SEON PREYES A
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increase your defence contribution.
But I would ask you to see the
L
in the
round. Hong Kong stands to benefit more quickly and more substantially from the
expected upturn in world trade than the UK Could ever hope to do. Indeed the UK
faces a period of some years of recovery. Even on a rough basis of comparison
& (4:7; whide the UK is planning
your current defence contribution is only q
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to donate 41% of GNP to Defence and her people are subject to a steeply progressive
tax rate starting at 35% as against your 15%. On any objective view the level of
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your current defence contribution, determined in agreement made against a
quite different UK situation, and eroded by the progress of inflation and the
relative movement of currencies, is low indeed. It is the position of HMG, therefore
by far that in the new defence costs agreement Hong Kong should contribute/the greater
ethe
ontri
part of the cost of the garrison required for its security. This cannot be other
than unwelcome to you though it will hardly come as a surprise given the fray
of the economic situation I have described, in which HMG would have been justified
in taking the position that the cost of forces stationed far from the area of
Entirely greatest threat to the UK, should be met by those for whose benefit they are
deployed.
9.
There is
I have now given you a full and frank account of HMG's position.
no doubt much that you would wish to say for Hong Kong's part and I look forward
Subrova
to hearing it. But I suggest further substantial discussions should be left in
CG.LLLS
the first place to the working level discussions already planned, when you
will have had time to consider the implications of all that I have said.
-5-
SEC:
SECRET UK EYES
EYES A