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'There is also the political problem that may arise from apparent compliance with requirements imposed seemingly for the benefit of the UK economy". Not only do I find this in itself an extraordinary- and unnecessary statement the Governor, but nowhere
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4 in the whole Memorandum is there any reference to the political advantage to Hong Kong of assisting the UK to uphold sterling.
6.
The conclusion in paragraph 15 is somewhat ambivalent. It asks for advice on whether, subject to further efforts to reformulate the accidental breach provisions, the British Government should be told that Hong Kong expects to meet the conditions of the offer, but leaves completely open what Hong Kong should do if the Treasury do not agree to a reformulation. This ambiguity is not removed by Hong Kong telegram no 467. In paragraph 3 of the telegram we are told that ExCo accepted the recommendations of the Memorandum and that this provides
to be made for further efforts in connection with the accidental breach provisions. It is not at all surprising that ExCo should have made recommendation nor that they should have been so critical of Treasury action in view of the way the question of the accidental breach provisions was presented to them. Indeed, one could go so far as to say that it would have been impossible for ExCo to have taken any other line.
7. The remainder of the telegram suggests means by which Hong Kong might guard against falling below the MSH.
In this connection you will wish to see a minute of Mr Lewty's which gives some interesting background to the Hong Kong position. More particularly, in paragraph 6 Mr Lewty says that Mr Saclair in the Treasury is advising against Hong "ong' request for a revised accidental breach provision, Barticularly in the light of the ExCo Memorandum, We should, I think, find it difficult to present strong arguments against a decision taken on economic grounds.
18
B
1 May 1974
сс де
hewly
FRD.
M A Goodfellow
Hong Kong & Indian Ocean Dept
CONFIDENTIAL