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4. There are undeniable disadvantages in the present connection. Politically it is embarrassing for HMG to be answerable to Parliament for the internal policies of a Colonial Government which acts to a large extent without reference to London in a cultural, racial and economic environment very different from
our own. There are constitutional powers for Parliament to legislate for the Colony; but equally there are practical and political limitations to these powers and no Government has since the war exercised them. Influence on the Colony's
internal policies is exercised indirectly through the Governor; but even his powers are in practice limited by the need to consult the Executive Council and to legislate with the advice and consent of the Legislative Council. There is the additional complication that there is an unofficial majority on the Finance Committee of the Legislative Council. Powers exist to override the Councils but in practice these have not been exercised for many years. There is also bound to be friction with a Colony with substantial interests of its own not necessarily compatible
with those of HMG. Recent and current examples of such friction are the Defence Costs negotiations, the problems over textiles and the question of the death penalty. There is also the out- standing issue of citizenship: if HMG as is now proposed creates a new category of British Overseas Citizens, there is a risk of a damaging loss of confidence in the Colony, particularly in business circles, as attention is focussed on the fact that the United Kingdom is a less certain haven in time of trouble. The Colony's very existence, moreover, carries with it risks of clashes with China and local unrest as in 1967. With the continu-
ance of the decolonisation process for our other dependent territories it can be expected that Hong Kong will begin to look progressively more anomalous and Parliamentary difficulties may well increase. Per contra, the further development of Hong Kong can be expected to produce increasing divergence between its economic interests and our own; and on present trends some of our commercial rivals, for geographical and other reasons, may well progressively out-compete us in the Hong Kong market.
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15.