EU sleeps as dragon claims its prize

Date: 10/04/1997

“Once the hand-over of Hong Kong takes place in July, relations with the city will stop being a British issue and start being an EU issue.”

Although a clutch of Euro MPs, spearheaded by UK Liberal Graham Watson, have been repeating these words like a mantra for months, they have as yet found precious few people willing to heed them.

Europe's leaders may have announced last December, in Dublin, that they hoped the hand-over would be smooth and successful, but since then the Union has sat back and watched the show.

Diplomats explain that the EU's position reflects a belief that Hong Kong remains a British issue and the fact that its member states are unwilling to anger future Chinese trade partners. If that is the case, retort civil liberties groups and a number of MEPs, they are making a dangerous mistake.

The transition of the West's most sparkling outpost on the Asian pacific coast will affect every European country profoundly, with no less than its very future in Asia at stake.

With China poised to be the world's dominant economic power in the 21st century, and Hong Kong its economic showpiece, profitable relations with the colony are at a premium.

The Union has so far taken it for granted that the only way to achieve them is via Beijing - and EU leaders have been tripping over themselves to woo Chinese politicians and industrialists, especially in the face of equally vigorous American diplomacy. Their efforts have been accompanied by a marked quietening of Union criticisms of Beijing's human rights record.

France recently backed down altogether from an EU-sponsored resolution condemning China in the United Nations, ironically doing so at a time when the US has been promising to get tougher, and the death of veteran leader Deng Xiaoping evoked a gushing of positive sentiments from European Commission President Jacques Santer which completely ignored his role in the Tiananmen Square massacre.

But while the Union's silence over the threat of democratic reverses in Hong Kong might seem propitious in the short term, the colony's democracy activists warn that in the long-term it could prove precisely the opposite.

Moral obligations aside, says Watson, “if you wish to trade successfully with the Chinese, you need the kind of free and transparent information you only get from Hong Kong. All indications are that the Chinese will abandon laws on the freedom of speech.”

A Chinese directive earlier this year ordering journalists to fill their reports with patriotic and Socialist sentiments certainly bodes ill, and has been accompanied by a general relocation of international news agencies to other parts of South-East Asia.

Martin Lee, democratic head of Hong Kong's legislative assembly and bitter opponent of future governor Tung

Chee-hwa, has been selling this message hard to the West in a whirlwind tour, recently calling on the European Parliament, Commission and Council of Europe to show united opposition to Chinese authoritarianism.

“If the European Union acts with one voice, it will certainly be more effective,” he insists.

Up until now, little has happened. But many believe that, in the final analysis, that may not be a bad thing. If a majority of the colony's businessmen are to be believed, the hype over the side-effects of transition is vastly over inflated.

Over the past decade, Hong Kong has already all but fully integrated with China. Its citizens depend on China for food, water and electricity, and they have witnessed a massive inflow of mainland investment in recent years.

Peter Lo, Hong Kong's special representative to the European Communities, foresees no major changes in EU-Hong Kong relations once the hand-over is complete and is even talking about enhanced cooperation under the new government.

“We would like to step up our relationship with the EU across a broad spectrum,” he told European Voice. “That would include improved investment links and greater cultural ties.”

Furthermore, it would be a huge mistake to assume that Hong Kong was a bastion of European liberalism in the first place.

The civil liberties laws which China has threatened to repeal - flouting an agreement with the UK - were only brought in at the last minute by a generally ruthless colonial administration.

And the city's economic system is in many ways already decidedly Socialist in flavour: half its population live in public housing (spending under 10&percent; of their incomes on rent), and the transport system is fraught with regulation and statist planning.

Labour protection laws are lax, strikes are almost unheard of and employers retain wide powers over their workers.

All in all, Hong Kong's special status under China (famously described by Xiaoping as 'one country, two systems') may not actually change things that much as far as the EU is concerned.

The market appears to agree. Business is booming, the stock exchange is buoyant and analysts still tip Hong Kong as a good bet. They appear convinced that even a hard-line post-Deng Beijing - struggling to assert its authority in the face of provincial manoeuvring, Taiwanese independence and Buddhist unrest - would not dare to kill the goose that lays the golden eggs.

But what they do not seem to take into account is the fact that while the goose will stay fat, it could find itself relocated to a battery farm.

Although the media spotlight should ensure a well-behaved Beijing for a year or so, all that might change as outside attention wavers.

Should things start to go wrong, Europe stands to loose a fortune.

Hong Kong is the EU's seventh most important trading partner, with flows reaching almost 23 billion ecu in 1995 (with an 8-billion-ecu European surplus), and two-thirds of EU-China trade and investment passes through the colony's hands. Its top partners are the UK, Germany, Italy and France, while the Netherlands and Belgium also have substantial interests.

Almost 100 EU banks and insurance companies have offices in the city, and Union industrial firms with bases there - including BASF, Bayer, British Petroleum and Olivetti - employ more than 20,000 people.

Many European universities have links with the colony and there are over 60 joint research projects under way.

Civil liberties groups stress that should the rule of law be eroded, China's notorious corruption could begin to infiltrate the system, bringing Hong Kong's much vaunted commercial flexibility to a relative standstill.

In response, the European Commission appears willing to continue monitoring its democratic credentials - but what it would do should it find them lacking is another matter altogether.

In Europe's defence, diplomats say that its inactivity merely reflects its real degree of influence over a country which holds all the cards.

Watson replies that Europe does have a big stick - China's bid for entry into the World Trade Organisation - but has so far failed to use it.

In all likelihood, the debate will simmer on and pragmatic apathy will win the day. The EU finds it difficult enough to deal with real crises - witness Albania - let alone potential disasters.

Given the UK's continued insistence that, until 1 July at least, its partners should keep quiet, there are precious few immediate goads to prod them into changing their tune.