conditions.
We should like further studies to be carried out objectively; our influence would, however, be diminished if a flag of convenience were established in Hong Kong;
(a) HMG's opposition to flags of convenience is of long standing and has been partly based on the view that such ships provide unfair competition to our shipping in so far as the profits of their operation are immune from tax unless repatriated. At present, British shipowners pay little tax because of past losses and flexible depreciation arrangements, but close companies are at a dis- advantage compared to flag of convenience owners.
Existing para 9: Attach this to the end of para 3.
Paragraph 11: Delete "a Cardiff collier"
Insert new paragraph 12
Conclusion
12. The Prime Minister will wish to listen to Mr Pao's views. He may wish to ask him to spell out in detail the benefits of setting up a separate shipping Register in Hong Kong and his views on the nationality and safety requirements that he has in mind and say that HMG will give the matter further consideration.
13. He may, however, wish to emphasise HMG's concern to preserve the existing high standards in relation to safety, equipment and accommodation for British registered ships, and discourage any suggestion that a flag of convenience might be established in Hong Kong.