BRIEF
HONG KONG/UK TRADE
30/3
Line to Take
1. I know that the Governor is very aware of the need to ensure that the UK's political links with Hong Kong are backed by strong commercial links. It is in Hong Kong's own interests that there should be an increase in British exports and, thus, a less uneven trade balance than at present. This would make it less difficult to resist domestic pressures in the UK for restrictions on Hong Kong's imports. Hong Kong's interests will be taken into account during negotiations about the future of the Multi-Fibre Arrangement (MFA) but I cannot, of course, predict the outcome.
Background
2. There are differences between the UK and Hong Kong over the question of textile imports from Hong Kong to the UK. Sixty-seven per cent of Hong Kong's exports to the UK are in the field of textiles and the Hong Kong Government are worried lest any renegotiation of the Multi-Fibre Arrangement, which is due to expire at the end of this year, should work to Hong Kong's detriment. Hong Kong would like to see the present MFA extended in its present form for at least a year in order to put an end to the present uncertainty over trading prospects for 1978. The Community has still to agree its negotiating position.
3. UK trade with Hong Kong is substantially in deficit and this trend has been increasing rapidly over recent years. In 1976 we imported goods from Hong Kong valued at £439.6 million against exports of £204.4 million. HMG and the Governor of Hong Kong have been concerned for some time about this trend and when the Permanent Secretary at the Department of Trade visited Hong Kong in October 1976 it was agreed that a study group should be set up to investigate ways in which the UK's export performance might be improved. UK is represented on the group by the Senior British Trade Commissioner in Hong Kong, and the group is at present studying
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