will certainly not include Hong Kong as a beneficiary in her scheme unless the
Community also does so but that, if the Community includes Hong Kong, the United
States will find it much harder to exclude her, and pressure can be put on the
U.S. Administration not to do so. The Community's attitude on this question
thus presents itself as one of the main keys to Hong Kong's future position in
the American market. Furthermore, if both the EC and the United States were
to include Hong Kong, most, if not all, other donors would probably do so as well.
10. A further advantage is that this single action on behalf of the Community
would to a very long way to settling the problem of Hong Kong in the enlargement
negotiations. The Community have already stated in these negotiations that,
L
in view of the nature of Hong Kong's economy and her export trade, they do not
consider that association under Part IV of the Treaty of Rome would be suitable
Inclusion of Hong Kong in the generalised preferences system,
in her case.
however, would -
11.
(a) safeguard Hong Kong's position in the United States' market, which is far
and away the first priority,
(b) provide sʊme alleviation for the phasing out of Commonwealth Preference
in the United Kingdom and
(c) present an easier solution for the existing Community than would
alternative action, as well as being more efficacious in spreading the
burden by global action rather than action confined to the Community
as such.
It has been argued that this solution is unacceptable to at least some
Member States of the Community because Hong Kong is too competitive and presents
a threat to their industries.
There are a number of answers to this. The
first is that the duty free quota system, plus the 50% cut off limit, adopted
by the Community in its offer under the G.S.P., provides an automatic safe-
guard system for all products deemed to be sensitive.
12. The second is that Hong Kɔng's costs and prices are rising. Her land
costs, capital costs (need for rapid iepreciation of equipment and buildings and
high interest rates) and transport costs for both exports and imports are
already high. To this is now being added rapidly increasing wages arising
RESTRICTED
/from the