Hong Kong is one of the world’s most important ports (Exhibit 1), with US $150 billion of goods flowing in and out each year. The country has played a historical role in linking the manufacturers of greater China with the consumers of developed nations. But that dominance is being eroded as the ports of Yantian and Shekou-Chiwan—in southern China’s Pearl River Delta, across the border from Hong Kong—attract shippers with lower costs and improved service. For Hong Kong, which derives almost one-fifth of its GDP and employment from the trade sector, the implications are serious.

To turn the tide back in Hong Kong’s favor, the government should first tackle the inefficiencies of getting cargo into the port by working with the mainland Chinese authorities to lift the barriers that make it difficult and expensive for shippers to transport goods there. Pricing, capacity, and competition at the port itself are secondary; the main source of inefficiency is trucking to it. From a typical factory in Dongguan—the Pearl River Delta’s largest export-oriented manufacturing area—the cost per container (40-foot-equivalent unit) of trucking goods to port is US $370 for Hong Kong, US $150 for Yantian, and US $110 for Shekou-Chiwan. This disparity accounts...