CONFIDENTIAL
36.
The Colony's reaction to such a refusal might be lively.
However, with a 5 year Agreement Hong Kong could not make
a lower sterling proportion a condition of continuing the
Agreement and is thus prevented from using the size of her
sterling balances as a potential weapon against the UK.
Nor, because of her colonial status, is the Colony 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 UK by
claining that the UK was taking advantage of Hong Kong's
colonial status to protect her own position to the
detriment of Hong Kong's legitimate interests.
VI
Non-trade Mitigations
37. Hong Kong does not publish balance of payments figures,
but an estimate of her balance of payments, showing the
relative importance of invisibles, is attached as Annex
Her earnings from tourism can be expected to continue to
increase provided the pace is peaceful and reasonably
prosperous, as can earnings from banking, insurance and
other commercial services.
38.
Though 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 this would make
the explanation of invisible earnings more difficult.
39.
It has been suggested that Hong Kong's earnings from civil
/aviation