Reference......
trade? It is perhaps a self-deception to think that the convenience of the forum can be diss- ociated from the substance of a likely solution. Although it is HMG's view that the L.T.A. should
not be renewed, it is by no means clear that others will think that an end to the Arrangement will represent a great advance in international trade practice, unless it is possible to revert to a pure GATT position. Since this is improbable, renewal of the Arrangement will probably appear to Hong Kong as a necessary evil, and the question may well arise for them as to whether on its renewal, it is not expedient to extend its scope to the m.m.f. sector. We have not taken this up with Hong Kong, but an exchange of thoughts might do some good. The alternatives from our
point of view are either a situation, foreshadowed by the Canadian problem in 1969, where we have to constrain Hong Kong by a policy which they think contrary to their interest or our adapting
a course which takes sufficent account of what they might fairly expect of us.
7. The lines of a possible reconciliation of our respective positions might be that,
(a) without prejudice to our own
position, we should support Hong Kong in their (presumed) preference for renewing the L.T.A., and,
(b) if international pressures by
importers in the m.m.f. sector grow and prove effective, we should consider an extension of the arrangement as a measure aimed at generally regulating an area of foreseeable conflict but we shall make it clear to Hong Kong that responsibility for negotiation of bilateral arrangements rested with them because
(c)
CONFIDENTIAL