CONFIDENTIAL
Treasury Chambers
Parliament Street London SW1P 3AG
Telex 262405
Telephone***x*x 233-8119
Your reference
R B JANVRIN ESQ
FOREIGN AND COMMONWEALTH OFFICE
DOWNING STREET
LONDON SW1A 2AL
Our reference
Date
147)
7 November 1975
134)
Dear Janvrin
никакива
HONG KONG'S CONTRIBUTION TO THE BRITISH ECONOMY
Thank you for your letter of 28 October giving us the opportunity to comment on the draft speaking note on this subject which you will be using in the informal oral briefing session for the members of the Defence and External Affairs Sub-Committee of the Select Committee on Expenditure who are shortly to visit Hong Kong.
2
We have seen Rackham's letter of 4 November and share his view that the slant of the paper was rather too emphatic about the benefits of Hong Kong to the UK economy on the basis of rather too little argument. We would accordingly prefer the alternative framework for the speaking note suggested by the Bank. A full cost-benefit analysis of our present relationship with Hong Kong might well show a net disbenefit to the UK - but the lack of hard information makes this possibility very difficult to test either way. In the context of our attempt to make Hong Kong pay a larger proportion of the costs of our garrison there it could be embarrassing if the DEASC members were led to conclude that the benefits of Hong Kong to us were such as to justify the commitment of a greater net amount of resources to its defence. It is thus right to describe our economic relations with the colony in strictly neutral terms.
3*
#1
You asked specifically for our views on the general problem of attempting to assess whether an unquantifiable invisible trade
surplus" offsets in any particular case the more obvious visible trade deficit. The short answer to the matter when put in those terms is that it is not possible to make an assessment without some quantitative assessment of the net level of invisible trade. For reasons perhaps familiar to you it is in fact not possible to calculate UK bilateral invisible trade balance with individual countries, In the present and similar cases therefore, as our comments in this letter suggest, it is best not to put too much weight on arguments about invisible trade. The request from DEASC members for an assessment of Hong Kong's benefit to the UK economy simply cannot be met.
You may well choose to adopt Rackham's suggested outline. If you do not then the two main changes we should like to see in your
4.
/present
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