CONFIDENTIAL
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HONG KONG:
1.
UK ALIGNMENT TO THE EEC GENERALISED SYSTEM OF PREFERENCES
In 1971 when we were negotiating the alignment of the UK's GSP with the EEC system, the Community reluctantly agreed to admit Hong Kong to their scheme, subject to the exclusion of textiles and footwear. When we align on 1 January 1974, we will therefore have to give preferences on these items to some of Hong Kong's major competitors, but will be prevented from doing so for Hong Kong. When he agreed to this in 1971, Mr Rippon said our aim would be to eliminate discrimination against Hong Kong.
2.
The Hong Kong Government have asked us to take steps to remove this discrimination before we align with the Community system. They argue that the political effect of discriminating against our own colony will be felt from the moment of our alignment on 1 January 1974. They fear that, for example, the US and Japan will cite our discrimination against Hong Kong to excuse their own.
3. Ministers however decided that there was no chance of getting the Community to change the arrangements for Hong Kong before our alignment. The Prime Minister therefore agreed that we could not reopen the question now in the context of alignment but should do so next year during the Community's annual review of the GSP. It was agreed that the Chancellor of the Duchy should make a statement on Hong Kong in the Council of Ministers. He did so on 6 November. The wording of his subsequent public statement was used to answer an inspired PQ on 9 November text attached. This has been copied to Hong Kong and may be used freely.
h. Hong Kong are not wholly satisfied with this (their telegram no. 1287 attached). The Governor has throughout argued that we should get the arrangement changed now, or at least be seen to have tried to do so. In fact we have done neither, but have got the best result that we in practice could. We have urged them to concentrate on the positive features of our statement and on the improvements we have been able to get in the existing GSP (FCO telegram no. 1143 attached). This means focussing on our statement of principle and our determination to secure a change in the 1974 review, rather than on how hard we have pushed to get a change now.
5.
It is in fact in Hong Kong's direct interest, as well as the interest of their relations with HMG, to present this as a success. If they claim that the UK have betrayed them it will worsen their problems with the Americans and Japanese. As with the sterling agree- ment our joint interest is to reach a workable arrangement and then present it in the best possible light.
6.
These considerations could be explored in talking to senior officials. But in public it would be better not to expand on the PQ.
Hong Kong and Indian Ocean Department
F CO
15 November 1973