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14. Mr. Cater said that it was important to take into account the political situation in Hong Kong. If Britain's entry into the EEC were to be to Hong Kong's disadvantage even in a relatively small way—and he noted the British market still accounted for 11 per cent to 12 per cent of Hong Kong's domestic exports--that would have important repercussions. China was anxious to see Hong Kong prosper because of the foreign exchange it earned through Hong Kong. If, however, as a result of Britain's entry, wages were reduced even in one sector of industry, industrial strife might result, with serious effects.
Internal problems of Hong Kong
15. Mr. Cater recalled that, in 1967, the internal truobles had started as a result of an industrial dispute. China had then been a reluctant supporter of the consequent internal strife, but in the future it might find it more difficult to control local Communists. Mr. Rippon had been told that a small cut back in wages would not be of great importance, but Mr. Cater did not believe this was true. It was not any argument that Hong Kong came out of the 1967 troubles well. China had at that time turned the issue into a political one, but if it had kept the pressure on at the industrial level the effects might have been much more serious.
16. Mr. Rippon appreciated that the political situation constituted an additional problem. Hong Kong was a dependent territory of Britain but it was intended during the negotiations to remind the European Communities that there were wider interests involved. He appreciated that China had a strong interest in maintaining the status quo in Hong Kong. He thought Mr. Cater's views were very relevant. He hoped that there would be no dramatic cut in wages in any sector of industry as a consequence of British entry into the EEC. He felt that problems of that nature were more likely to arise from the protectionist policies, and those the United Kingdom would hope to be able to influence effectively from within the enlarged Community.
17. Mr. K. S. Lo said that Mr. Cater had expressed a real fear in the Community, one which he personally would not like to express in public. For that reason Hong Kong needed assurances from Her Majesty's Government that Hong Kong's access rights would be protected as far as possible.
Vulnerability of Hong Kong industries
18. Mr. Wu wondered if Hong Kong had perhaps not sold itself too well. He thought that developed countries might have lost sight of the basic difference between Hong Kong and other less developed countries: Hong Kong's absolute dependence upon exports of industrial products. Mr. Rippon agreed that Hong Kong did suffer from its success story and its dependence on industrial exports. He felt it was important to emphasise the vulnerability, both political and economic, of Hong Kong. Taiwan, for example, had a large agricultural sector and was thus on a much sounder economic base.
19. Mr. Wu referred to the vulnerability of certain of Hong Kong's industries such as the electronics sector, which was largely dominated by United States interests. Industries such as this could very easily be moved elsewhere should Hong Kong's economic position worsen. They could, for instance, be moved to Taiwan which had everything that Hong Kong had to offer, except for a less efficient administration, plus lower wages and a better-educated labour force. Mr. Cater agreed that the electronics industry was particularly vulnerable: there was already an incentive for manufacturers to move to countries such as Taiwan and Singapore. The Chairman said that no opportunity had been lost to make those points to Her Majesty's Government.
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