0003230
G.F. 323
CONFIDENTIAL
- 9 -
the
23.
If these proposals are eventually adopted by the Council, effect on Hong Kong will depend on the extent to which the processes Hong Kong considers adequate to confer origin are compatible with those acceptable to the Community. For the time being, this must remain a matter of conjecture, although in fact the latter are unlikely to be too stringent as they will also apply for establishing the origin of Community exports. All the Department can do at the moment is to follow developments closely and be prepared to intervene if there is a swing in favour of an added value criterion or if there is pressure for the Community to define origin in such a way as to limit imports from "low-cost" countries in general and from Hong Kong in particular. Current opinion is that the Community, if it were to adopt an added value criterion, would not be satisfied with 25% and would probably insist on 50%. Hong Kong's trade with the Common Market could suffer seriously if this were adopted. Apart from the expensive costings involved, it is doubtful whether many industries, dependent as they are on imported raw materials and semi-manufactures, could achieve such a high added value. Even the less stringent French requirement of a 50% Commonwealth content seriously affects Hong Kong's trade in, for example, silks and radios to that country.
The Possibility of the United Kingdom joining the Common Market
24.
It is said that every time General de Gaulle feels insecure, he becomes ostentatiously friendly with Moscow and hints that he would accept Britain into the Common Market. He did so during the Common Market crisis last year and now on his impending withdrawal from N.A.T.O. After the experience of their first effort to negotiate their way into the Common Market, the British Government are likely to need much more than messages of convenience before risking another attempt to join the Six; and the Six themselves may wish to solve their internal problems before taking on the load of renewed negotiations with Britain. But there is no doubt that France was, and probably remains, the main obstacle to Britain's entry. She was responsible for terminating the previous negotiations on the grounds that Britain would upset the balance of political power between the Latin and the non-Latin countries; that Britain's commercial and industrial strength, consider- able in spite of the dreary succession of crises, might challenge France's economic position; that Britain might drag the U.S.A. in after her; and that the addition of British trade to that of the E.E.C. might increase the number of items for which the Community and the U.S.A. accounted for 80% or more of world trade and for which, therefore, the 1962 Trade Expansion Act empowered the American Government to negotiate tariffs to zero in the Kennedy Round. These considerations would still appear to be applicable. The additional factors which may change de Gaulle's attitude are that Britain would probably be as apposed as France to surrender of sovereignty and to a growth of power in the Commission; that now France seems to have successfully limited qualified majority voting, she could maintain the racial and economic balance of power within the Community by means of a veto; and that preoccupation with negotiations for Britain's entry might further slow down the implementation of those aspects of the Treaty of Rome about which France is uncertain.
25.
Britain's attitude towards a resumption of negotiations will become apparent only after the present election campaign with its somewhat wild statements on the subject, is over.
26.
During the 1962 negotiations a Working Party a Six was convened to work out with the United Kingdom Government appropriate measures for Hong Kong. The Working Party had failed to agree by the time the Community discontinued the over-all negotiations for Britain's
/entry
CONFIDENTIAL