bel
Confidential
UKKG/N
Mr. J. R. A. Bottomley
c.c. Mr. K. M. Wilford
Mr. Burns (TPD)
Mr. Morgan (FED)
Reference..
364)
Prime Minister's Meeting with Mr. Sato
Hong Kong
You asked me what Mr. Sato was complaining about when he referred to "Hong Kong's tariff arrangements" and "the yen conversion rate in Hong Kong",
2.
Mr. Dorward, an Assistant Director of Commerce and Industry, Hong Kong, who is at present in London, called on me yesterday and I took the opportunity to discuss Mr. Sato's remarks with him.
3. Neither of us could understand why Mr. Sto referred to Hong Kong's tariff arrangements. There is no general tariff in Hong Kong. Duty is levied only on alcoholic beverages, tobacco, hydro carbon oils, table-waters and methyl alcohol imported or manufactured for internal consumption. There is a reduced level of duty on imports of tobacco and alcohol from Commonwealth countries but we think it most unlikely that Mr. Sato had this in mind. It may be that he was thinking about the first registration charge which is levied before motor vehicles can be put on the roads. This is at the rate of 15 per cent of the f.o.b. value of the vehicle in the case of imports from Commonwealth countries and at 25 per cent in the case of vehicles imported from foreign countries. After the first year the registration fee for a vehicle comes down to a low figure which is the same for all vehicles what- ever their origin may be. Mr. Dorward told me that the Japanese did not like these arrangements.
Nor did they like the arrangement, incredibly enough enshrined in two pre-war ordinances, whereby the bus companies in Hong Kong had to buy their buses from Britain.
4. As regards Mr. Sato's point about the yen conversion rate, it is quite possible that a dealer might get fewer, say, Hong Kong dollars for his yen in Hong Kong than he would in Japan. This is a normal trading phenomenon in a free port such as Hong Kong. But it is difficult to see how it could seriously affect Japanese trade, particularly as the Japanese should be able to control dealings in yen if they want to.
5. Mr. Sato went on to talk about cases where Japanese products were sold in third markets disguised as Hong Kong goods, and he suggested that this could be to Japan's disadvantage when such products were calculated against the total permitted level of Japanese imports. Mr. Dorward could not understand this either. He told me (indeed I was already aware of this following my recent visit to Hong Kong) that the Department of Commerce and Industry had had to develop over the years a strict
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