Finally, I hope that before you receive this letter you will not already have been the target of indignant complaints about the Industrial Development (Ships) Bill. If so, it is more than likely
that you will not have known what all the fuss was about.
This Bill imposes a balance of payments test on applications for investment grants for ships. You might well wonder why Hong Kong is involved. The fact is that shipyards in EFTA countries and the Irish Republic have been exempted in the Bill from the balance of payments tests because of the risk of conflict with the EFTA and AIFTA Conventions. Dependent Territories however have not been
exempted.
When this Bill was at the Committee stage in December, Mr. Royle who is, as you know, a stout champion of Hong Kong's interests) moved an amendment to exempt the shipyards in dependent territories also from the balance of payments tests. Rather embarrassingly, and surprisingly, he was successful at that stage. But the other embarrassing feature of the situation is that the Joint Parliamentary Secretary at the Ministry of Technology (Dr. Davies) opposed Royle's amendment on the grounds that it would involve us in a breach of the m.f.n. rule in GATT. This was the stage at which my department became involved.
Unfortunately, between that stage and the Report stage, when the Bill was restored to its original form, the weaknesses of Dr. Davies' GATT arguments were discovered so thoroughly discovered, in fact, that in the House of Commons Dr. Davies made no further use of them. To cut a long story short a very unconvincing defence was put up for the application of the measure to dependent territories while Mr. Royle made a good deal of useful play on the well known Hong Kong grievances that EFTA countries are better treated by HMG than the dependent territories for which she has, or ought to have, a special responsibility. Incidentally, in the meantime, there had been received by Lord Shepherd three letters of complaint from the Hong Kong Association, the Hong Kong and Shanghai Bank and John D. Hutchison, Ltd. All of these were to the same broad effect, that HMG was unsympathetic to the interests of Hong Kong, and all raked up the old grievances you know so well, such as the Tunnel, cotton textile tariff, the airport, etc.
The best attempt possible was made in the House of Lords to correct the situation and when you get your Hansard, Vol.307, No.30, you will find in column 315 the relevant paragraph of Lord Delacourt- Smith's speech. The best arguments we can use, if this matter comes up, is simply to say that the purpose of the Bill was to make sure that when an investment grant was made, it would be for the benefit of the UK balance of payments. But for our Treaty obligations to EFTA and the Irish Republic, we should have allowed no exceptions at all to the necessary balance of payments tests. But we were legally advised that we had to. It remains to say that if a Hong Kong shipbuilder can pass the balance of payments tests then he will get a grant, and if he cannot, he should not. We are able to say that the Eritish owners who have been in the habit of having ships built or converted in Hong Kong should have little difficulty in passing the test and getting the grant.
(W. S. Carter)