H M Treasury
Parliament Street London SWIP 3AG
Switchboard 01-233 3000 Direct Dialling 01-2333889
5 March 1979
Bostock Mr Watts
Mr Whitear
FR Barratt CB
Deputy Secretary
A J Lippitt Esq
Department of Industry
Ashdown House,
Victoria Street London SW1
Jean John.
METCAM: HONG KONG MTRC PHASE II
Thank you for your letter of 15 February in which you suggested that we should complement pressure on the Japanese with a course of action which would imply matching aggression with aggression.
2.
No doubt those concerned are arranging to exert the diplomatic pressure. I imagine also that Leo Pliatzky will have this on the One particular aspect agenda for his forthcoming visit to Japan.
I which would I think merit investigation is the extent to which
Japanese aid on hard terms is consciously geared in with the pursuit of specific export projects.
w
3. I was certainly not intending to say, however, in my letter of 25 January that the success of Japanese competition derived principall from devious financial practices, rather than from straight commercial competitiveness. And I am sure you would agree that it would make
competition no sense to try generally to meet Japanese- or other with aggressive export credit support unless there is a good prospect of our being able to win. I know of absolutely no reason to believe that in an all-out export credit race we could hope to have a chance of winning. The end result of pursuing such a course would far more likely be damage to our export interests at large, loss of jobs, and the stimulation of counter-aggression by others which would put at risk contracts for exports of capital goods which we might otherwise have secured. That is why we in the Treasury attach such importance
of anything like to the export credit consensus and the avoidance
an export credit war. I am sure that the Department of Industry does too, for there is no doubt that it is in all our long-run interes
4.
There is already clear evidence of the risks we are running. You will know, for example, of the American protests about what they call "predatory" export credit financing by the UK (Rolls-Royce/ Pan Am, Dhekelia B, and now the power station in Thailand) and of
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