In 1993 and annually from 1995 through 2007, the Department of State submitted reports to Congress, pursuant to the Hong Kong Policy Act of 1992, as amended (the Act). This report responds to the requirement in the House explanatory report 113-499 accompanying H.R. 5013, the State, Foreign Operations, and Related Programs Appropriations Bill, FY2015. The following highlights key developments since June 2007.

Summary

The United States has considerable and longstanding interests in Hong Kong. Cooperation between the United States Government and the Hong Kong Government (HKG) remains broad, highly effective, and mutually beneficial. Our relationship with Hong Kong is based on the framework of “one country, two systems,” enshrined in Hong Hong’s Basic Law, which serves as a virtual (or de facto) constitution. Under this system, Hong Kong exercises autonomy in all areas except foreign policy and defense affairs. Hong Kong participates actively and independently in a range of multilateral organizations and agreements such as Asia-Pacific Economic Cooperation (APEC) and the World Trade Organization (WTO), with trade policy objectives that generally align with our own, and is recognized as a separate customs territory by the United States.

There are more than a dozen U.S.-Hong Kong agreements currently in force. Our day-to-day bilateral law enforcement cooperation is on par with many of our closest allies. Hong Kong’s strong traditions of rule of law, low levels of corruption, and high levels of public safety make it a preferred choice for American businesses in the region. The United States enjoys diverse cultural, educational, scientific, and academic exchanges with the people and Government of Hong Kong.

Hong Kong maintains a comprehensive strategic trade controls system that follows multilateral export control regimes, and our governments work closely together to maintain and strengthen measures to prevent illegal diversion of controlled items. Since 2007, the United States and Hong Kong have signed three bilateral agreements, including two in 2014. There were no suspensions under section 204(a), terminations under section 204(d), or determinations under section 201(b) of the Act during the period covered by this report.

Since the issuance of the last report in 2007, Hong Kong has maintained a high degree of autonomy under the “one country, two systems” model sufficient to justify continued special treatment by the United States for bilateral agreements and programs. Since 2007, the people of Hong Kong, the HKG, and the Central Government have vigorously debated the nature, scope, and pace of democratic and electoral reforms.

U.S. - Hong Kong Relations

The United States has a long history of positive bilateral relations with Hong Kong and is committed to its stability, prosperity and continued success as an international trade and financial center. We also have long supported democratic development in Hong Kong in accordance with the Basic Law. The United States and Hong Kong share many values, including respect for rule of law and for civil liberties. U.S. interests are enhanced by Hong Kong's continued autonomy, stability, and prosperity; protection of civil liberties; and the preservation of Hong Kong's respect for the rule of law under “one country, two systems.”

There are more than 1,300 U.S. businesses operating in Hong Kong, drawn in part by Hong Kong’s openness, transparency, and strong rule of law. Hong Kong is home to an estimated 65,000 U.S. citizens, and more than one million U.S. citizens visited or transited Hong Kong in 2014. It is America’s 9th-largest export market for manufactured goods and it is 6th-largest for total agricultural exports, including 1st for tree nuts, 4th for beef products, and 4th for wine. The United States is Hong Kong’s second largest trading partner after mainland China.

The United States and Hong Kong have developed a robust law enforcement relationship – including export control, counterterrorism, counter-proliferation, anti-money laundering, counter-narcotics, and anti-corruption – in which Hong Kong works with the United States to protect our shared security interests. In each of the past three years, an average of 13 U.S. Navy ships per year made port calls in Hong Kong. U.S. educational institutions and Hong Kong counterparts hold extensive regular exchanges, including short-term visits by U.S. faculty, summer programs for students, and multi-year exchanges of faculty and staff. Hong Kong is among the largest per capita sources of students who travel to the United States for study.

In June 2013, the United States Government pursued assistance from the HKG in apprehending Edward Snowden based on a U.S. arrest warrant. Mr. Snowden was nonetheless permitted to depart Hong Kong on June 23. While Hong Kong continues to honor its mutual legal assistance treaty obligations in the vast majority of requests, the incident strained our relations with Hong Kong and, due to its intersection with issues related to foreign affairs and security, revealed a limit to Hong Kong’s autonomy in law enforcement cooperation.

Electoral Reform

On June 10, 2014, China’s State Council released a first-ever “White Paper” on its Hong Kong policy. The paper stressed Beijing’s “comprehensive jurisdiction” over the SAR and indicated that Hong Kong must be governed by “patriots,” including the Chief Executive. Hong Kong’s legal sector found fault with the White Paper’s description of judges as “administrators” within the HKG, rather than as members of an independent, judicial branch with a duty to interpret the law of the SAR.

The “White Paper” was issued at a particularly sensitive time, following an initial round of public consultations to discuss the implementation of universal suffrage for the 2017 Chief Executive election. The debate surrounding the 2017 election began in 2007 when the National People’s Congress Standing Committee (NPCSC) determined that the election of Hong Kong’s Chief Executive “may be implemented by the method of universal suffrage” in 2017 and that Hong Kong may elect the Legislative Council by universal suffrage beginning in 2020. Hong Kong’s Basic Law states the "ultimate aim" of political development is election by universal suffrage of the Chief Executive and the Legislative Council (LegCo). Currently 40 of 70 LegCo members are directly elected, while the Chief Executive is selected by a 1,200-person Election Committee dominated by members traditionally seen as pro-Beijing.

Following the initial round of public consultations, the HKG in July 2014 submitted a report to Beijing stating that “mainstream opinion” in Hong Kong supported a nomination process restricted to a nominating committee based on the election committee used for previous Chief Executive elections. This statement was dismissed by pro-democracy advocates. On August 31, 2014, the NPCSC issued a decision allowing universal suffrage for the 2017 election, but with a strict limit on the number of candidates and a strict 50 percent threshold of support needed from the nominating committee to become a candidate. The NPCSC decision also reiterated that the Chief Executive must be a person who “loves the country and loves Hong Kong.”

Demonstrations against the NPCSC decision on universal suffrage took place throughout September 2014. On September 28, 2014, following a week of student protests and the detention by police of a group of student leaders who had entered restricted grounds outside the HKG headquarters, police used tear gas in an attempt to disperse a steadily growing crowd gathered in areas around the HKG headquarters and Legislative Council. This marked the beginning of mostly peaceful protests that occupied key commercial and transportation centers in Hong Kong for 79 days. Police announced the arrest of 955 persons for committing various offences related to the protests, although most were released without charge. According to the Hong Kong government, 130 police officers were injured, and 221 protesters received medical treatment.

Efforts by pro-Beijing Chinese media in Hong Kong and state-controlled media in mainland China to paint the protests as the result of interference by “foreign forces,” primarily the United States, contributed to an increasingly polarized political atmosphere and a chilling of freedom of expression contrary to Hong Kong’s traditional spirit of openness to the global community.

While it may be that the NPCSC’s decision conformed to the requirements of the Basic Law in the literal sense, it was criticized by many in Hong Kong as violating the SAR’s commitments under the International Covenant on Civil and Political Rights (ICCPR) and as effectively blocking non-establishment candidates from competing in the election for Chief Executive. The United States has called for the conduct of a multi-candidate competitive election for Chief Executive in 2017, which would enhance the legitimacy of Hong Kong’s Chief Executive, would be a major step forward in Hong Kong’s political development and would bolster Hong Kong’s stability and prosperity.

Developments in Media Freedom

Hong Kong news outlets regularly publish a wide variety of reports and opinions, including articles critical of the Central and Hong Kong Governments. Hong Kong’s netizens can freely access web sites, including those blocked in the Mainland. However, concerns over constrictions of Hong Kong’s press freedoms have grown in recent years, including increasing reports of self-censorship regarding issues deemed sensitive by the Central Government. The Hong Kong Journalists Association said in a July 2014 report that the past year had been “the darkest for press freedom” in several decades. Since 2010, Hong Kong has dropped 27 places, to 61^st, in the Reporters Without Borders ranking of press freedoms. Chief among these concerns has been a series of still-unsolved violent assaults on journalists. Some media companies have also drawn criticism for firing journalists critical of the Central Government. Pro-democracy media outlets reportedly experienced a sharp increase in cyber-attacks.

Export Controls

The United States enjoys excellent cooperation with Hong Kong counterparts on strategic trade control and counter-proliferation initiatives. The HKG actively implements relevant United Nations Security Council resolutions and acts quickly to detain and investigate suspect shipments. As part of a longstanding dialogue on strategic trade controls, the U.S. and Hong Kong have held joint seminars for industry groups and published due diligence guidance to raise industry awareness about the risks inherent in transshipment. On December 23, 2014, the Department of Commerce’s Bureau of Industry and Security amended the Export Administration Regulations to expand license requirements for exports and re-exports to Hong Kong of items controlled for national security reasons (see 79 FR 76867). This change better aligns U.S. export license requirements with Hong Kong import license requirements.

Bilateral Agreements and Multilateral Forums

Hong Kong continues to participate actively and independently in a range of multi-lateral forums, including the WTO, APEC, and the Financial Action Task Force. In 2009, the United States and Hong Kong entered into a protocol on scientific cooperation in the earth sciences. In 2014, Hong Kong signed a Tax Information Exchange Agreement with the United States, along with an Inter-Governmental Agreement to facilitate implementation of the Foreign Account Tax Compliance Act. Additionally, there are more than a dozen U.S.-Hong Kong bilateral agreements currently in force. While these have generally functioned very well, the HKG has effectively suspended the transfer of American prisoners to the United States since November 2012, stating it needed more time to review cases. Additionally, Hong Kong’s legal requirement for "sovereign assent" by the Central Government to some forms of international liaison hindered timely cooperation and in some instances resulted in denial of cooperation.

Treatment Under Hong Kong Policy Act

There were no suspensions under section 204(a), terminations under section 204(d), or determinations under section 201(b) of the United States-Hong Kong Policy Act of 1992, as amended, during the period covered by this report.