What's happening in Europe



Tale of four cities: Montreal and Toronto - Hong Kong and Singapore - the fall of two boosts the fortunes of two rivals

What appears to be happening to Hong Kong today is taking on aspects of what happened long ago in Canada's then major city in the French-speaking Province of Quebec in the 1970s where long-standing civil rights were curtailed in a nationalist cause to bolster the role of the shrinking French language.

Thus, the use of the English language was severely curtailed by law. In Hong Kong, it is the same, but different. Different because while it had little to do with language, but the same in that civil rights, such a freedom of expression, and freedom of assembly and rule of law, long enjoyed by citizens, has been now criminalised if exercised.

What happened in one place and what is happening in the other had, and continuous to have, a negative impact on trade. What was once legal was now illegal and there were new expenses in doing business from Montreal. In Hong Kong, it was made plain that the court's judgment was not the last word if the administration thought otherwise.

True rule of law means the court has the power to restrain the state if the state breaks the law. Under the new regime, the state could do what it liked when it liked. This state of affairs encouraged deal makers to look elsewhere for rule-of-law jurisdictions in which to make their deals.

What happened to Canada's biggest city at the time, Montreal, is beginning to happen in Hong Kong after Beijing bypassed the provisions of the Beijing-London Joint Declaration to respect the territory's autonomy until 2047 and forced the passage of the National Security Law, outlawing demonstrations and protests of which the Beijing disapproved. Then Halloween came early and Beijing forced laws on Hong Kong, harassing an otherwise free press, with unofficial gangs of thugs wrecking the Falun Gong press, and suitting down the popular Apple Daily, then amending election rules that disqualified candidates with whom it disapproved.

In like manner, the Quebec provincial government in the 1970s enacted language laws that denied freedom of choice of language in schooling and commercial signs. Like apartheid South Africa, Canada could not sign the United Nations protocol against discrimination in education as it forced children into French schools just as South Africa forced kids into Afrikaans schools, when there were plenty of English schools willing to have them.

This prompted what became known as the "Anglo Exodus". This included the departure of the world's second largest railway, the Canadian Pacific that moved from Montreal to Calgary. The Sun Life, the world's largest life insurance company, also took the "401 Solution", a reference to the highway leading to Toronto, leaving what was for the longest time, the largest building in the British Empire. Canada's pharmaceutical giants moved out too, though mostly to the US.

More recently, the American Chamber of Commerce in Hong Kong voiced serious concern with developments: "We're seeing people start to question how long they can stay here. And whether being here is going to be effective for them long term," said Amcham president Tara Joseph.

Then we heard that Wells Fargo, America's fourth largest bank by assets, is to move its Asian base of operations from Hong Kong to Singapore just as the Royal Bank of Canada and the Bank of Montreal moved its main operations to Toronto. Of course, the more far-sighted HSBC - the Hong Kong and Shanghai Banking Corporation, was spooked early and moved from Hong Kong to London in 1991.

In Canada, the irony was that because of the loss of its English-speaking population, Montreal lost bragging rights as the second biggest French-speaking city in the world after Paris. This title now fell to Kinshasa, the capital of the Democratic Republic of the Congo. Also without fanfare, Toronto became the biggest city in Canada.

What appears to characterise the two situations is a certain reticence about what is happening when it is happening - such as Amcham members' thoughts before they actually materialise in frank expression. The Canadian banks and the railway did not advertise their plans as threats. They gave every appearance that all was well until they said they were departing - the way Wells Fargo did.

One suspects that when the Covid crisis lifts, there will be something of an mass exodus, accompanied by major importers reshoring production to places like Vietnam the Philippines, Indonesia, Malaysia, India and Bangladesh.

In the short term at least, it is good news for ASEAN (Association of Southeast Asian Nations). The ASEAN share of US-bound container shipping increased 20 per cent year on year in 2020, driven by furniture and electric equipment exports that once came from China, reports Tokyo's Nikkei Asia. In contrast, China's share, still the biggest globally, has decreased for two straight years.

The Japan Maritime Centre tallies US-bound transportation from 18 Asian countries and regions, including Japan, South Korea, China and the ASEAN region. Its figures show increases in shipping from ASEAN, including Singapore and seven other countries to 4.01 million TEU, a 16.1 per cent increase from a year ago and one that exceeds the four million mark for the first time, with ASEAN's share increasing 2.3 percentage points to 21.9 per cent.

Quite apart from the political downside, Chinese labour costs have increased. Manufacturers have set up production outside the country in a strategy called "China plus one". The trend continued amid the Covid crisis.

The US-bound volume originating in Vietnam increased 24.8 per cent to 1.99 million units, representing a share of 10.8 per cent - up 1.8 percentage points from a year earlier. The share of Thailand-originating volume increased 0.3 percentage point to 4.1 per cent. In the latest data as of January 2021, the share of the combined ASEAN region reached 23.3 per cent.

The volume originating in China excluding Hong Kong increased 2.4 per cent from a year ago to 10.81 million units. The figure, which represents the first year-on-year increase in two years, is still 6.4 per cent less than the 2018 peak before US-China trade frictions started to swell. China's 2020 share was down 0.9 percentage point year on year to 58.9 per cent, remaining below the 60 per cent mark for the second year in a row. The figure further dropped to 58.2 per cent in January.

The share expansion of the ASEAN region was driven also by the US-bound shipping volume of furniture increased 13.1 per cent and 29.4 per cent for home electronics from a year earlier. This helped boost the volume departing from Vietnam, which has many furniture and smartphone plants.

What is abundantly clear is what China thinks is good politically, is bad for Hong Kong economically. But from an ASEAN perspective, it's all good for its trade with a more accepting world ready to be less dependent on China.

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Europe Trade Specialists

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