Major Economic Indicators 

Recent Developments 

• Plunging exports and private investment led the US economy to shrink another 5.5% in the first quarter of 2009, following a decline of 6.3% in the fourth quarter of 2008. While signs of stabilisation and recovery have been emerging, the US economy is still forecast to contract by 2.5% in 2009, before a modest expansion of 0.75% next year.
• Despite a series of stimulus measures to promote job creation, the US manufacturing industry and labour market have continued to deteriorate as recession's grip tightens. The unemployment rate in the US rose from 7.6% to 9.5% between January and May 2009, which in turn dampened consumer sentiment, resulting in a 10% drop in retail sales.
• Externally, US exports of goods plummeted by 22% to US$329 billion in the first four months of 2009, while imports of goods fell by 31% to US$493 billion.
• The US is Hong Kong's second largest export market. Hong Kong's total exports to the US declined by 20% to US$14 billion in the first five months of 2009, while its imports from the US dropped by 10% to US$7 billion.

Current Economic Situation 

After contracting by 6.3% in the last quarter of 2008, the US economy shrank another 5.5% in the first quarter of 2009. Plunging investment and exports were above all the major drags on the US economy, registering respective declines of 49% and 31% in January-March 2009. Despite a slower pace, the US economy has continued to deteriorate so far in 2009 as recession's grip tightens. The unemployment rate rose from 7.6% to 9.5% between January and May 2009, while retail sales showed a 10% decline.

With the economy sliding into a recession, the Consumer Price Index (CPI) fell by 1.3% in May 2009. Falling prices for energy and transportation were the main sources of deflationary pressure in May 2009, while food and housing prices also continued to show an easing trend.

Externally, US exports of goods decreased by 22% to US$329 billion in the first four months of 2009, after a 12% growth in 2008, while imports of goods dropped by 31% to US$493 billion, after registering a 7% growth in 2008.

Looking ahead, despite increasing signs of stabilisation, the US economy is forecast to contract in line with its financial and housing market corrections in the whole of 2009. Domestic demand will continue to stagger in the near term, following rising joblessness, still-tight lending standards for new loans, lower wealth and a sharp decline in confidence. Complicating problems is the uninspiring external demand due to proliferation of the financial tsunami originated from the US. However, with a recuperating consumer demand gradually taking shape on the back of the US$787-billion fiscal stimulus plan, the US economy is forecast to bottom out by the end of this year. For 2009 as a whole, GDP is expected to decline by 2.5%, but return to a modest growth of 0.75% in 2010.

Trade Policy Developments

On 8 November 2005, China and the US formally signed a comprehensive bilateral agreement on textile and clothing trade. China and the US agreed on the re-imposition of quotas from 1 January 2006 through 31 December 2008, covering a total of 21 groups involving 34 categories of textile and clothing products, which expired on 1 January 2009. Textile and clothing shipments to the US made on or after 1 January 2009 are no longer subject to any quotas, although US textile manufacturers are continuing to wage an intense lobbying campaign in an effort to persuade the US government to extend the current anti-dumping monitoring programme on Vietnam to cover sensitive textile and apparel products from the Chinese mainland.

On 5 April 2005, the US Department of Commerce (DOC) announced two major changes to anti-dumping (AD) practices involving non-market economy (NME) countries, including China. Under the new practice, application for a separate AD rate will no longer be made by completing and returning the Section A of the questionnaire to the DOC. Instead, an applicant should complete an application form which will be posted for each investigation on DOC's website. In addition, each exporter applying for a separate rate will be required to list all the suppliers whose merchandise they export to the US during the period of investigation or review. The dumping margin assigned by the DOC to an exporter will be a combined rate, which is calculated from the rate of the exporter and those of the producers which supplied merchandise to it for export to the US.

In a landmark decision that confirmed a major reversal of US trade remedy policy for NME countries, the DOC issued on 30 March 2007 a preliminary affirmative determination of countervailing (CV) duty investigation of coated free sheet paper from China. Although the US government ultimately decided not to impose any CV duties in this proceeding, the investigation is significant in and of itself because it marked the reversal of a 20-year-old DOC policy against assessing CV duties on products from NME countries. Following this landmark decision, the US International Trade Commission (USITC) issued on 20 June 2008 a final affirmative injury determination in its anti-dumping and countervailing duty investigations of circular welded carbon-quality steel pipe from China, marking the first CV duty order on China over 20 years. This demonstrates the emergence of CV actions as a key weapon against allegedly subsidised mainland Chinese products.

On 30 April 2009, the Office of the US Trade Representative (USTR) issued its annual "Special 301" report, evaluating the intellectual property rights (IPR) protection policies and enforcement measures in some 77 countries. The report notes that China remains a top IPR enforcement and TRIPS (Trade-Related Aspects of Intellectual Property Rights) compliance priority for the US. In addition to China, this year's priority watch list includes Algeria, Argentina, Canada, Chile, India, Indonesia, Israel, Pakistan, Russia, Thailand and Venezuela.

The US has adopted various security initiatives since 9/11, including the introduction of the Container Security Initiative (CSI) in January 2002. The CSI purports to push the US cargo screening process outward to reduce the risk to US ports and cities. To date, CSI is operational at 50 ports, representing the point of origin of more than 80% of the cargo shipped to the US.

Another cargo security initiative, the Customs-Trade Partnership Against Terrorism (C-TPAT), has been in force since November 2001. Through this initiative, CBP requests US companies to ensure the integrity of their security practices. Participants of C-TPAT are entitled to the convenience of fast-track clearance through US Customs. As such, major US importers have signed up to the programme, and request overseas suppliers to adopt measures in response to the C-TPAT requirement.

Regarding high-tech exports, the US Bureau of Industry and Security (BIS) created a Validated End-User (VEU) programme in June 2007 to facilitate civilian trade by reducing administrative and logistical hurdles for certain exports to pre-screened mainland Chinese companies. About four months later the BIS announced an initial list of five mainland Chinese companies approved to receive exports, re-exports and transfers of certain controlled goods and technology under the programme. Since then, several lawmakers and government watchdogs who are concerned that sensitive items exported without federal review could find their way to the Chinese military have called on the BIS to halt the VEU programme. In late January 2009, the BIS announced the full implementation of the VEU programme for China.

Trade Rules and Regulations

Goods brought into the US are often subject to import duties, but import licences are generally not required. There are no foreign exchange controls over payments for imports.

Imports are usually subject to ad valorem and/or specific import duties. Regular rates are applied on imports from locations enjoying normal trade relations (NTR) or formerly most-favoured-nation status, including Hong Kong and the Chinese mainland. Products from some countries receive preferential import treatment via the US Generalised Scheme of Preferences (GSP). CBP has final authority on tariff classification for duty rates purposes.

The US rigorously enforces laws on dumping. When the DOC determines that a class of foreign goods is being, or is likely to be, sold to purchasers in the US at less than its fair value, an antidumping duty investigation may be conducted. The USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order. On the other hand, the US also enforces laws on countervailing. When the DOC determines that a class of foreign goods receives countervailable foreign government subsidies, a countervailing duty investigation may be conducted. As a standard practice, the USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order against the subject imports.

Imported goods are usually required to be marked with the country of origin in English. The marking has to be permanent, legible and conspicuous. Additional labelling is required on food, cosmetics, textiles and apparel, selected household products and flammable fabrics.

Certain imported products must be approved by the proper US authority. For example, certification by the Underwriters' Laboratory or ETL Testing Laboratories must be obtained for electrical appliances, gas equip­ment and fire prevention apparatus.

Signed into law in August 2008, the Consumer Product Safety Improvement Act (CPSIA) forms part of a comprehensive effort by the US government to enhance the safety of imported consumer goods, which could create additional hurdles for the entry of items such as toys and other children's products. Among others, the lead content for children's products cannot exceed 600 parts per million (ppm) beginning 10 February 2009, while manufacturers of children's products must subject their products to third party testing of safety standards compliance 90 days after the publication of the applicable accreditation rule by the Consumer Product Safety Commission (CPSC).

Moreover, the CPSC is also seeking comments on a proposed rule that would establish requirements for consumer registration of durable infant or toddler products. Section 104(d) of the CPSIA requires the CPSC to promulgate by 14 August 2009 a consumer product safety rule requiring each manufacturer of a durable infant or toddler product to (1) provide with each such product a postage-paid consumer registration form, (2) keep records of consumers who register such products with the manufacturer and (3) permanently place the manufacturer name and contact information, model name and number, and date of manufacture on each such product.

Under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the US requires specific documents for fur imports. In addition, to close a loophole in the Fur Product Labelling Act (FPLA) that exempts fur-trimmed garments from the labelling requirements, legislation was introduced on 19 May to require the labelling of all fur garments, regardless of value. In fact, several states - including New York, Massachusetts and Wisconsin - already require all real fur and fur-trimmed clothing sold within their jurisdictions to be labelled as "real fur" and all garments made with fake fur to be labelled "faux fur."

Hong Kong's Trade with the US^

The US is Hong Kong's 2^nd largest export market. Hong Kong's total exports to the US decreased by 20% to US$14 billion in the first five months of 2009, after a decrease of 2% to US$46 billion in 2008. Major export items in January-May 2009 included telecommunications equipment and parts (shared 15% of the total), toys, games and sporting goods (10%), articles of apparel, of textile fabrics (7%), women's or girl's wear of textile fabrics, not knitted (7%), footwear (5%), and travel goods and handbags (4%).

On the other hand, the US is Hong Kong's 5^th largest source of imports. Hong Kong's total imports from the US decreased by 10% to US$7 billion in the first five months of 2009, after a 9% rise to US$19 billion in 2008. Leading import items in January-May 2009 included semi-conductors and electronic valves and tubes (shared 15% of the total), aircraft and associated equipment, spacecraft & parts (9%), telecommunications equipment and parts (8%), parts and accessories of office machines/computers (7%), pearls, precious and semi-precious stones (5%), and fresh/dried fruit and nuts (4%).

US Involvement in the Hong Kong Economy

There are approximately 1,380 US firms in Hong Kong, concentrated in trading, banking and finance, and transport. As of 1 June 2008, there were 311 regional headquarters and 612 regional offices of US companies in Hong Kong.

The US is one of the major sources of foreign direct investment in Hong Kong. According to the latest Hong Kong official statistics, the US was the fifth largest source of foreign direct investment in Hong Kong after the Chinese mainland, British Virgin Islands, the Netherlands and Bermuda, with a total stock of HK$278.6 billion as at the end of 2007.

Most major US banks, insurance firms, transportation companies, and multinational corporations operate in Hong Kong. Among them are Citigroup, AIA, Federal Express, Exxon, Marriott International, Microsoft, IBM, Hewlett-Packard Company, American Express International and 3M.

Hong Kong invests in the US in various areas, such as hotel and manufacturing. The stock of Hong Kong's direct investment in the country amounted to HK$30.6 billion as at the end of 2007. Hong Kong companies having presence/investment in the US include the Peninsula Group (hotel), the Bank of East Asia (banking), Lee Kum Kee and Vitasoy (food and beverage manufacturing), and Café de Coral (Fast Food restaurant).

As at the end of 2008, there were about 28,620 US nationals residing in Hong Kong, according to Hong Kong's Immigration Department.

US States including California, Illinois, Nevada, New York State, North Carolina, Ohio and Virginia have set up representative offices in Hong Kong. In addition, US port authorities of Georgia, Long Beach, Los Angeles, New York & New Jersey, Tacoma and Virginia maintain a presence in Hong Kong.