Para 3D
Para 3E
SECRET
:
I understand that in negotiating traffic rights DTI
always have full consultation with Hong Kong in cases which affect them and that the UK always ensures that Hong Kong is not damaged in any way. Whilst there may not be great advantage to Hong Kong in the UK control of traffic rights, apart from some overall bargaining advan- tage, there is certainly no disadvantage. I gather that the DTI know of no Hong Kong grievance on this score at present.
(But/we are going to give further detailed guidance the Department should be consulted).
The UK cannot accept any responsibility for the loss which Hong Kong sustained in 1967. This was in common
with the loss by all other sterling area countries:
though Hong Kong's reserves were almost all in sterling and therefore the loss was great, by the same token Hong Kong had previously had the benefit with many years of higher sterling interest rates offsetting the devaluation loss. The UK has however accepted
responsibility for maintaining the dollar value of the bulk
of Hong Kong's sterling reserves however high these may rise during the currency of the present Sterling agreement: the fact that more of Hong Kong's reserves are now at risk than at the start of the agreement is a reflection of Hong Kong's greater wealth, while her vulnerability is less than prior to the agreement.
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URGENT.