration to take Special 301 action against countries named in any of the other categories. Hence there would not be any threat of trade sanction against Hong Kong.
- Although the Report cited that $200 million worth of pirated goods were exported from Hong Kong, no evidence was ever provided to substantiate this claim. The Administration believed that there was no need to conduct copyright negotiations/talks with the USTR. Should Hong Kong become the target of the US Administrations unilateral action under the Special 301 law, Hong Kong would, as a member of the World Trade Organisation (WTO), resort to taking the US Administration to the dispute settlement mechanism under the WTO.
- The USTR recognised in the Report the efforts made by the Hong Kong Government in cracking down on copyright infringements. Instead of following the current arrangement of conducting an annual review, the USTR had committed to reviewing Hong Kongs performance in six months to determine whether Hong Kongs status on Special 301 should be modified or terminated.
- Major lobbying work that had been undertaken by the Hong Kong Government included providing the USTR with detailed information on results of Customs mega raids and explaining to him the new copyrights piracy offence provisions in the Intellectual Property (World Trade Organisation Amendments) Ordinance which would come into operation on 10 May 1996. The new law would give the Administration more power to raid shops and offices and to prosecute retailers and wholesalers of pirated goods or anyone financing such operations. The Governor and the Chief Secretary would, during their visits to Washington in May and June 1996 respectively, reinforce the Hong Kong message on the IPR front to their US interlocutors. The Secretary for Trade and Industry would also, at her meeting with the Deputy USTR on the following day, stress to the latter the Hong Kong Governments commitment to tackle the problem.
5. Responding to a members enquiry on Government efforts in combating re-export of pirated goods, Miss YUE explained that although the USTR noted that Hong Kong was not a production centre of pirated goods, he was concerned about smuggling of these products produced in China into Hong Kong for local sale or re-export to other places. Since Hong Kong was one of the busiest ports in the world, although the Administration would tighten control by introducing and enforcing the new intellectual property law, it would be very difficult to locate counterfeit products in export transits. There was also great difficulty in checking passengers and vehicles passing through the border checkpoints because of the busy traffic. Nonetheless, the Government would endeavour to enhance co-operation with the Chinese authorities in exchange of information and intelligence in tackling cross-border smuggling of pirated products. Members concurred that since Hong Kong was a free port, caution had to be exercised to avoid affecting the normal trade activities in cracking down on piracy activities.
6. On the reasons for conducting an out-of-cycle review on Hong Kongs status, Miss YUE said that the earlier review by the USTR might be the result of pressure from IPR investors and organisations of the US. She undertook to seek more information from the USTR on this point. As regards the basis for evaluating Hong Kongs performance, Miss YUE said that there was no information on the specific items for evaluation. She speculated that the USTR might be concerned about the effect of the new legislation and Hong Kong Governments increased enforcement action against piracy.
(Appendix II to LegCo Paper No. CB(1)1340/95-96)
7. At the Chairmans invitation, Miss YUE briefed members on the present position regarding the development of the Community Electronic Trading Service (CETS) and the Governments proposal to provide Tradelink with a maximum loan of $425 million. Miss YUE emphasised that CETS was a vital piece of infrastructure required by Hong Kong in pursuing continued economic growth.
8. While recognising CETSs importance, members were concerned about the delay in launching the service from the original target date of February 1996 to the present estimate of early 1997. Some members also expressed reservations about the Governments funding proposal for Tradelink. They opined that Government might incur additional risks in providing the loan as there existed fundamental problems in the operation of the company mentioned in para. 8 of the Administrations paper. It would therefore be advisable to attract new shareholders and encourage existing shareholders to inject more funds into the company. A member also opined that Government should review the CETS development plan. He said that as there was delay in implementating CETS and a lot of unexpected problems emerged affecting the viability of the plan, Government might need to consider terminating the plan to avoid wasting more resources. He further requested the Administration to provide members with the full report on the financial consultancy on Tradelink and the reorganisation plan of Tradelinks top management. Other members also opined that more details on the Government funding proposal should be provided.
9. Addressing members concerns, Miss YUE made the following points :
- Government did not intend to increase its investment in Tradelink beyond its existing share of 48%. Indeed, it had planned to reduce its share to 30% eventually. While the company was making efforts to enlist financial support from new shareholders, existing private shareholders had indicated that they were content for their support to remain at the present level and would consider putting additional investment only after CETS was in full operation.
- Compared with the already approved funding limit of $374 million for investment in Tradelink, the present proposal was a more viable option and would incur little or no additional risk to Government. If the proposed loan was approved, the undrawn balances of Governments approved commitments for investment amounting $296 million would no longer be required.
- The consultants findings indicated that Tradelink could be commercially viable in the long run. However, as the operating fund was running out, if additional funds were not provided by June 1996, the company would be unable to continue to operate. This would lead to further delay of the CETS project.
10. Miss YUE also informed members that both Government and the Tradelink Board had been taking steps to implement the consultants recommendations and work towards meeting the dates for launching of commercial services for Restrained Textiles Export Licences (RTEL) and Trade Declarations (TDEC) in January and April 1997 respectively. As CETS was approaching its commercial phase, it was essential that Government should step up its co-operation with and participation in Tradelink. As a result, the Secretary for Trade and Industry was elected Chairman of the Tradelink Board and the Director-General of Trade also became a director of the company. In the recent months, plans to reorganise and to strengthen top management of the company were progressing satisfactorily. An experienced government official was seconded to the company to provide specific trade control system information to ensure that the joint testing of Governments and Tradelinks new computer systems could be successfully completed without further delay. According to the latest estimates, the test for RTEL and TDEC would be conducted in June and July 1996 respectively. Government was confident that CETS could be commercially launched in early 1997.
11. Miss YUE further assured members that their concerns were fully noted. She also undertook to provide members with more information on the development of CETS and the proposed loan before submitting the proposal to the Finance Committee.
A member expressed full support for the CETS project and was optimistic that Tradelinks performance would greatly improve with the strong new leadership. Nonetheless, to allay members worries about Tradelinks financial situation and the possible risk incurred by Government in providing the loan, he suggested that the Administration should provide for members reference a cash flow projection of the proposed loan for the next 24 months. The Administration undertook to do so.
(Appendix III to LegCo Paper No. CB(1)1340/95-96)
13. With the aid of slides, Miss A C Waters made a presentation on the Administrations legislative proposal and the proposed computerised system for the new patent registration system for Hong Kong. Under the new system, Hong Kong would be able to grant an independent patent on the basis of the registration of a patent granted by any of the three patent offices to be designated. The proposed designated patent offices (DPOs) were the United Kingdom Patent Office, the European Patent Office (in respect of patents designating the UK) and the Chinese Patent Office. Once granted by the Patent Registry in Hong Kong, the patent would become a Hong Kong patent independent of the original patent granted elsewhere.
14. Members in general welcomed the proposal which was considered a big step forward in enhancing protection of intellectual property rights in Hong Kong. A member enquired whether a patent applicant in Hong Kong could apply through the Hong Kong Patents Registry for registration of a patent with the three DPOs and use its computer database for searching patent information. Another member supported providing searching facilities to applicants to facilitate their patent applications.
15. In response, Mr Stephen Selby made the following points :
- Under the proposed patent registration system, an applicant had to first apply for grant of a patent from any of the three DPOs where his application would be published. He could then file a request to the Hong Kong Patents Registry to record the published DPO patent application and complete the remaining procedures for obtaining a patent in Hong Kong.
- As far as he understood, there were private companies which provided application service for a Chinese patent. With advanced communication devices, applications could be sent to the Chinese Patent Office very quickly, thus greatly expediting the application process.
- The patent computerisation system to be installed for operation and management of the new patent registration system would initially provide public searching facilities for information on Hong Kong patents. The Patent Steering Committee had already endorsed a proposal to expand the system to facilitate searching of patent information worldwide at a later stage after 1998. At present, there were service providers in Hong Kong providing similar services to patent applicants.
16. On the estimated number of local inventions which would be qualified for patent protection, Miss Waters said that the number involved was very small, in the range of zero to ten a year.
(Appendix IV to LegCo Paper No. CB(1)1340/95-96, Appendix II to LegCo Paper No. CB(1) 1365/95-96 and the MFN Information Kit tabled.)
17. Reporting on the latest situation regarding the renewal of the MFN trading status to China, Miss YUE said that in addition to the US Secretary of States public assurance of unconditional renewal of MFN status at his recent meeting with Chinese officials in Hague, the US Vice-President had also re-affirmed the message during his recent meeting with the Governor. The US President was expected to announce this decision by the end of May 1996. However, the biggest obstacle was the US Congress. There had been suggestions by US Congressional members to introduce legislation which would have adverse effects on Chinas MFN status. Despite the difficulties ahead, the Governor and other senior government officials of Hong Kong would continue with their lobbying work with key members of the US Congress, US senior Administration officials and the business community for renewal of Chinas MFN status.
18. The meeting ended at 4:20 p.m.
6 July 1996
Last Updated on 21 Aug, 1998