Commentary on Political Economy

Wednesday 19 August 2020



U.S. Ends Three Pacts With Hong Kong on Extradition, Taxes

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The U.S. announced it is suspending its extradition treaty with Hong Kong and ending reciprocal tax treatment with the former British colony, the latest salvo in escalating tensions between Washington and Beijing.

The moves are part of the Trump administration’s efforts to pressure China over the imposition of a national security law that curtailed many of Hong Kong’s freedoms. They follow up on an executive order to end preferential trading treatment for the city, which President Donald Trump and his team say is now essentially just another Chinese city.

The agreements terminated on Wednesday “covered the surrender of fugitive offenders, the transfer of sentenced persons, and reciprocal tax exemptions on income derived from the international operation of ships,” State Department spokeswoman Morgan Ortagus said.

“These steps underscore our deep concern regarding Beijing’s decision to impose the National Security Law, which has crushed the freedoms of the people of Hong Kong,” Ortagus added.

The moves strip away some of the few remaining ways in which the U.S. treated Hong Kong differently from the rest of China as part of Beijing’s “One Country, Two Systems” policy. Earlier in August, the U.S. imposed sanctions on Hong Kong Chief Executive Carrie Lam and other top officials.

Other moves may still be coming, possibly including sanctions against senior staff at some of Hong Kong’s biggest banks. The U.S. may also impose further limits on the sorts of technology that Hong Kong companies can buy from the U.S. Earlier, some administration officials had studied ways to undermine the Hong Kong dollar’s peg against the U.S. dollar, but backed off that idea for fear it would rebound and hurt the U.S. economy.

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