CONFIDENTIAL
(ii) Acceptance of the application of the common external
tariff to Hong Kong's exports to the U.K., even if this
had to be achieved in a single step.
Hong Kong officials were told that there was no evidence to suggest that the Six were thinking in terms of (ii); it could be discounted as a probability. Hong Kong officials could be told at the next round of talks that (i) would plainly be the easiest solution for us from the negotiating angle; if it induced the Six to demand protection from Hong Kong competition, that would put them in the position of
"demandeurs" and thus give us a tactical advantage.
To seek special arrangements for Hong Kong for a more favourable rate of application of the common external tariff than the rate generally applied.
12.
Hong Kong officials are themselves aware of the danger that any request to the Six for special arrangements for Hong Kong is likely to stimulate them to seek protection from Hong Kong competition (see paragraph 5 (c) above).
To request continued preferential access on a limited scale to the British market.
13.
This is open to the same objection as the course discussed in paragraph 12 above. Moreover it would plainly be more
of consultar Mus difficult to sell to the Six. In our next round with Hong Kong officials, it would seem best to begin by probing carefully the validity of their argument that a preferential duty-free market in the U.K. is necessary for the launching of new products. Our
understanding is that many new products have in fact been launched
in the highly competitive United States market. Without further
evidence, it is difficult to accept that success in a duty-free U.K. market will necessarily lead to, or even increase, the chances ofy success in other non-preferential markets. Non of the non- textile exports mentioned by Hong Kong officials last time seemed to provide supporting evidence for their general argument on this point. Indeed, the success of stainless steel cutlery exports to the U.K. were shown to be due, not so much to preferential tariffs, as to a voluntary agreement which limited the import of competing Japanese cutlery. Equally, when Hong Kong cutlery exports to South Africa had made substantial inroads on the domestic market
there, they were promptly excluded by quantitative restriction. The development of Hong Kong exports of electric motors was shown
to have to have begun in other markets, and only spread to the U.K. market only ar- ▲ later stage.
a
14. It could also be put to the Hong Kong Delegation, as was done
in due course at the last round of talks, that they could hope to benefit from the proposals on which both O.E.C.D. and U.N.C.T.A.D. have been
working for the establishment of a system of generalised preferences for less developed countries. This might provide Hong Kong with
/just
CONFIDENTIAL