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21/9 (II)
CONFIDENTIAL
A. F. Toms, Esq.,
Department of Trade & Industry,
1, Victoria Street,
London, S.W.1.
24 November, 1970.
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Thank you for your letter of 9 November about the Hong Kong Under round project.
Perhaps I should explain a little more carefully what I meant by a Government to Government approach. The Hong Kong Government has for many years based its economic and commercial policy on a free for all economy. It is, of course, the classic type of a laissez faire free enterprise state and one must admit that on the whole it has been very successful. I would not like to suggest that anything be done to alter this state of affairs merely to favour 3ritish exports - although one does sometimes wonder as one sees order after order going to our competitors what advantage the retention of Hong Kong brings to the U.K.- to balance, for instance, the complications it brings to our relations with China. It would be difficult to imagine the French, for instance, being so liberal in one of their Colonies (or even ex Colonies for that matter).
I
However, assuming that we accept this traditional policy of Hong Kong us desirable or, at any rate, unavoidable, I still think that a major utility of the size and value of an Underground Railway deserves rather special consideration. need not again go into my reasons for believing that the loss of such an order to, for instance, the Japanese, would be catastrophic as far as British commercial standing in Hong Kong is concerned. The Colony would almost certainly fall into the Japanese economic sphere of influence. The reactions of Peking to this development might also be serious for the political future of the Colony.
If we admit, therefore, that this project cannot, for the politico-economic reasons given, be allowed to follow its normal commercial course (when it would almost inevitably end up in the Japanese lap), I can see no way of preventing
CONFIDENTIAL
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