CONFIDENTIAL
of her sterling balances as a potential weapon against the United Kingdom.
Nor,
because of her colonial status, is Hong Kong in a very strong position to end
the Agreement and move the balances. It is therefore more likely that Hong
Kong would first seek to put political pressure on the United Kingdom by
claiming that the United Kingdom was taking advantage of Hong Kong's colonial
I
status to protect her own position to the detriment of Hong Kong's legitimate
interests. There is a risk that this might be reinforced by denying United
Kingdom tenderers the award of public sector contracts.
NON-TRADE MITIGATIONS.
Though
28. Hong Kong does not publish balance of payments figures, but an estimate
of her balance of payments, showing the relative importance of invisibles, is
included in the Annex. Her earnings from tourism can be expected to continue
to increase provided the territory remains peaceful and reasonably prosperous,
as.can earnings from banking, insurance and other commercial services.
the steady growth of invisibles can be expected to contribute to maintaining
Hong Kong's prosperity, it cannot be expected to replace any substantial
damage to her export trade. This is mainly because a failure of exports to
grow at a sufficient rate would result in a failure of industry to give
enough employment, and no conceivable expansion of activity in the non-indus-
trial sector, is likely to be adequate to replace the lost jobs.
29.
[
1
1
It has been suggested that Hong Kong's earnings from civil aviation and
from tourism might be improved if airlines other than BOAC were given landing
rights in Hong Kong. In fact, in addition to BOAC and Hong Kong's Cathay
Pacific, 24 regular scheduled airlines of other countries already serve Hong
Kong, 9 of them with direct flights or through aircraft services from Europe.
Air transport movements have more than trebled and (with larger aircraft) air
passengers multiplied over six-fold at Hong Kong over the last ten years
considerably over the world average. To give scheduled service traffic rights
at Hong Kong to more airlines belonging to countries which cannot offer worth-
while rights in exchange under the world-wide system of bilateral bargaining
(in which EEC members act in just the same way as other countries) would sap
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