CONFIDENTIAL AND PERSONAL
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the Community directed at obtaining increased protection at the expense of the large suppliers. Nevertheless, my personal opinion, and I should be grateful if you and David Jordan were to keep it to yourselves since I am not sure how far it will prevail, is that the Community will not in fact propose arrangements which will result in any significant reduction of imports from Hong Kong. On the other hand, I can certainly assure you that we are all conscious of the risk of disruption of trade which would certainly occur if negotiations dragged on until late in the year with the prospect of a lengthy wrangle just before the existing arrangements expire.
5. David Jordan had lunch with Evan Luard and Hugh Cortazzi at the end of his week in London. I understand that Jordan, who is
a forceful advocate, was at pains to try to justify the point made in paragraph 11 of your telegram. However, while we fully accept that economic growth is important for Hong Kong it is difficult to believe that the kind of restrictions on Hong Kong imports that might emerge from the renegotiation of the MFA could significantly affect growth. Nor, frankly, is there a disposition to accept that such restrictions would really put the fulfilment of your social programmes in jeopardy. I am encouraged to say this by tho fact that, to judge by your telegrams on the 1977/78 budget, revenue remains bouyant and you are prepared to fall back on your reserves in order to safeguard the implementation of social programmes. The psychological point is fully taken here, and I would like to talk to you about it, but for the present we are groping in the dark because we cannot yet predict the Community's negotiating position with any accuracy.
Youn's
Dounl
F Murray
silent cc Mr Arbuthnott, EID(E)
Mr Roberts, CRE 4, DOT
CONFIDENTTAL AND PERSONAL