CONFIDENTIAL
be a disadvantage in the fact that we could not speak up in the G.A.T.T. on Ilong Kong's behalf against a Community policy to
which we had already agreed.
10, Mr. Cowperthwaite said that, insofar as G.A.T.T. rights
depend on powers of retaliation, Hong Kong was in a weak
position, since whenever the Hong Kong Government had seriously
considered retaliation against a country which had acted against
Hong Kong's exports, they had concluded that this would do more
harm to Hong Kong than to the offender. The fact that Hong
Kong had favourable trade balances with most of the countries
concerned still further restricted the scope for retaliation.
It was true that she had in the past considered the possibility
of retaliation against France, with whom she had an unfavourable
trade balance, but it remained the Government's firm practice
not to retaliate.
economy was so export-orientated that the damage it would
suffer as a result of retaliatory measures would be
proportionally much higher than the damage caused, for example,
to the German economy as a result of the loss of German exports
to Hong Kong. Mr. Audland said that, while retaliation might
not affect the whole of the offender's economy seriously, it
could if concentrated in a sensitive and politically vocal
sector, have a significant effect. It might be possible,
especially when allocating major capital goods contracts,
to find cases where the extra cost to Hong Kong of discriminating
against a particular supplier was negligible. Mr. Selwyn
Mr. Haddon-Cave added that the Hong Kong
suggested that, given the changing pattern of world trade,
Hong Kong at some time in the future have to reconsider her
position on retaliation e ven at a certain cost to herself.
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/Declaration.....