CONFIDENTIAL
the future arrangements for imports of cotton textiles (and possibly other
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I
4.
textiles too) and their circulation within the enlarged Community.
ACTION BY HONG KONG
23. In this section of the paper, we consider what forms of action are open
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to Hong Kong either to protect her own interests or to find new sources of
earnings to replace any trade lost as a result of these various developments.
Pad the *
There would undoubtedly be political repercussions for us in Hong Kong if our
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entry into the EEC resulted in serious damage to Hong Kong's exports,
c che
particularly if other factors (such as the textile developments) were simul-
cent falive
taneously affecting them. Relations with the "Establishment" of leading
Chinese citizens who provide the unofficial members of the Executive and Legis-
lative Councils and Advisory Committees on which the smooth administration of
the Colony depends would inevitably become strained. They might press for
{{
retaliation of one kind or another.
proble
TRADE MEASURES
24.
nicy
Hong Kong exercises her GATT rights through the United Kingdom. Though
she might continue to exercise them, for what they are worth, against the USA,
it is scarcely conceivable that she could do so against the members of an
enlarged Community which included the United Kingdom.
Since Hong Kong imports
more than she exports, the possibility of trade retaliation might be considered
but Hong Kong has no protective tariff and merely imposes revenue duties on
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drink, tobacco and petroleum. She could institute a customs tariff, as Britain
/ Car
did in 1931, or impose quantitative restrictions. Either of these would
require setting up a new administrative machine, and the concept of a colonial
government taking retaliatory action against an economic grouping including
i
the metropolitan power is difficult to envisage. It could scarcely be done
TROV *
without the consent of the United Kingdom Government. On the whole retaliation
by means of trade measures seems highly unlikely. Hong Kong would much more
probably seek, as is her general. habit, to negotiate the best deal she can
for herself item by item.
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CONFIDENTIAL