CONFIDENTIAL
country than a developed one.
(11) A number of countries generally accepted as
developing have per capita income equal to or higher
thar Hong Kong.
(c) Hong Kong is "competitive"
4.
(i) Other developing countries, in particular South Korea and Taiwan are no legs competitive than Hong Kong. What Hong Kong secks is the avoidance of discrimination
against her alone.
(ii) The total exclusion of a country on grounds of
competitiveness was rejected by the OECD in 1967. (iii) The OECD report of 1967 (sec paragraph 3 (a) (iv)
above) recommended that the way to deal with commodities considered to be competitive was by the use of safeguard arrangements or by excepting the products altogether.
In recent years Japan has been running a large and rapidly mounting trade surplus with Hong Kong (US $295 million in 1967; US $413 million in 1968 and US $546 million in 1969). In 1969 Japan only absorbed 3.4% of Hong Kong's total exports whereas the US took 42; and the EEC 10%.
Japan is an important source
She is Japan's third largest
of raw materials for Hong Kong.
buyer and her exclusion could adversely affect Japan's export potential. Hong Kong's trade deficit with Japan is greater than her surplus with the USA which means that the USA 10 virtually financing Hong Kong's deficit with Japan. A Japanese decision to exclude Hong Kong which encouraged the USA and others to do likewise would clearly have adverse effects
/ on the
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