5.
CONFIDENTIAL
iii. QUOTA RESTRICTIONS (CRE 3 CRE 2)
iv.
V.
The compilation of a Community Liberalisation List for trade with Hong Kong might result in an extension of the discriminatory quota restrictions on her trade with the EEC to which we as members of the Community should have to subscribe. This possibility and its consequences together with that of a proliferation of restraints on Hong Kong's exports throughout the world would have to be made clear in the paper.
COTTON TEXTILES (CRE 3)
The paper should describe the problems facing Hong Kong in the cotton textile sector in the context both of the adoption of the EEC/UNCTAD offer and of United Kingdom domestic policy.
IMPACT ON HONG KONG'S INTERNAL STABILITY (FCO)
If Hong Kong's access to overseas markets were limited by quotas or her competitive position were undermined by preferences granted to her competitors, the level of employment in the Colony would be endangered. The impact of a high level of unemployment on the Colony's interhal stability and the political and defence consequences of social unrest should be assessed.
SCOPE FOR RETALIATORY MEASURES BY HONG KONG (Treasury)
Ministers had asked that the paper should cover the extent to which the Colony might use her sterling balances to hit back at the United Kingdom if she felt her interests had been neglected. Apart from this possibility of disrupting the sterling market, Hong Kong seems to have little, if any, scope for retaliation.
6.
POSSIBLE COURSES OF ACTION TO MITIGATE THE POTENTIAL DAMAGE
i.
ii.
iii.
iv.
TRADE MEASURES OPEN TO HONG KONG (CRE 2)
Hong Kong had no trade barriers and few market opportunities with which to bargain with the developed countries who were threatening to exclude her from the Generalised Preferences Scheme and to restrain her exports.
MODIFICATIONS THE UNITED KINGDOM MIGHT SEEK TO EXISTING UNCTAD OFFERS
The major donor countries would hold a private discussion on beneficiaries on July 16 when the United Kingdom would argue the case for Hong Kong's inclusion and the attitude of the EEC would become clearer. We had already put forward the idea of an intermediate category for "most developed" ldc's under which Hong Kong might benefit but this had found little sympathy among the Six.
EEC LIBERALISATION LIST (CRE 3)
We might seek to persuade the Six that the common liberalisation list for EEC trade with Hong Kong should incorporate as few of the French illegal restrictions as possible and not result in a reduction of the Colony's trade with the Community.
DIVERSIFICATION OF HONG KONG'S INDUSTRY (CRE 2)
The Colony had adapted rapidly to new market opportunities and had the resources to finance diversification. The problem was not however an
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CONFIDENTIAL