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IN QUIESCENT ATTITUDE TOWARDS A BRITISH STATEMENT: TAIWAN MAY BE UNWILLING TO INCUR A SECOND LOSS OF EARNINGS FOR CAL WHILE TAIWAN'S EVENTUAL ACCOMMODATION WITH JAPAN MAY ENCOURAGE IT TO SEEK A COMPROMISE FORMULA WITH BRITAIN AT THE BEGINNING OF NEGOT- IATIONS. HOWEVER, THE GAP OF A YEAR MUST HAVE MADE IT EASIER FOR THE CHINESE TO ACCEPT JAPAN'S PARTIAL RETRACTION OF ITS 1974 STATEMENT, AND HMG COULD BARELY HOPE TO OFFER SUCH A SOP TO TAIWAN IN THE COURSE OF NEGOTIATIONS WITH THE CHINESE.
7. A STATEMENT ISSUED PRIVATELY BY HMG TO THE CHINESE ON CAL'S STATUS, TOGETHER WITH A MUTUALLY AGREED REORGANISATION OF CAL GROUND SERVICES AT HONG KONG, MIGHT BE TOLERATED BY TAIWAN, SUCH A COURSE, HOWEVER, WOULD DEMAND A CONCESSION FROM THE CHINESE WHO HAVE, INSISTED ON A PUBLIC STATEMENT FROM HMG..
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MR MURRAY. MR CORTAZEl.
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