Mr Morgan
CONFIDENTIAL
Reference..
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1KK 6/54/13
1979
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GENERALISED PREFERENCES
1. When the Governor of Hong Kong came to this country in November he argued strongly, in view of the EEC's intention to exclude textiles and shoes from its general- ised preference offer to Hong Kong, that Britain should urge the Community to exclude them from its scheme altogether. The record of the talks is attached. A submission - on which we were not consulted set out the reasons for recommending against the Governor's views, and was accepted by Ministers.
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2. At the latest talks Mr Cater, Director of Commerce and Industry in Hong Kong, again strongly argued that acceptance of the scheme as a definitive settlement of the problem posed by Hong Kong, in the context of enlargement, would involve its application by the UK after accession. This would in turn mean discrimination in textiles and footwear by the UK against Hong Kong and in favour of, in particular, Taiwan and the Republic of Korea. He also pointed to the serious political difficulties which might be created for the UK vis-à-vis China (telegram no. 93 to Hong Kong). Mr Cater sought assurance that the UK would not in any circumstances agree, as a member of the enlarged Community, to discriminate against Hong Kong in favour of her competitors in textiles and shoes. Mr Denman replied that the UK would use its best endeavours as a member to minimise the degree of discrimination in the UK." He pointed out that acceptance of the EEC's offer would only mean acceptance of the regime to be applied by the enlarged Community to Hong Kong; it had no implications as to the treatment of other beneficiaries such as Taiwan and Korea.
3. After further consultations with the Governor, the
Chancellor of the Duchy of Lancaster, in his statement
at the Ministerial meeting of the enlargement negotiations
(telegram no. Codę L 72), said that "it must be our
continuing concern to avoid discrimination against
Hong Kong in favour of its principal competitors among the developing countries."
4. I should have thought if China were to take a view on this, it would be that the exclusion of Hong Kong on foot- wear and textiles would tend to weaken the Colony's economy and thus lessen its value. As far as the EEC scheme is concerned, I doubt if the Chinese would have sufficient grounds for a formal or noisy complaint, and I suppose that we could always argue that to have pressed the footwear and textiles' issue too far would have risked getting Hong Kong excluded from the EEC scheme altogether, and then, by extension, from the US and Japanese schemes. There would then have been more discrimination in favour of Taiwan and Korea. What seems more dangerous is if we
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CONFIDENTIAL