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the present imbalance of cerninge under the UK/UAR Air Services Agreement. Ho are unlikely to be able to do much to protect - Hong Kong's interests at the forthcoming E.E.C. negotiations and must do what we can to support one of their bajon zine, which to to become a centre of tourten and communications in the Far East.
We have boon examining what we could do to offset the loss of foreign exchange which may flow from granting these rights. The Dutch are likely to decide very shortly whether or not to buy the Swingfine anti-tank guided picstle. In view of Franch and American competition there is a risk that falling some new factor in the situation the Dutch will opt for the American Tow weapon. I understand that the Ministry of Defence attach considerable importance to selling this weapon to the Dutch, and hope that this could lead to salos to other European countries. I would not propose that we should make our offer of traffic nights conditional on the purchase of Swingfire but would take the 1ino that one good turn among Europeens deserves another.
in tho past it hzs been estimated that cur balance of paymonts would suffer to the tune of about half a million pounds, a year if the Dutch woro granted landing rights at Hong Kong. The Swingfire ordor is worth noerly seven million pounds though the value to us, if other Europeane followed the Dutch example, could turn out to bo (much more.
Finally I would like to point out that in their aide-memoire to the Socrotary of State the Dutch have clearly stated that their roquest is for a once weekly service to Hong Kong. In our roply wo would stress that this concession is made to remove what Dr. Luns has called "a festering sore" in Anglo-Dutch relations and that there can be no question of increasing the frequency lator. I hope therefore that you will be able to agree that should meet the Dutch on at least their request for Hong Kong rights, proforably in time to influence their docision on Swingfire which is expected towards the end of the month.
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