The world's biggest and most luxurious watch and jewelry fair opened on Thursday, showcasing tens of thousands of exhibits ranging from diamond encrusted masterpieces to cheap and cheerful plastic models.

But away from the soft lights, sweet talk and chinking glasses on the glit-tering stands at Baselworld, the mood was grim after Swiss authorities refused to relax a ban on traders from Hong Kong Special Administrative Region because of fears about a contagious new illness.

The Hong Kong delegation - the second biggest after the Swiss hosts with 317 exhibitors and around 2,500 staff - said it would pull out of the fair altogether because of the "totally unacceptable" Swiss measures and threatened to sue for compensation.

"We are obviously not welcome here," said Frederick Lam, deputy executive director of the Hong Kong Trade Development Council.

Hong Kong's Secretary for Commerce, Industry and Technology Henry Tang warned the Swiss action would hurt their "economic relationship."

The Swiss defended their decree, issued on the eve of the fair, which banned anyone who has been in Hong Kong and China's inland regions, Singapore or Vietnam since March 1, from working at the exhibition. Given the physical contact involved in putting jewelry or watches on potential customers, health officials fear that even one or two exhibition staff infected with Severe Acute Respiratory Syndrome, or SARS, could pass this on to hundreds of visitors.

Lam said withdrawal would cost Hong Kong exhibitors at least HK$50 million (US$6.4 million) in air fares, hotels and marketing costs. But he said the true business loss would be far higher.

Hong Kong companies normally clinch 20-30 percent of their annual turnover at the Swiss fair. Jewelry manufacturers alone thus risk losses of US$400 million worth of exports, said Charles Chan, president of the jewelry manufacturers' association.

The Hong Kong delegation was grouped in the city of Zurich with 26 other national exhibitions. The main part of the fair, featuring 1,377 brand names, is in Basel.

Visitors to Zurich faced hundreds of display stands containing unpacked boxes and disconsolate staff - although personnel were forbidden to sell products, they were still allowed to enter the exhibition center.

At the main venue in Basel, there was a sense of business as usual, despite the re-strictions and the war in Iraq.

"The Basel fair is simply a must," said Walter von Kaenel, president of Longines - part of the Swatch empire - summing up the mood.

The watch market is more resilient than many sectors to economic gloom. The Swiss watch industry - the world's biggest - increased its volume of exports by 15 percent last year. The value of exports totaled 10.64 billion Swiss francs (US$7.7 billion) last year, 0.1 percent down on the record of 2001. Sales of gold and platinum watches did particularly well.

Exhibitors sought solace in the fact that in times of economic depression, luxury goods offer an escape from everyday worries.

"The bread and butter end of the market isn't doing as well as the luxury sector," said Stephanie Labeille, public relations director of chic Chopard. "The big pieces are still very much in demand, because it really is an escape," she said, referring to items costing more than US$600,000.

(eastday.com April 5, 2003)