Clement Leung, the commissioner for the Hong Kong government in the United States, was our special guest yesterday at a joint luncheon hosted by the Arizona Chamber of Commerce & Industry and the Arizona Commerce Authority. Commissioner Leung gave our audience a great overview of Hong Kong and its “one country, two systems” political structure.
Also joining us was U.S. Rep. Matt Salmon. You’ll be hard pressed to find a more effective voice for greater U.S.-Asia engagement than Rep. Salmon. From his push for Permanent Normal Trade Relations with China during his first tenure on Capitol Hill, to his essential role in the passage of Trade Promotion Authority and his call for additional trade agreements such as the Trans-Pacific Partnership today, Rep. Salmon, from his perch as chair at the Asia-Pacific Subcommittee of the House Foreign Relations Committee, is the go-to source on the U.S.-Asia relationship in Congress.
Commissioner Leung looked at what makes Hong Kong an economic powerhouse. Here are five things you need to know:
The consensus #1 pick for economic freedom. Hong Kong is your undisputed heavyweight champion of economic freedom in the world. The Heritage Foundation and The Wall Street Journal, in their 2015 Index of Economic Freedom, give Hong Kong high marks for its limited government, rule of law, regulatory efficiency and open markets. Hong Kong holds another belt from the Cato Institute’s Economic Freedom of the World 2015 Annual Report, where it also landed the number 1 spot. Page through previous years’ reports and you’ll see that Hong Kong has been running up the score for years.
Keep it simple. Hong Kong has a flat tax rate of 15 percent for individuals and 16.5 percent for business. By contrast, the highest U.S. corporate tax rate is 39.1 percent, which doesn’t even include corporate taxes at a state level. (But don’t worry; Chad and the United Arab Emirates are still higher than us.) A flat tax rate translates to simple tax returns. Commissioner Leung told our audience that his most recent annual filing took him 20 minutes. I’ll remember that next April 15 when I’m bugging my accountant (my sister).
All of this speaks highly of Gov. Doug Ducey’s push to make Arizona’s tax code simpler and our tax rates lower. Commissioner Leung spoke highly of Arizona’s work to improve its competitive standing. He also made the interesting point that sometimes it’s best to ride out economic ebbs and flows rather than for governments to intervene. Government actions can sometimes prolong economic pain.
Infrastructure keeps the commerce flowing. Hong Kong is home to the world’s busiest cargo airport, even beating out FedEx’s behemoth in Memphis. In fact, Hong Kong is expanding the airport to increase capacity. The city’s average download speeds are a speedy 88 mbps, and it’s constructing a bridge to Macao. For a country that views trade and logistics as a major pillar of its economy, this stuff matters. Meanwhile, here at home, 2012 marked the last time Congress was able to pass a long-term transportation funding package. The U.S. Chamber estimates that deficient roads and bridges cost the average American family over $1,000 a year. Projects like Interstate 11 aren’t luxury items; they’re critical to strengthening Arizona’s trade profile. This is why the Arizona Chamber’s Accelerate Arizona project over the past year has been educating opinion leaders across the state about transportation infrastructure’s importance to the state’s economic success.
Where’s the U.S. beef? In Hong Kong. Hong Kong and the U.S. maintain a tight trading relationship, with Hong Kong serving as the number 10 overall market for U.S. exports. In fact, Hong Kong is the third-largest destination for U.S. beef and it’s home to the second–largest fleet of Boeing 777 aircraft. Arizona electronic and integrated circuity manufacturers have major customers in Hong Kong.
Does free trade work? Look at Hong Kong’s zero percent average tariff rate for the answer.
Start me up. Hong Kong’s economic freedom encourages a strong start-up culture and an ability to adapt to new industries and trends. This year Hong Kong has already seen double the number of new businesses started there compared to 2014. And thanks to its zero percent tax rate on wine, Hong Kong has become the world’s largest auction center for wine, and it has become a major auction center for fine art, as well. Hong Kong might just be a great place for wine connoisseurs from around the world to get exposed to some great Arizona wine.
Commissioner Leung commended Arizona for its own culture of innovation and mentioned discussing the latest Arizona has to offer with Commerce Authority CEO Sandra Watson.
Hong Kong is an inspiring laboratory of what happens when the power of the free market is unleashed.