(Next Magazine, 2016/3/10, A002, Second Opinion, Bill Stacey)

The dark side of localism

Localism is on the rise. Edward Leung Tin-kei, a localist candidate, did not win a Legco seat in the New Territories East by-election. However, the more than 66,000 votes he garnered suggest that the sentiment to distance, or even put up a wall between Hong Kong and China, is on the rise. Such sentiment is a threat to one of our most precious competitive advantages – our openness.

This openness is founded on traditions of free trade in goods that are so entrenched that we take for granted the benefits. We have no tariffs, no distorting value added taxes and no taxes on capital gains and investment income. Both for trade in goods and for the flow of capital, there are few barriers.At the most basic level, trade works because when two people make a free exchange both are better off. The buyer gains something that they want or need and the seller exchanges that for another good that they want or money that they can use to buy other goods, save or invest. Trade makes people better off irrespective of national borders. Tariffs and other barriers make us worse off. We buy an inferior good or we pay more for something and as a result have to buy less of other goods. Tariffs usually have the biggest negative impact on lower income people, raising prices for everyday items.

So we gain directly and indirectly from free trade. We have produce from around the world, typically at the lowest prices anywhere. Our openness enables us to become a regional and often global hub for logistics and distribution. Our thriving exhibition industry is built on the ease of transferring exhibits free of taxes.We reap huge benefits from free trade, even if our trading partners are protectionist. Their goods might be subsidized and cheaper, but that is a fiscal transfer from the taxpayers of other countries to us. Other countries tariffs might reduce our opportunities to sell and trade, but cost their own people more. Openness has created jobs.The positive side of Hong Kong’s localist movement recognizes and wants to protect our openness to the world. Yet there is a dark side, which by closing, particularly to the rest of China, risks closing to the rest of the world.There have been parts of the Hong Kong establishment that despite our traditions have always been able to stave off competition and raise walls against free trade. Doctors have limited entry from highly qualified professionals from other countries.

Our television and radio regulatory regime can hardly be seen as open. We have our own incipient licensing Raj. Fears about migrant workers or refugees are easily stoked. The panic about maternity beds and milk powder found fertile ground in natural desire to protect our young. Attacks on cross border shoppers and tourism seek to throw up walls that are alien to our traditions, but also undermine our prospects of retaining our special culture. Free trade creates interdependence. As one of the freest economies in the world, people in countries everywhere as well as through the rest of China rely on and have an interest in our continued openness. This is the best protector of freedoms that we have.We have a choice between pursuing the splendid isolation of a Bhutan or the openness to become indispensable of a Switzerland. That openness does mean constant change. Other cultures mix with and subtly alter our own. We are integrating coffee and croissants into traditions of strong milk tea and noodles. We have integrated Korean soap opera with Hello Kitty and perhaps moved on from both. Our culture is not so fragile that it can be swamped by trade, commerce and interdependence with other vibrant and dynamic peoples. If it becomes so fragile, then we are doomed.

Bill Stacey