An exuberant crowd of US and local residents at the American Chamber of Commerce in Hong Kong applaud news of Barack Obama winning the US presidential election yesterday. Edmond Tang

Visiting Hong Kong yesterday, former United States Secretary of State Colin Powell allayed fears that President-elect Barack Obama may resort to protectionism to save the country's ailing economy, thereby resulting in trade disputes with China.

Powell said the Sino-US political and economic relationship will continue to be positive.

"I don't think that China has any reason to be nervous and concerned about President-elect Obama's policies," Powell said. "I do not expect that he will adopt protectionist policies."

Colin Powell

The president-elect will need to face challenges to recapitalize the financial system and restore the confidence of Americans, Powell said.

He said Obama has to deal with concerns among the Americans about the US economy and the loss of jobs, as well as the necessity for China to increase consumption of its own products.

"But I am quite confident that President-elect Obama will deal with these concerns in a way that recognizes the importance of international trade," he said.

Trade disputes between China and the US have centered on product safety, with some US consumers suggesting a boycott of Chinese products.

But Powell said such individual issues should not be regarded as conflict.

He said he expects Obama to continue reaching out to China and to seek cooperation to deal with the financial difficulties.

"I think you will see that President-elect Obama understands the importance of a relationship with China in its political and economic dimension," he said. "You can't be isolated from the rest of the world."

However, the fear of the possible rise of protectionism in the US was widely seen among the economists who talked to China Daily yesterday.

City University Management Sciences Associate Professor Chan Yan-chong expects the Obama administration to increase job opportunities in the US through promoting the country's manufacturing industry, meaning measures will be taken to lower the imports of products from the mainland and Hong Kong.

Total exports from Hong Kong to the US reached $47.21 billion in 2007, slightly lower than the $47.6 billion in 2006. In the first three quarters of this year, Hong Kong exported products worth $34.33 billion , dropping by 0.6 percent over the same period last year, figures provided by the Trade Development Council show.

Obama pledged during his campaign to use all diplomatic means to induce China to change its foreign-exchange policies, making the nation rely less on exports.

"Hong Kong businessmen with operations on the mainland will be affected," Chan said.

Hong Kong Baptist University Government and International Studies head Jean-Pierre Cabestan expects the Obama administration to be more inclined to turn to the World Trade Organization (WTO) to tackle trade disputes with China.

"Obama will not hesitate to use the dispute settlement of the WTO to protect their interest," he said. "Obama will be busy with addressing the concerns of voters and keen on protecting American trade interests."

The business community in the US will give Obama strong pressure to deal with renminbi-related issues, Cabestan said.

Michael Spencer, an economist at Deutsche Bank, said he suspects that Obama "will make the trade policy tougher than it is now".

Ben Kwong, head of research at KGI Asia, thinks Obama's policy on trade deals with China will ramp up pressure on Chinese exporters. "Trade friction is inevitable in the future if he is serious about enforcement," Kwong said.

But local industrialists are more optimistic about the new US political landscape.

Kenneth Fang, chairman of Fang Brothers Knitting, and former chairman of the Hong Kong Exporters Association, said manufacturers are more concerned with the US economy than the political situation.

He said that, nowadays, US protectionism would not affect Hong Kong as much as it used to.

"The manufacturing industry in the US is not in large scale. The country needs to rely on imports, and it cannot strongly oppose importation of products," he said.

Federation of Hong Kong Industries Deputy Chairman Stanley Lau said Obama may adjust trading policies, but adverse impact to Hong Kong manufacturers is unlikely.

"I don't expect there will be serious trade disputes between the US and China, because the two countries still need to cooperate to face the financial crisis," he said. "Restriction on imports from China will result in high product prices and a lack of supply in the US, which will further dampen the country's consumption market and economy."

(HK Edition 11/06/2008 page1)