AUTONOMOUS NON-CENTRAL GOVERNMENTS IN THE INTERNATIONAL SYSTEM - THE CASE OF HONG KONG A Thesis submitted for the Degree of Doctor of Philosophy (PhD) By Miguel F. Gonçalves Matos Santos Neves Department of International Relations The London School of Economies and Political Science University of London September 2003 ABSTRACT The thesis analyses the evolution of Hong Kong as an autonomous international actor and how that has been sustained under Chinese sovereignty, in the context of the wider debate on paradiplomacy and the increasing international participation of Non-Central Governments (NCG). The opening chapter offers a review of the literature on non-state actors (NSA) and emphasises the limitations of the new literature on NCGs that emerged in the 1990s which fails to deal with the heterogeneity of NCGs, the specific characteristics that differentiate them from other NSA and their impact on the international system. The next two chapters examine the factors behind the process of HK’s emergence as an international player in the early 1960s: textile trade interests and reaction to proteccionism; HK elite bureaucracy legitimisation strategy; flexibility of the international system for what accounted the Dominions’ historical precedent and the pragmatic interests of influential states. HK’s emergence as an international financial centre, the development of a system of external representation in the 1970s and the creation of the new framework for external relations inserted in the 1984 Joint Declaration, further contributed to consolidate and expand HK’s autonomy into new areas, including political ones, at the same time they introduced a note of ambiguity in HK’s international status. Fresh insights into the negotiation of the JD international affairs chapter are offered. Chapter Four examines HK’s post-1997 implementation of the new external relations’ framework and how far external autonomy was preserved demonstrating that the level of external autonomy HK enjoys is determined not merely by the relation with the Central Government but by the interplay between this, HK’s own strategy and actions and the attitude of external players. The logic of “autonomy cum isolation” that prevails in HK-Beijing relations, deviant practices concerning “specific authorisations” and excessive govemmentalisation of external affairs are identified as the main risks for future autonomy in a context where the SAR has been able to preserve the core of its external autonomy in relation to China. Chapter Five deals with HK’s legitimacy basis and sources of influence as an international player looking at its participation in WTO. To assert its influence HK uses not one but a combination of sources of influence, namely technical expertise, economic power, and above all the performance of a systemic broker role associated with its dual identity. The final chapter discusses the research results and concludes that, unlike other NCG, HK has been able to have a direct impact on the international system, namely through the participation in the process of international rules-making in trade and financial matters. This capacity is determined by the triangle “external autonomy-legitimacy-influence” which conditions the ability of NCG to take advantage of the opportunities created by the globalisation-localisation process to enhance their international role and contribute to a better global governance. CONTENTS Acknowledgements 4 Introduction 5 Chapter 1 Non-state actors and Non-Central Governments as international 10 players - a review of the literature Chapter 2 The emergence of Hong Kong as an international player: causes and 56 processes Chapter 3 The Sino-British negotiations and the transition period: impact on 118 Hong Kong’s external autonomy and international status Chapter 4 The Hong Kong Special Administrative Region’s external autonomy 169 and international participation in the post-handover period. Chapter 5 The HKSAR in WTO: autonomy basis and influence 237 Chapter 6 The Hong Kong case and Non-Central Governments in the 284 international system: comparative analysis and discussion of research results. Conclusions 312 Appendices 316 Bibliography 320 Acknowledgements This study owes a great deal to my supervisor at LSE, Professor Michael Yahuda, who provided guidance, inspiration, advice and invaluable assistance at all stages of my work and stimulated the development of rigorous and responsible academic scholarship. I would like also to thank all the assistance the Hong Kong Government officials and NGO representatives I contacted in Hong Kong and abroad, who provided invaluable information and shared their views in an open and frank manner. My sincere thanks are also extended to the staff of the Hong Kong Public Records Office who was extremely helpful guiding me through the archives and facilitating the access to documents. A special reference should be made to my friend, Professor Brian Bridges, from the Lignan University in Hong Kong, who always showed interest in my research and gave me assistance with his suggestions, encouragement and support during my field trips to Hong Kong. Finally, during my visits to Beijing the Director and researchers of the World Development Institute of the State Council gave me every assistance in my research and helped me gaining access to various departments of the Chinese Government and arranging the interviews with PRC officials with responsibilities on Hong Kong as well as with Chinese scholars doing research on the HKSAR. 4 INTRODUCTION The Hong Kong (HK) handover on 1 July 1997, a high profile event which commanded wide international interest, constituted the apex of the internationalisation of the HK question and at the same time a puzzling situation for the entire international community insofar as it was about to witness an act which apparently runned counter the logic of the post-Cold War era. In fact, not only the end of a colony was delinked from the creation of a new state and the exercise of the right of self-determination, but also a prosperous and strategic international capitalist centre was being handed over peacefully and voluntarily to a socialist state. Moreover, the new HK Special Administrative Region was going to operate according to the “one country, two systems” model in which the capitalist and socialist systems coexist inside the same state, an innovation without precedent in the international system. The presence of a very large number of states and the high international visibility of the event was to a great extent justified by HK’s role as a major international trade and financial centre strongly founded on its capacity to act on its own internationally, with whom the states present are used to deal directly with. Understandably, the far reaching transference of sovereignty from Britain to China raised doubts about the ability of HK to preserve its international status and external autonomy, particularly in a context marked by a growing economic integration with China, and how far China would respect its commitments enshrined in the Joint Declaration and allow HK freedom on the international stage. Similarly, questions could be raised about the potential influence of HK on the PRC system and how far it could induce changes on specific aspects of China’s foreign policy. As an autonomous international actor, HK, being a non-sovereign entity, is apparently an anomalous case in an international system still strongly influenced by a state-centric perspective that sees states as the dominant and only relevant international actors. However, the emergence of HK as an international player associated with a complex process of decolonisation and the interplay between the complex forces of globalisation, seems to be the expression of an inherent flexibility and adaptability of the international system, often overlooked. In this context the HK international experience is useful to understand better under what conditions and through which processes the international system has accommodated this unorthodox phenomenon as well as the limits of this flexibility. Interestingly, HK’s “anomaly” has been attenuated as a consequence of the increasing international participation of other Non-Central Governments (NCG), particularly in the course of the 1990s, which has been called “paradiplomacy” and equated with a process of localisation of foreign policy1. This phenomenon is considered by the body of theory on “paradiplomacy” to be the result of the acceleration of globalisation2, which created favourable conditions for a greater presence of NCGs and other Non-state actors (NSA) on the international stage, associated with important qualitative changes, namely the diversification of the issue-areas where they participate, direct contributions to shape emerging international regimes and the development of new sources of influence3. Evidence suggests, however, that it was not globalisation alone but a more complex process involving the interaction between globalisation-localisation that explains the phenomenon, although this trend of localisation has been largely neglected by the literature4. Interestingly, localisation has in some ways paved the way to advances in economic globalisation, namely in terms of the localisation of comparative advantages of firms, as demonstrated by the clustering approach5, insofar as in order to compete 1 Hocking, Brian. Localizing Foreign Policy - Non-Central Governments and Multilayered Diplomacy. St.Martin’s Press, London, 1993. Duchacek used the concept of paradiplomacy,