CONFIDENTIAL
AN ACQUIESCENT ATTITUDE TOWARDS A BRITISH STATEMENT: TAIWAN MAY BE
NWILLING TO INCUR A SECOND LOSS OF EARNINGS FOR CAL1 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 CORTAZZl.
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CONFIDENTIAL
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