History
Supplementary Teaching Materials
【World Trade Organization】
1
Introduction
Hong Kong will be hosting the sixth ministerial conference of the WTO in
December 2005. This will be a great event for Hong Kong. The free trade
promoted by the World Trade Organization is important not only to the present
day Hong Kong, but also to the growth and development of Hong Kong
throughout the 20th century. The World Trade Organization was established in
1995, with the primary objective of coordinating world trade. Its origin can be
traced back to the end of the Second World War. The establishment of such an
organization has affected the whole world in an important way. Since Hong
Kong will be hosting the sixth ministerial conference of the WTO, let us take the
opportunity to review its establishment process, impact, and prospect of
development. This may help us get a better understanding of the issues relating
to “The growth and development of Hong Kong” and “International
cooperation” in the junior and senior History curricula.
Teachers may make flexible use of these materials according to students’
abilities. For example, junior secondary students with higher academic ability
may attempt some data-based questions and participate in class discussion.
Likewise, teachers may arouse the interest of senior secondary students with
lower academic ability by asking simpler questions before proceeding to class
discussion. Teachers may refer to the suggested answers and amend or
supplement them based on the level of their students.
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【The growth and development of Hong Kong】
How important was free trade to the economic development of Hong Kong in
the 20th century?
Assignment 1: Data-based Questions
Hong Kong Today
Study Sources A to D and then answer questions 1 to 4.
Source A
The following is extracted from the government’s press release article on Tung Chee Hwa, the
Chief Executive on 1 November 2000.
The Chief Executive, Mr Tung Chee Hwa, received the 2001 Index of Economic
Freedom from Mr Edwin Feulner, President of the Heritage Foundation, at the
airport this (November 1) evening on his return from his visit to London.
Mr Tung said that he was delighted that the Heritage Foundation had rated Hong
Kong as the freest economy in the world for the seventh consecutive year. He said,
“It signifies the confidence of the international community in Hong Kong.”
"Economic freedom has been a fundamental driving force for Hong Kong's success.
Our open and competitive market system is built on economic freedom. This has
brought Hong Kong through many challenges. It has also enabled us to overcome
the Asian financial turmoil, to stay competitive and to maintain economic growth,"
Mr Tung said.
Adapted from the following website
http://www.info.gov.hk/gia/general/200011/01/1101188.htm
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Source B
The following is adapted from the transcript of a stand-up media session by the Financial
Secretary, Mr Donald Tsang, after attending the Economic Freedom Index 2001 luncheon on
1 November 2000.
I am of course very excited by this honour to be declared the freest economy for the
seventh year by the Heritage Foundation. This is not only a philosophical belief.
Behind this it means Hong Kong has a very free and very competitive market where
individual firms compete on their own strength in a competitive environment
without government intervention.
Adapted from the following website
http://www.info.gov.hk/gia/general/200011/01/1101209.htm
Source C
The following is extracted from the government’s press release article on Antony Leung, the
Financial Secretary on 9 July 2003.
Hong Kong is once again ranked as the freest economy in the world, according to
the newly released "Economic Freedom of the World, 2003 Annual Report"
published by the Cato Institute of the United States in conjunction with the Fraser
Institute of Canada and some 50 other research institutes around the world.
Hong Kong has been in first place in each report since the index of economic
freedom was first published in 1996.
Apart from winning first place in economic freedom, Hong Kong also ranks first
in "size of government", "freedom to exchange with foreigners", and "regulation of
credit, labour and business".
Welcoming the report, the Financial Secretary, Mr Antony Leung, said, "I am
pleased to note that Hong Kong's entrenched advantages are once again recognised
by these reputable organizations. Among the advantages are our low tax system,
free trade and free market, free flow of capital and information, just to name a
few."
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"The Government is firmly committed to further enhancing Hong Kong's
competitiveness as an international financial and business centre and maintaining
an open and business-friendly environment. I am sure international investors,
businessmen and traders will all find Hong Kong to be their preferred location for
doing business," he added.
Adapted from the following website
http://www.info.gov.hk/gia/general/200307/09/0709003.htm
Source D
The following is adapted from the article “HK ranked world's freest economy for 11th
consecutive year” published in the Hong Kong government press release website on 4 January
2005.
The Financial Secretary, Mr Henry Tang, welcomed the ranking of Hong Kong as
the freest economy in the world for the 11th consecutive year by the Heritage
Foundation, “I am pleased that the virtues we have been upholding to keep Hong
Kong flourish as a free market economy have once again been reaffirmed by the
international community.”
“We see the Government’s role as that of a facilitator who provides a
business-friendly environment for all firms to compete on a level-playing field,
while maintaining an appropriate regulatory regime to ensure the integrity and
smooth functioning of a free market. The Government will also take a leading role
in government-to-government interactions, for instance, on market access
arrangements,” Mr Tang said.
He added that the Government would spare no effort in preserving its strengths and
in further improving other aspects where there was room for further improvement.
Adapted from the following website
http://www.info.gov.hk/gia/general/200501/04/0104095.htm
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1.
The comments in these Articles represent the stance of which group? Cite relevant clues
from the sources to explain your answer.
2.
From the above comments of the four leaders of Hong Kong Government, what do you
think their attitudes were towards a free economy? Explain your answer with reference to
the sources.
3.
List the advantages brought about by a free economy to Hong Kong? Explain your
answer with reference to the sources.
4.
What do you think are the usefulness and limitations of the above sources in reflecting
the impact of a free economy on Hong Kong?
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Assignment 2: Source analysis
According to the opinions of the four leaders of Hong Kong Government, referred to in
Assignment 1, a free economy has been very important to the development of Hong Kong. Do
you agree with them? Please read the following materials to understand the situation in Hong
Kong a hundred years ago and look for evidence from history.
Hong Kong during the entrepot era
With a lack of natural resources, Hong Kong cannot be self-sufficient, depending merely on
agriculture. Hong Kong can hardly transform into a cosmopolitan city without the
development of trade. Study Source A and answer Questions 1-4.
Source A
By the mid 19th century, the discovery of gold mines in the US and Australia drew
loads of Chinese from South China shores to the gold rush. At the same time, lots
of Chinese went to Southeast Asia, Canada and South America to be coolies.
Millions of them gathered in Hong Kong waiting for departure, greatly
contributing to the development of Hong Kong’s commerce, hotel and shipping
business. During the Taiping Rebellion, the chaos caused by the domestic war
resulted in the southward shift of both population and wealth to Hong Kong.
Hong Kong thus became the shelter for fleeing refugees. Population growth led
to the gradual expansion of the city, and the flourishing of different industries.
What was worth noting was that due to the continuous growth of the population of
overseas Chinese, a tremendous overseas market for Chinese products was created.
Leveraging on the convenience of information transmission and transportation,
Hong Kong businessmen endeavoured to meet this increasing demand. Some
so-called Kam Shan Chong [firms trading with the United States] and Nam Yeung
Chong [firms doing trading businesses in Southeast Asia] thus emerged. Besides,
trading firms known as Nam Pak Hong (companies trading with Southeast Asian
countries and China) flourished with the development of the shipping industry
along the coastal waters of China. Hong Kong then evolved into an entrepot …
With the rapid growth of entrepot trade, Hong Kong’s position in China’s foreign
trade continued to grow during the late Qing Dynasty. This is attributable to
Hong Kong as a “free port”, with an excellent harbour and advanced ancillary
facilities, broad international connections and very stable political environment.
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According to the statistics released by the Customs of the Qing government, trade
between Hong Kong and the mainland accounted for 37% and 21% of the total
imports and exports of China in 1880 and by 1890, the percentages had increased
to 55% and 37% respectively. It is worth noting that these figures had not taken
into account illegal smugglings.
Between 1898 and 1941, Hong Kong’s development experienced difficult times.
Its entrepot trading activities were affected by changes in the global environment.
Hong Kong’s entrepot trade was hard hit when the First World War broke out. The
shipping business recovered soon after the war. Some local Chinese owned
shipping companies commenced operation, and there was an unprecedented
growth in Hong Kong’s ship building industry. Entrepot trade was burgeoning in
the 20’s. Although Hong Kong’s economic activities almost came to a standstill
during the General Strike of Guangzhou and Hong Kong in 1925-1926, the city
recovered quickly. Shortly afterwards, Hong Kong’s harbour became one of the
busiest harbours in the world. The world depression in the 30s again brought Hong
Kong into stagnation. Japan’s invasion of China dealt another severe blow to
Hong Kong.
Source of information:
王賡武主編。
《香港史新編》(Wang Gungwu. Hong Kong: New Perspectives) Joint Publishing
(Hong Kong) Company Limited (1997), First volume, pages 285,286 and 288.
1.
According to Source A, what was the cause-and-effect relation between the influx of new
arrivals from the mainland of China and the economic development of Hong Kong?
2.
Was the rapid development of Hong Kong’s entrepot trade attributable to free trade
policy alone? Explain your answer with reference to Source A.
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3.
According to the source, what are the factors restricting the development of Hong
Kong’s entrepot trade in the 20th century?
4.
Evaluate the impact of free trade on Hong Kong’s economic development during
1850-1941.
(Note: Teachers may require students of higher academic ability to read the article about
entrepot trade of Hong Kong so as to substantiate the answer. Students may access the
following website for reference.)
http://www.singpao.com/20041222/local/653005.html
The article on the above website was published in Sing Pao Daily News on 22 December
2004. The writer is Professor Fok Kai Cheong, the vice dean of Macau Millennium College.
The headline of the article was “How does the Western Kowloon Cultural District
Development Project reflect the factors accounting for the success of Hong Kong people”.
The article focused on the contribution of Hong Kong people to the mainland of China during
the late 19th century and the early 20th century.
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Hong Kong during the era of industrial take-off
By the 1950’s, Hong Kong transformed from an entrepot trade-driven economy to an
industry-driven economy. Study Source B and answer question 5.
Source B
Due to the establishment of the communist regime in China in 1949, and the
outbreak of the Korean War in the early 50’s, Western nations imposed a trading
embargo on China. Hong Kong’s entrepot trading activities were hard hit.
However, the 1950s marked a new stage in the transformation of Hong Kong into
a manufacturing base. Starting from the development of a few industries, Hong
Kong soon became an export-oriented labour intensive manufacturing centre and
rapidly developed into an industrialised city in the 60’s and 70’s. Since 1970’s,
Hong Kong has also become a regional financial centre.
Hong Kong’s economic take-off after the 70’s has largely to do with the
development of globalization. Since the mid 70’s, Western nations have started to
outsource their labour-intensive production to regions that have lower labour costs.
Among them, the “Four Little Asian Dragons” got much of the benefit. Hong
Kong’s manufacturing industry witnessed exponential growth during this period
and was denominated by export-oriented light industrial consumables such as
garments, electronic consumer products and toys. These products became the
backbone of Hong Kong’s industrial output.
Adapted from the following website
http://www.cuhk.hk/soc/courses/ih/globalization/lect02/e_lecture-chi-02.htm?page=2
5.
Describe the relationship between a free economy and the rapid development of Hong
Kong into an industrial city.
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Hong Kong’s development into a financial centre
From the 80’s, Hong Kong began to transform from an industrial city to an international
financial centre. The free economic system became increasingly important. Study Source C
and answer questions 6-7.
Source C
The following describes the present economic environment of Hong Kong.
Hong Kong is well-known for its market-oriented economic policies, which means
the government will not intervene in the economy or the market by implementing
guiding or compulsory plans. Investors and entrepreneurs are deemed to understand
the market far better than government officials. The activities of private companies
will lead Hong Kong to prosperity better than government economic plans.
Hong Kong advocates and practises free trade – a free and liberal investment regime,
the absence of trade barriers, no discrimination against overseas investors, freedom
of capital movement and low and predictable taxation. The Government of the Hong
Kong Special Administrative Region follows a laissez-faire policy of
non-intervention and endeavours to create a favourable business environment.
Through this Hong Kong became the eleventh largest trading centre in the world,
and developed into a major exporter of garments, clocks and watches, toys, games,
electronic products and other light industrial products. More than 3200 international
corporations chose to establish their Asian regional headquarters or offices in Hong
Kong. The major types of business carried on by the regional headquarters include
the wholesale/ retail and import/ export trades, banking and finance, manufacturing
and transport and related services.
Hong Kong places a strong emphasis on the rule of law and on maintaining a level
playing field. We will not prohibit foreign companies from participating in the local
financial markets, nor will we restrict the flow of capital into and out of Hong Kong.
Thus, Hong Kong becomes an international financial centre, characterised by the
free flow of capital and an efficient and transparent operation in compliance with
international standards. Hong Kong is the twelfth largest banking centre in the
world.
In addition, Hong Kong does not impose any foreign exchange controls. Hong
Kong’s foreign exchange market is well-developed, and trading is active. Hong
Kong’s foreign exchange market is linked to overseas foreign exchange markets,
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enabling it to carry out foreign exchange transactions with the rest of the world
round the clock. According to the global survey conducted in 2004 (a survey
conducted every three years) by the Bank for International Settlement, the trading
volume of the foreign exchange market in Hong Kong ranked sixth in the world.
Adapted from
HONG KONG in brief (http://www.info.gov.hk/info/hkbrief/eng/)
HONG KONG means BUSINESS (http://www.info.gov.hk/info/HKbus/eng/bus.htm)
Hong Kong: The Facts: Financial Services (http://www.info.gov.hk/hkfacts/finser.pdf)
6.
How does Source C reflect the practice of a free economic system in Hong Kong? Cite
two relevant clues to explain your answer.
7.
How do you think the two clues you cited for Question (6) have helped Hong Kong to
develop into an international city? Explain your answer.
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Conclusion and reflections
Study Source D and answer question 8.
Source D
The following information was adapted from the statistics provided by the Trade and Industry
Department in April 2005.
The ranking of Hong Kong in respect of its trading activities
In respect of commodity trading, Hong Kong was ranked the eleventh largest
trading centre in the world and the eleventh largest exporting and importing region
in the world in 2003.
In respect of commercial service trading activities, Hong Kong was ranked the
fifteenth largest trading centre in the world and the tenth largest exporting region
and the nineteenth largest importing region in 2003.
In addition, according to the “Index of Economic Freedom (2005 edition)”
published by the Heritage Foundation of the United States, Hong Kong was named
the world’s freest economy for 11 consecutive years.
8.
Based on the above statistics, what do you think is the prospect for Hong Kong’s trade
development?
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Teachers may guide students to reflect further on the following issue:
Due to Hong Kong’s unique geographical environment, human resources and historical
background, free trade policy becomes the bedrock for the growth and development of Hong
Kong.
However, is Hong Kong’s free trade development favourable to each and every Hong Kong
individual? Has development been detrimental to the livelihood of certain people? Study
Source E and answer questions 9-11.
Source E
During the mid 80’s, faced with the challenges brought about by the high
production costs in Hong Kong and the intense competition from other emerging
industrial economies (such as Thailand and Indonesia), Hong Kong manufacturers
began to explore more profitable development opportunities abroad. The shift of
plants towards the North became the major production strategy for Hong Kong
manufacturers.
Therefore, during the 90’s, Hong Kong was transformed from a base for industrial
production to an operation centre that controlled a widely distributed cross-border
production network. Such a change indicated that Hong Kong has evolved from a
production contractor serving overseas clients to an agent between overseas buyers
and plants in the mainland in a “triangular relationship”.
Adapted from the following website
http://www.cuhk.hk/soc/courses/ih/globalization/lect02/e_lecture-chi-02.htm?page=2
9.
Do you think the shifting of plants to the North as referred to in Source E was favourable
to Hong Kong manufacturers? Explain your answer.
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10.
How did the shifting of plants to the North as mentioned in question 9 affect local
workers? Explain your answer with your own knowledge.
11. Free trade helps transform Hong Kong into an international city. At the same time, it
works against the interest of certain people. Which type of people will be affected? Do
you think that on balance it is worthwhile?
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Suggested answers
Assignment 1: Data-based questions
1.
The comments represent the stance of the government.
Because, for example:
--The articles recorded the opinions of Tung Chee Hwa, Donald Tsang, Antony Leung
and Henry Tang, all being leaders of the Hong Kong government, but did not cover the
perspectives of other people.
--The source of information was the press release articles of the government, which
reflected the stance of the government.
2.
Attitude
Supportive/ welcoming
Explanations
--Tung Chee Hwa indicated that he was pleased that the Heritage Foundation continued
to rank Hong Kong as the world’s freest economy. This proves that he supported the free
economic system. (Source A)
--Donald Tsang believed that the Government had no intention to intervene in the market
and distort the competitive environment, and he thought that we should take pride in this.
This proves that he supported the free economic system. (Source B)
--Antony Leung said that he was very delighted to see that Hong Kong’s institutional
strengths had once again been confirmed by these reputable organizations. Our
competitive edge included our low-tax regime, our principle of free trade and free market
practice and the free flow of capital and information. This proves that he was positive
about the free economic system. (Source C).
--Henry Tang said that he was pleased that the commitment to maintaining Hong Kong
as a free market economy had again received international recognition. He also stressed
that the Government was committed to strengthening the existing economic practices in
Hong Kong, paying attention to the room for improvement and enhancing present
standards. This proves that he was very supportive of the free economic system.
3.
Advantages brought about by the free economic system
Examples:
--Helped Hong Kong overcome numerous challenges and weather the storm of the Asian
financial crisis, and is key to maintaining Hong Kong’s competitiveness and economic
growth. (Source A)
--Enhanced the competitiveness of Hong Kong and created a favourable business
environment. (Source B)
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--Encouraged international investors to invest in Hong Kong and merchants to conduct
business in Hong Kong. (Source C)
4.
Usefulness:
The information gives us a positive perspective and helps us understand the positive
impact of a free economy on Hong Kong.
Limitations:
Since the information reflected just the opinions of the leaders of the government and did
not cover the opinions of other sectors, we do not have a full picture of the advantages
and adverse effects of a free economy.
Assignment 2: Source analysis
1.
The cause-and-effect relationship between the influx of new arrivals and Hong Kong’s
economic development
Example:
--People waiting for migration to overseas countries gathered in Hong Kong and
contributed to the development of Hong Kong’s commerce, hotel and shipping business.
--Refugees fleeing from wars took up residence in Hong Kong, contributing to the
population growth and the flourishing of different industries in Hong Kong.
--Hong Kong became the entrepot for trade conducted between overseas Chinese and the
mainlanders, and entrepot trade boomed.
2.
The answer should be “no”, otherwise it is difficult to give a sensible answer. Example:
In addition to the free trade policy, an excellent harbour and advanced ancillary facilities,
broad international connections and a relatively stable political environment all
contribute to Hong Kong’s entrepot trade development.
3.
Factors restricting entrepot trade development:
Wars (such as World War I and Japanese invasion), strikes (The General
Guangzhou and Hong Kong) and economic depression.
4.
Strike of
The impact of free trade on Hong Kong’s economic development during 1850-1941.
Both affirmative and negative answers are acceptable.
Example:
Great impact:
If people were not allowed to travel freely into and out of Hong Kong, people from
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Southern China could not have migrated to or conducted business in Hong Kong. The
population would grow at a slower pace and the development of Hong Kong would be
restricted. Kam Shang Chong and Nam Yeung Chong would not have emerged. In
addition, according to the reading materials, if wars or strikes broke out in Hong Kong,
or the world entered into economic depression, or free trade was threatened, Hong
Kong’s economy would be hard hit and people’s livelihood would be affected
accordingly.
Insignificant impact:
Hong Kong’s economic development also hinged on its excellent harbour and advanced
ancillary facilities, its broad international connections and a relatively stable political
environment. Free trade was just one of the factors promoting Hong Kong’s economic
development.
5.
The relationship between a free economy and the rapid development into an
industrialised city
Free economy promotes export trade, and the development of an export-oriented
economy stimulates the production drive of local industries. In addition, a free economy
attracts manufacturers in Europe and the US to set up plants in Hong Kong and fuels the
development of Hong Kong’s industries.
6.
Two criteria to enable the practice of a free economy in Hong Kong
Two of the following:
Examples:
-- The Government follows a laissez-faire policy of non-intervention and endeavours to
create a favourable business environment.
-- The Government does not prohibit foreign companies from participating in local
financial markets and does not restrict the flow of capital into and out of Hong Kong
-- No imposition of foreign exchange control
7. How does a free economy help Hong Kong develop into an international city?
Example:
-- The Government follows a laissez-faire policy of non-intervention and endeavours to
create a favourable business environment. → Hong Kong becomes the eleventh largest
trading centre in the world and develops into a major exporter of garments, clocks and
watches, toys, games, electronic products and other light industrial products.
-- The Government does not prohibit foreign companies from participating in local
financial markets and does not restrict the flow of capital into and out of Hong Kong →
Hong Kong becomes a major international financial centre.
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-- No imposition of foreign exchange control → Hong Kong’s foreign exchange market is
well-developed, and trading is active. Hong Kong’s foreign exchange market is linked to
overseas foreign exchange markets, enabling it to carry out foreign exchange transactions
with the rest of the world round the clock.
Conclusions and reflections
8. prospects of Hong Kong
For this question, positive answer is to be expected. For example, Hong Kong will
probably continue to grow and become more important in international trade and
finance.
9.
Manufacturers benefited from the cheap labour in the mainland. With the lowering of
production cost, profits were set to increase.
10. The shifting of plants to the North reduced employment opportunities. Local workers
were faced with unemployment and had difficult lives.
11. Free trade may work against the interests of certain people. Is it worthwhile?
Both “Yes” and “No” answers are acceptable.
Example:
It is worthwhile —
--Every success is achieved at a price. It is inevitable that the interests of some may have
to be sacrificed, in order to protect the overall interest of Hong Kong people. People
whose interests are affected may be re-trained for other occupations or resort to social
welfare for assistance.
It is not worthwhile –
--Each individual is important and the Government should not sacrifice the interests of
anyone.
Teaching suggestions:
Teachers may refer to the teaching materials for S4-5 Integrated Humanities – “The WTO and
economic globalizations: Are they a blessing or a disaster?” The suggested activities require
students to analyse the pros and cons of the WTO and economic globalization from different
perspectives. Through role play and reading materials, students may gain a better
understanding of the different opinions of government officials, scholars, farmers, workers
and capitalists on the WTO and economic globalization. Teachers may use the reference
materials provided by the teaching kits to carry out discussions with students and guide them
to reflect on the impact of a free economy on the world.
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【International cooperation】
How do the European Union and the World Trade Organization as
economic cooperation organizations differ in terms of origins and
achievements?
Background
Both are economic cooperative organizations. The origins of the European Union (EU) and
the World Trade Organization (WTO) can be traced back to the end of World War II. After six
years of warfare, the whole of Europe and the world economy were severely affected. Due to
the exhaustion of both financial and material resources, the countries involved in the war were
not able to rebuild their shattered economies on their own. This, coupled with a rising trend of
Economic Protectionism, provided the incentive for economic cooperation in the recovery
process. As a result, international cooperation became increasingly important in the road to
recovery. Since 1945, the new world order has set off a fresh wave of global economic
cooperation. By the 1990s, both the EU and WTO had been established. Both had a huge
effect on Europe and also had great influence globally.
Since Hong Kong will be hosting the sixth ministerial conference of the WTO, let us review
the establishment processes and achievements of these two organizations as well as their
prospect of development, so that we can fully reflect on the issue of international cooperation.
Assignment 1:
The comparison of the establishment processes and the development of the EU and WTO
Please read the following table in detail and answer the questions.
1947
The formation of the EU
The formation of the WTO
Belgium, The Netherlands and
Luxemburg formed a tariff union
23 countries, including the United States,
Britain and France signed a multilateral
known as ”Benelux Union”,
pursuant to which the three
countries eliminated the
economic restrictions on the flow
of goods and capital and the
movement of workers.
agreement known as the “General
Agreement on Tariffs and Trade”
(GATT) in Geneva, Switzerland,
pursuant to which, the member countries
reduced tariffs and advocated against the
increasingly popular trade protectionism
and discriminatory trade policies while
promoting international free trade.
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1948-1986
Contracting parties to the GATT carried
out 7 negotiations and reduced tariffs
significantly, which promoted the
development of international trade.
However, during the 70’s and in
particular when entering the 80’s, trade
protectionism in the form of government
subsidies, bilateral quotas, market
oligopoly and various types of non-tariff
barriers (e.g. the imposition of
protectionist intellectual property laws)
gained ground again. In addition,
contracting parties to the GATT
increased to 103 by 1986.
1952
Encouraged by the tremendous
success of the Benelux Union,
France, Germany, Italy, Belgium,
the Netherlands and Luxemburg
established the European Coal
and Steel Community, pursuant
to which the countries lifted the
tariff barriers on coal, iron and
steel, and the investment and
production of coal and steel were
coordinated by a unified senior
office.
1957
The six member countries of the
European Coal and Steel
Community signed the “Treaty of
Rome”, pursuant to which the
European Economic Community
was established. Tariff barriers
among the member countries
were lifted, agricultural tariffs
were abolished, the free flow of
commodities, resources and
labour was promoted, and the
wages, social welfare and
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measurement standards were
unified.
1967-1991 The European Economic
Community was renamed the
European Community in 1967
and the “Exchange Rate
Mechanism” was introduced
whereby the currencies of the
member countries were pegged.
A common agricultural policy
was adopted under which a
uniform price was set for each
agricultural product. In the event
that the market price fell below
the uniform price, the difference
would be made up by the
subsidies granted by the
agricultural fund established by
the member countries. The
“Single European Act” was
enacted to remove the restrictions
on the internal trade and the flow
of commodities within the
European Community, and to
strengthen controls of the
Community on hygiene, security,
environmental protection and
consumer protection issues. By
1986, the members of the
European Community increased
to twelve.
1986-1994
Contracting parties to GATT launched
the eighth round of multilateral
negotiation, namely the Uruguay Round.
The achievements of this round of
multilateral trade negotiations included
(1) strengthening the multilateral
disciplinary framework in managing
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international trade, and agricultural
products and textile products were
included as trade liberalization targets of
GATT. (2) Conclusion of a trade-related
intellectual property agreement. (3) The
tariffs were further reduced. (4)
Resolution to establish the World Trade
Organization.
1993
The European Community was
renamed the European Union,
abbreviated as EU. The member
countries agreed to extend the
areas of cooperation to
non-economic aspects, including
the joint development of
diplomatic and security policies
as well as labour and social
policies.
1995
When the Uruguay Round of multilateral
trade negotiation was launched in 1986,
the topics discussed involved issues
beyond the trading of goods, such as
intellectual property protection, service
trading and trade-related investment
measures. Since it was quite difficult to
conduct negotiations on these important
topics which did not involve the trading
of goods within the old framework of
GATT, it became necessary to establish
an official international trading
organization to conduct these
negotiations. It was therefore decided at
the ministerial conference of GATT at
Morocco in April 1994 that the World
Trade Organization would be officially
established. The World Trade
Organization was established on 1
January 1995.
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The development of EU
The development of WTO
The WTO’s highest decision-making
body is the ministerial conference. All
the members of WTO meet at the
conference, which is held at least once
every two years. The ministerial
conference is under full authority to
perform the duties of WTO and take
necessary actions, and is entitled to
decide on all the issues under the
1995-2005
multilateral trade agreements. By 2005,
the WTO had already convened five
ministerial conferences in Singapore
(1996), Geneva (1998), Seattle (1999),
Doha (2001) and Cancun (2003)
respectively. Hong Kong will be hosting
the sixth ministerial conference in
December 2005. Since the WTO has
always been regarded as promoting
globalization, anti-globalization protests
have been staged at each conference
since the Seattle ministerial conference.
1999
The Euro was launched by the
EU to replace the national
currencies of all the member
countries. As at the end of 2003,
all European countries had
adopted the Euro, with the
exception of Sweden, Denmark
and Britain.
2001
2004
China officially joined the WTO.
The members of the EU
increased to 25.
2005
The member countries of the WTO
increased to 148.
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1.
After studying the above introduction to the European Union and the World Trade
Organization (WTO), please try to complete the following table.
European Union (EU) (including
World Trade Organization (WTO)
Benelux Union, European
(including the General Agreement on
Economic Community), European Tariffs and Trade)
Community)
Background of
the
Establishment
The growth in
the number of
Member
Countries
European Coal and Steel Common General Agreement on Tariffs and
Community (1952)：______
Trade (1947)：_____countries
WTO (2005)：______ countries
Countries
EU (2004)：______ countries
Content of
Economic
Cooperation
For Example:
Annulling the limitations on goods,
capital and free mobility of the
people.
Content on
Non-economic
Cooperation
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Teaching Suggestions:
Teachers may ask students of high academic ability to design their own tables for comparison,
or even skip this part and carry out the discussions directly.
2.
Class Discussion
The EU and the WTO were eventually established after nearly half a century of
international cooperation. Students may discuss the similarities in the processes of
establishment between the two organizations.
(Hints: Student may discuss the background for the establishment, the changes in the
nature of cooperation, the scale of development, etc.)
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Assignment 2
The achievements of the EU and WTO
Both the EU and WTO have accomplished a great deal since their establishment. The EU
helped expedite the rebuilding and revival of the post-war European economy, and
contributed to the development of a rich and strong Europe, which is now acquiring a high
international status. The EU has also brought peace to Europe and the world in general. The
WTO promotes trade liberalisation through which countries are offered more choice of goods.
The WTO also resolves trade disputes in a constructive manner and promotes world peace.
However, internal divergences and antagonisms exist among member countries of these
organizations. Although the sources of divergence vary, agricultural policy is often at the heart
of the divergence.
Study Source A, and answer question 1.
Source A
Many developing countries, mainly African and Asian ones which have agriculture
as the heart of their economy, have been criticizing the EU for its *agricultural
subsidy policy. In their opinion, the EU’s subsidies contribute to over-production,
drive down world prices of commodities, and inflict damage on their economies.
Since these countries are major participants in world trade negotiations, the
uncompromising attitude of the EU on the issue of agricultural subsidies has
currently brought the trade negotiations of the WTO to a standstill.
The EU has agreed to reform its agricultural subsidy policy recently, in an attempt
to remove the major stumbling block to world trade negotiations. However,
experts pointed out that the recent reform is not going to alter the EU’s practice of
subsidising the sales of agricultural products in the international market. In other
words, the developing countries are still not going to be able to compete with the
low-priced agricultural products from Europe and the United States. A researcher
from a UK institution indicated that peasants from the developed countries will
continue to over-produce and dump their products in developing countries.
A report on the EU agricultural subsidy policy
*Agricultural subsidy policy (also known as Common Agricultural Policy): In order to
safeguard the interests of European farmers, the EU set a uniform price for various
agricultural products. In the event that the market price falls below the uniform price, the
difference is made up by the subsidies granted by the agricultural fund established by the
member countries. As such, European farmers do not incur a loss due to the drop in the
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market price even if they produce too much. The subsidies are financed by the annual budget
of the EU.
(Teachers may refer to the following website for more details about the policy:
http://www.politics.co.uk/issues/common-agricultural-policy-$2124064.htm)
1.
Describe how the EU’s agricultural subsidy policy has led to a dispute within the WTO.
Study Source B and answer questions 2-4.
Source B
On June 15, 2005, the European Union held a Summit Conference in Brussels. The
Summit ended in failure two days later, because the EU members were divided
over the subject of the UK’s refund and the EU’s agricultural subsidy policy.
In 1984, Margaret Thatcher, then Prime Minister of Britain, won the support of
other members for the granting of a refund to the UK in proportion to its net
contribution to the common budget, on the argument that Britain received the least
amount of subsidy among all the EU members. From 1997 to 2003, Britain was
refunded an average amount of 4.6 billion Euros annually. It is estimated that from
2007 to 2013, Britain is going to get an average refund of 7.1 billion Euros each
year. Most members of the EU, including France, claim that Britain, being an
advanced nation, should give up this refund. However, Britain is not willing to
give it up.
In addition, Britain and France were in fierce dispute over the EU’s agricultural
subsidy policy. The EU’s agriculture subsidies account for 40% of its budget.
France, being an agricultural nation, gets the most benefit from this. The UK
vigorously opposed the agricultural subsidies granted to France.
British Prime Minister Tony Blair insisted that the EU should reform its
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agricultural subsidy policy limiting the amount of agricultural subsidies, before
Britain considers giving up the subsidy refund. Meanwhile, other members of the
EU also pushed forward their own claims. Major contributing members like
Holland and Sweden demanded a reduction of their yearly contributions to the EU.
Others like Italy are opposing the EU’s reduction of assistance to its poorer
regions.
A report on the negotiations on the EU budget plan
2.
Was the dispute mentioned in Question (1) the same as the internal disagreement in the
EU? Explain your answer will reference to Source B.
3.
What do you think are the major barriers to international cooperation nowadays? Explain
your answer with reference to Sources A and B and your own knowledge.
4.
If you were the president of the EU, what would you do to resolve the above disputes
among EU member countries?
29
Many Korean farmers consider themselves victims of the agricultural subsidy policy
implemented by leading powers. According to some news coverage, a large group of Korean
farmers will be staging protests in Hong Kong during the sixth ministerial conference of the
WTO in December 2005. The following article will help us understand the difficulties faced
by these Korean farmers. Study Source C and answer questions 5-6.
Source C
A Rally of 200 people against the WTO
As a dress rehearsal for the mass rally against the WTO Ministerial Conference at
the end of this year, about 200 people, including representatives of Korean and
Indonesian farmers, joined a rally organised by the Hong Kong People’s Alliance
on the WTO yesterday afternoon. Acting as vanguards, 5 South Korean farmers
said that they would organize 1000 South Korean farmers and 500 social
movement activists to come to Hong Kong in December to air their grievances to
the governments of the world against the WTO through advertisements and
forums. However, they emphasised that the whole process would be peaceful.
The protesters marched from Central District to the Central Government Offices.
They protested against the WTO General Council meeting to be held in Geneva
two days later, as well as against the Ministerial Conference to be held in Hong
Kong at the end of this year. Banners with the words “WTO kills farmers” and
pictures taken in previous demonstrations were shown. Anti-WTO slogans were
shouted in Cantonese. Protesters included 5 South Korean farmers representing
the Korean Women Farmers’ Association, South Korean Federation of Peasants
Association and the South Korean People’s Solidarity as well as two Indonesian
farmers. The Chairperson of the Korean Women Farmers’ Association said that the
media in Hong Kong had implicitly called Korean farmers “barbarians” and
“rioters”, but that, in fact, they were peaceful and rational - just struggling to
survive.
10,000 protestors are expected in December.
The Chairperson of the Korean Women Farmers’ Association said that the Korean
government did not subsidise agriculture, and thus many peasants were deeply in
debt. As a result of pressure from the WTO, the Korean government had had to
abolish tariffs on foreign agricultural products. Korean agricultural products are
now no match for cheap imported products. She argued that this was just like
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ordering the death of peasants, who were the ones who suffered most. Many of
them had no choice but to commit suicide by drinking insecticide or to flee from
their farms at night.
The chairperson of the Hong Kong People’s Alliance on WTO, Miss Tang Yin
Ngor, estimated that 10,000 people from 130 organizations would come to protest
at the 6th WTO Ministerial Conference at the end of this year. Two-thirds of the
protestors would come from abroad, mostly from South Korea.
Adapted from Oriental Daily (25 July 2005)
http://hk.news.yahoo.com/050724/10/1euk1.html
5.
What do you conclude about the purpose of the protestors in organising such a rally?
6.
If you were the chairperson of this WTO ministerial conference, how would you resolve
the antagonism between the farmers and the WTO?
Conclusion
From the above, we know that the road to international cooperation is not without obstacles.
Establishing a balance between the interests of individual countries and the world at large
remains the key to success for organizations on international cooperation.
31
Reference Websites
A Brief History of the GATT
http://globalmon.org.hk/02_wto_e.htm
Background information：The cause and effect of World Trade Organization
http://www2.hkedcity.net/sch_files/a/lpy/lpy-ltl/visitor_cabinet/41713/%A5@%B6T%ADI%
B4%BA%B8%EA%AE%C6.doc
Timeline: World Trade Organization
http://news.bbc.co.uk/2/hi/europe/country_profiles/2430089.stm
32
Suggested answers
Assignment 1
1. Similarities:
Examples:
Both organizations are the products of World War II, European countries lacked the
means for self-directed economic reconstruction, and hence, could only develop their
economies through economic collaboration (the European Union). In addition, after
World War II, economic protectionism flourished, and to overcome this countries had to
collaborate in trade, decreasing tariff walls, and hence, the General Agreement on Tariffs
and Trade (GATT) was signed. This eventually grew into the World Trade Organization.
Both the EU and the WTO have their origins in free trade.
Economic collaboration in the EU, and its predecessor
Examples：
--Benelux Economic Union repealed the limitations on goods, capitals and free mobility of
common people.
--The European Economic Community removed tariff walls.
--The European Community introduced the exchange rate mechanism.
Economic collaboration in the WTO and its predecessor
Examples:
General Agreement on Tariff and Trade reduced tariffs.
Non-economic collaboration in the EU and its predecessor
Examples：
--The European Economic Community unified wages, social welfare, common
measurements, etc.
--The European Community enforced controls on hygiene, safety, environmental protection,
and consumer protection.
Non-economic collaboration in the WTO and its predecessor
Example：
The WTO’s scope for discussion covers intellectual property protection, trade in services, and
measures of trade-related investment, etc.
At the same time as expanding the scope of their collaboration, the EU and the WTO are
increasing the number of their member countries.
EU: Only 6 countries participated in the European Coal and Steel Community. The EU
33
expanded to include 25 member countries in 2004.
WTO: There were only 23 member countries when the GATT was signed. The number of
member countries in the WTO has increased to 148.
Assignment 2:
1. Internal divergence within the WTO
Agricultural subsidies encourage leading powers to produce food in large quantities,
which lead to lower prices. Under the free trade environment, food is dumped in poor
countries. Due to the inefficiency and lack of competitiveness in the agricultural sectors
of poor countries, the income of local farmers is reduced, leading to disputes between
rich and poor countries.
2.
Divergence within the EU
The divergence within the EU is different from that in the WTO. Several EU countries,
such as Britain, do not object to the agricultural subsidy policy, but are not satisfied with
the uneven distribution of subsidies out of the budget under the agricultural subsidy
policy. France is the major beneficiary of the agricultural subsidy policy while Britain
has little to gain. Britain, therefore, under Margaret Thatcher, complained that it was
paying too much to subsidise the agricultural sectors of member states, and proposed
either to reform the EU agricultural subsidy policy or claim back a refund. However,
France objected to Britain’s proposal, and this led to a bitter dispute between the two
countries.
3.
Barriers to international cooperation
The major barrier to international cooperation is that countries try to protect their own
interests more than the interests of the whole. For example, in the WTO, rich countries
implement the subsidy policy to safeguard the interests of their own farmers, who then
over-produce and jeopardise the interests of farmers in poor countries. In the EU,
countries act only out of their own interests and object when the EU formulates a
measure which is unfavourable to them. This makes cooperation very difficult.
4.
Method to resolve conflicts
Students may express themselves freely. The underlying principle is to persuade both
parties to focus on overall interests, and to compromise as far as possible.
5.
Purpose of the rally
e.g.
--to remove the Hong Kong media’s misunderstandings about South Korean farmers;
34
--to highlight the hardship suffered by South Korean farmers.
6.
Students may freely express themselves. For example:
The fact that farmers do not generally resort to violent means of protest offers an
opportunity for an exchange of opinion with representatives of the farmers. It is hoped
that both sides will compromise and reach a consensus. We can encourage leading
powers to abandon or revise their agricultural subsidy policy, and offer assistance to
farmers in small countries so that they can become efficient and self-sufficient.
35