CONFIDENTIAL
uncharacteristic forthrightness for Matthieson who usually volunteers little or nothing of his own opinions, and one can only assume that the drink opened him up a little. Kemmis naturally replied with our stock arguments national income per head, narrowly-based economy, self-election principle, etc. but I think we must accept that we are up against a pretty firm Commerce Department view which will take some shifting. This is borne out by the attitude adopted by rehmer and co. during the Stans talks in London as described in paragraph 11 of A.L.'s memorandum No. 234 of 30 April. It is perhaps also noteworthy that, despite some obvious leads and the fact that I have known Matthieson quite well since 1964 (he was at New Delhi), he kept his cards very close to his chest as regards Hong Kong's status when he talked with me.
15. My conclusion from this is that pretty full briefing
on Hong Kong's developing status will be required for the Stans visit to Hong Kong. My defensive intervention for UNCTAD II can be used as the basis of this and it can be worked up with any further arguments and points of detail you can cancaet. The most dangerous aspect of the Commerce line is, of course, the idea that, while Hong Kong should be classified with Japan as developed, Taiwan and South Korea (and presumably also Singapore and Malaysia) should be treated as developing. I will expand on this' below.
EEC
I
6. As explained above as far as the EEC is concerned I am concentrating on Tran. I enclose copies of correspondence that indicates he is ready to talk further and I have the blessing of Lenden to go ahead with this exercise. saw Tran briefly in the Falis yesterday and arranged to get in touch with him to fix up a meeting early next week (week beginning 12 May). I will therefore necd the supplementary material by that date if it is to be of any use. Tran told me he felt "optimistio" about ong Kong's eventual inclusion, but we shall see.
Other Countries
7.
I still feel that most other countries will follow the US/DEC lead over Heng keng. If both these major donors were to exelude Hong Kong it is probable that the more minor ountries (Canada, Switzerland, Austria and even the Scandinavians) will follow their lead. But, partly because of the structure of the schemes that they are concocting (shallow cuts - Switzerland, Canada and probably Austria; safeguard procedures - Scandinavians) I doubt whether they would independently exclude Hong Kong if the U.S. and EC include her. The one exception is Japan. We know already that she is not including Hong Kong. In her case the question is whether she will also exclude Taiwan and South Korea.
Tactics and Strategy
8. In view of the continuance of this uncertainty I have ber
egun recently to go over to the attack a bit in the carriders in genversation with Group B colleagues, but in no more than a tentative way. I am pointing out that the
CONFIDENTIAL
/idea