VII
VII
1.
COMMONWEALTH PREFERENCE ON VEHICLES
There is no tariff on private cars or commercial vehicles of British and Commonwealth manufacture, but for vehicles of other origin a "non- Commonwealth" tax equivalent to 15% of the value of the vehicle is imposed. Apart from liquor, this is the only product on which the UK enjoys preference in Hong Kong.
2. This preferencs is likely to continue to be of considerable value to us, particularly if our present favourable competitive position in the Hong Kong market is eroded by wage inflation. In the first eight months of this year Britain exported 942 cars and 1,000 commercial vehicles. Our share of the commercial vehicle market was 65% last year and this your has gons up to 74%. However, it is possible that the Hong Kong Government may come under pressure to remove the preference in the next budget firstly because Hong Kong's preferences in Britain are being eroded and secondly on the grounds that this will raise much needed revenue.
Line to take
3. If it seans desirable to raise an issue with Mr Jordan, rather than spend the entire meeting responding defensively to points he raises with us, we could express the hope that, if this pressure exists, Hong Kong will refrain from changing the vehicle tariff arrangements for Britein and other Commonwealth countries until the issue of Britain's EEC renegotiation is settled.
CRE 2