Mr O'Keeffe
SECRET
NICK
Corred to 4KK 6/548/2
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Flag R
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HONG KONG DEFENCE AGREEMENT AND IMPORT RESTRICTIONS
1. As you will know from the telegram I sent to you in Seychelles the Governor of Hong Kong wants to talk to you today about the timing of an announcement on the Defence Costs Agreement. The idea is that you and he and Mr Haddon-Cave, who has stayed on in this country, should have a three-sided conversation, if one can
be set up.
2. There have been a number of developments in your absence con- cerning the timing of an announcement and I think it will be best if I take them in chronological order. First, Mr Davies (who, with Mr Thornton, returned to Hong Kong on 12 December) gave us a copy of a telegram from Hong Kong reporting on the outcome of the Executive Council's meeting on 9 December. This telegram was sent
through the Hong Kong Government Office. It has not been shown to the MOD. However, Mr Davies drew on it during discussions with Mr Andrew on 10 December (Mr Janvrin's minute of 11 December refers).
While these discussions were going on in the MOD, Mr Rodgers's Frivate Secretary was writing to Number Ten to say that in view of the Governor's letter of 8 December, Mr Rodgers saw "no prospect of announcing the agreement on defence costs until a firm decision is taken on the question of import controls". I drew attention to this development and to the telegram from Hong Kong in a note to the PS/PUS on 11 December (following up your submission of Flag 9 December).
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3.
While these exchanges were taking place with regard to the Defence Costs Agreement, the Secretary for Industry had sent a minute to the Prime Minister on 8 December saying, in effect, that Mr Rodgers could tell the Governor that the only area of major concern which would affect Hong Kong in the context of selective
import controls would be that of woven shirts and that we expected to press Hong Kong strongly to reduce their sendings to us in 1976.
/This minute
cc: Mr Janvrin
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