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:
1
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In assessing the possible effects of Hong Kong's exclusion we should distinguish clearly between
(A) the loss of existing Commonwealth preferences in favour of Hong Kong against non-Commonwealth countries (including many LDCs), and
(B) the establishment of new preferences against Hong Kong in favour of all other LDCs.
1
In previous discussions it has been generally agreed that the surrender of Commonwealth preferences would be accept- able if there is a reasonable quid pro quo in the form of increased access by Commonwealth LDCs to major markets outside the Commonwealth, particularly in the U.S.A. Attention has in fact been focussed on situation (A) above and there has been relatively little discussion or agree- mont on what Britain should do in situation (B), where the - scheme of generalised preferences is used to discriminate against a particular Commonwealth LDC.
The attached statement, which compares Hong Kong's four largest export markets (U.S.A., Britain, Japan and West Germany) and also compares her imports from these four coun- tries, throws some light on the probable consequences of situations (A) and (B) above. Firstly, while Britain is steadily maintaining her shares of Hong Kong's visible trade, taking 13% of Hong Kong's exports and supplying 9% of her imports, the trade shares of the non-Commonwealth countries
taken as a whole - are marginally increasing.
:
This seems
The
to suggest that the existing preferences which Britain extends to Hong Kong, and the reverse preferences given by Hong Kong to Britain, are not of great significance. probable effect of removing these preferences would be to emphasise the existing trend, with Hong Kong's trade tending to grow slightly faster with the U.S.A., Japan and West Germany, and slightly less fast (in absolute terms) with
Britain.
However, the establishment of new preferences against Hong Kong by the U.S.A., Japan or the E.E. C., would tend to reverse the existing trend. It is important here to note
CONFIDENTIAL
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