Mr. Kermis
OVA/10/8/1
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Preferences - United States' position
vis-d-via Hong KonK
As I sat next to Mr. Leary at our lunch in the Beau Rivage today I was able to have a long con- versation with him on various matters. When the subject came round to preferences he gave the impression that it would still be some time before any American list was tabled. The main reason for this was the problem of squaring the Congress.
The Administration were well aware that the tactics adopted by their predecessors in the Kennedy Round of agreeing deals on, e.g., ASP and the Anti-dumping Code, had led them inte great difficulties with Congress. The present Administration did not wish to repeat this experience and they were afraid that, if they tried to bounce Congress (and especially the Senate who were very sensitive on these matters) with an international agreement on preferences to which they had already committed themselves, the consequences might well be adverse, There was therefore quite a debate going on at the higher levels on how Congressional opinion might be mobilised behind any U.8. move in this field.
2. This idea is, of course, not new. It had already reached the ears of the Canadians in Paris and Matthieson mentioned it in passing to me earlier this week. Nevertheless, I think it was useful to get this from the spokesman of the State Department on the preferences question.
3. Leary then went on to give a few hints about earlier discussion in the interdepartmental "task force". In arguing over a tentative list they had, according to Leary, quite often come up against the problem of what he called the "competitive position" of Hong Kong. There had then been an argument about whether or not the product in question should be excluded and, naturally, there were voices which questioned whether other developing countries should be penalised because of Hong Kong's competitiveness. There was therefore some doubt as to whether Hong Kong should be included in the scheme but, according to Leary, the question was still unresolved.
In reply, I pointed out that this was not a question which need to be looked at in black and white terms. There were various shades of grey which should not be excluded. Just because in certain products Hong Kong was competitive - and so were some other developing countries in the same or other products - this did not mean that the extreme step should be taken of excluding her altogether from the scheme. To do so would not only have serious con- sequences for Hong Kong's position in the U.S. market in a number of products in relation to her competitors (especially Taiwan, South Korea and one or two other countries, possibly including Mexico) but could
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