SECRET.
Our approach to Europe
The Handling of Hong Kong's Affairs
the last analysis do what Hong Kong considers to be in the
Colony's best interests.
9. Another factor is the pronounced European stance of our
policy in recent years and its consequences for Hong Kong.
One of the consequences of our membership of EFTA is that a
wide range of products from EFTA countries now enter the UK
duty free whereas on some of them Hong Kong is charged duty.
(Hong Kong is particularly worried about low-cost Portuguese
competition in textiles). If we obtain entry into EEC,
Hong Kong will almost certainly be shut out from membership on
an associate basis and, losing its Commonwealth preference,
will have to compete in the UK market across the EEC's common
external tariff. The EEC (and Britain) have, however,
accepted Hong Kong as a beneficiary under the Generalised
Preferences Scheme.
(Japan has stated publicly that it will
follow suit before April 1972 but the American reaction is still
unknown).
10. There has been a certain reaction in Hong Kong to the
successive mergers which led to the formation of the Foreign
and Commonwealth Office. Somewhat unreasoning fears were
felt, among officials as well as unofficials, that those who
handled Hong Kong's affairs in the merged office would have
an inadequate knowledge of its problems; or that Hong Kong's
interests would weigh lightly if they had to be measured in
the balance against the greater interests of our relations
SECRED
/with