.COM
3
CONFIDENTIAL
then judge it politic to intervene. In the second place the Community themselves might raise difficulties about free circulation to the rest of the Community on goods (not just textiles) from Hong Kong, given the much higher proportion the United Kingdom took of these cheap goods than the rest of the Community. The Hong Kong Government people tended to favour lying low for as long as possible on the argument that too
early an emphasis of their problems might be counter productive with the Six. On the other hand they were clearly concerned about possibilities mentioned above. As you will sce from the WGF paper we are circulating our conclusion here in discussion after my return is that we should in the interests of Hong Kong raise this earlier rather than later.
7. In relation to quotas one idea we had had here before I went to Hong Kong was that a trade agreement between the enlarged Community and Hong Kong might be envisaged. But the Hong Kong Government people were opposed to this. They argued that an agreement of this kind would stimulate the Six to have more quota restrictions rather than the reverse. The point is an arguable one but we need to take their wishes into account.
8. One last general point. In concluding the discussion with the Trade and Industry Advisory Board I said that one could make too much in discussion of the negative s ides of the problem. They should not lose sight of the fact that two important advantages could flow to Hong Kong from our entry. In the first place our growth rate would improve; some of them had been grumbling about the stagnant nature of the UK market compared with others (und this had been partly responsible for the fall in the share the UK had taken of Hong Kong exports over the last few years); but our cntry should mean a more rapidly growing and prosperous market for Hong Kong exports. In the second place the United Kingdom's influence in the huge trading bloc which an enlarged Community would represent would be on the side of the minimum of restrictions in trade with Hong Kong. These points seemed to go home.
9. On the whole I think that my visit, though a quick one, was cxtremely useful, I certainly got quite a different perspective of the problems than I had before. And the Hong Kong Government were very appreciative of the fact that someone had come out to see them. They had been feeling a little out on a limb but after our talks and with the visit of Mr Rippon in prospect they felt that people in London were making a real attempt to get their views. In the light of our diccussions John Cowperthwaite readily agreed that further discussions in London (on the pattern of the ones in 1967) need not take place until about November, subject obviously to developments in the meantime.
Copies of this letter co to the other members of the team and to Peter Thornton.
CR Denman
CONFIDENTIAL.