The position may not be as serious as the Governor claims.
First
Hong Kong exports in 1977 are already significantly down on 1976 levels (about
5% down for the UK). And the Foreign Secretary in his recent minute to
the Prime Minister expressed the view that the Governor had overrated the
likely effect of the cuts on the Hong Kong economy. Secondly, although the
Commissions proposals go much further than the 'reasonable departures' from
the provisions of the MFA which Hong Kong was ready to accept in Geneva in
July it is noteworthy that the Governor does not say that Hong Kong will
not renew the MFA on these terms. Finally, it could be argued that the
BEC's global approach will help established suppliers, and Hong Kong in
particular by freezing trade in its existing pattern. The evidence suggests
that Hong Kong is becoming less competitive in world markets and the effect
of the FEC's global ceilings could be to shield Hong Kong from increasing
competition from small suppliers and newcomers.
5 Nevertheless it would be difficult to argue to the Governor that the
Commission's proposals are not tough. At best Hong Kong will be tied to
present depressed levels of trade for these eight products during the lifetime
of the next MFA. The main defence must therefore be that they are essential
for the UK and EEC industry.
{
The Commission's proposals are a major departure.
Although the BC mandate
for the re-negotiation does not rule out reductions in existing trade for
dominant suppliers there was general agreement in Brussels before the summer
that they were undesirable. The UK has consistently opposed cut-backs
in Community discussions chiefly because of doubts about their negotiability
but also because we wished to avoid discrimination against Hong Kong.
cannot now hold out against cuts for Hong Kong:
But we
4