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Unofficials in an attempt to persuade them to increase
their offer. The Governor will advise on the best method
of exerting pressure; but the case will probably have to
be based largely on the comparative states of the economies
of the UK and Hong Kong, their respective defence expenditure
in terms of percentage of GNP and their comparative rates
of taxation etc. There will come a point when it appears
that the Unofficials have made their best offer and the
Minister will then have to consider how far he is prepared
to go in indicating that in HMG's present economic difficulties
the commitment to provide what we regard as an adequate
defence for Hong Kong cannot be absolute unless Hong Kong
is prepared to pay what we consider to be a reasonable
share. Any explicit threat to reduce the garrison still
further will probably be best avoided at this atage, since
if our bluff were called we could be placed in an embarrassing
position.
19. The Minister will have to judge in the light of the
reactions of the Unofficials at what point to move to any
fallback position which he has been authorised to adopt in
the hope of reaching agreement. If no such position has
been authorised there may have to be a pause in the
negotiations while we refer to London by telegram.
20. If unhappily there is no prospect of reaching agreement within
the terms of the Minister's mandate it will probably
be better to break off the talks at a fairly early stage
before relations become embittered. This could be done,
more in sorrow than in anger, on the basis that the Minister
is disappointed that Hong Kong does not feel acle to respond
to IIMG's demands and that he has no alternative but to go
back and report to his colleagues.
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