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European partners to increased textile imports from countries
such as Hong Kong. But we must be given discretion to pick
the most auspicious occasions and tactics for pursuing this.
12. We have also done what we can to ensure that Hong Kong's
legitimate needs for oil supplies are taken into account,
although we cannot of course isolate Hong Kong from the general
world situation on oil. Perhaps most important of all, at some
cost to our relations with the Chinese, we have given them no
encouragement to pursue the proposal of establishing a Chinese
Representative in Hong Kong.
13. There is a further range of issues, which may not be
common knowledge, where HMG has gone to considerable lengths
to resist domestic pressures to maintain a balanced policy in
the interests of Hong Kong. HMG has not acceded to strong
demands from the UK knitwear and cutlery industries for better
protection against imports, particularly imports from Hong
Kong. Suggestions (both from UK industry and from some of our Community partners) that there should be comprehensive controls
on clothing imports have also been resisted.
14. On the other side of the coin HG has sometimes had cause
to be disappointed. The decision that a Japanese bid for the
mass transit contract has been preferred to the very carefully
prepared offer made by the Anglo-Italian consortium was
profound regret to the UK.
a
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15.
But at the end of the day our political and economic
Both economies have a vital stake
interests run in parallel.
in continued growth. In the current difficulties facing the
world trading community this identity of concern transcends
the complexities in our relations
HONG KONG/CHINA QUESTIONS
16.
•
These are covered in the briefs for Peking. It will be
necessary to decide after the Peking visit what can be said in
Hong Kong on these issues.
BILATERAL ISSUES:
DEFENSIVE POINTS
STERLING
(Brief no. 3)
17. The present extended guarantee agreement which the Hong
Kong Government have now accepted for their own holdings of
sterling protects their reserves at about US$ 2.42. Given
the current level of sterling and interest rates in London,
this guarantee is valuable to them, though the point cannot
be made much of, since it implies lack of confidence in
sterling's prospects over the next months.
18.
Possible Criticisms: The UK have controlled Hong Kong's
reserves in the interests of sterling and an ailing British
economy. The Treasury's failure to consult with Hong Kong
about possible successor arrangements well in advance of the
expiry of the old agreement in September was discourteous and
damaging to Hong Kong.
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19. Line to Take: Hong Kong and the whole world have benefited
from the stability secured by the sterling agreements. The
delay in reaching agreement on the cxtension of the guarantee
from September was because Hong Kong itself needed to consider
the application of our unilateral offer to their special
problems The agreement that has now been reached is voluntary
and is plainly in the interest of both of us. We have taken no
decisions yet about possible arrangements for the period after
March. We are consulting Hong Kong and other sterling holders
on this and aim to indicate our conclusions in good time before
expiry of the present arrangements.
HONG KONG AND THE DEC GENERALISED SCHEME OF PREFERENCES (GSP) (Brief no. 4)
20. Our alignment with the Community's GST scheme on
1 January 1974 means discriminating against Hong Kong's
textiles and footwear in favour of some of its major competi-
tors. Since we could not re-negotiate the terms of entry, the
Chancellor of the Duchy informed the Council of Ministers that
we would press resolutely for the elimination of this discrimi-
nation during the 1974 annual review. This statement has been
published.
21.
Possible Criticism: The political damage took place at
the moment of alignment. Importers also place their orders
ahead in the light of the actual situation and Hong Kong fears
that this will result in diversion of trade. This is a
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