CONFIDENTIAL
terms, both on the regional routes where CPA is competing and, if
they could get it, on the trunk route.
CURRENT NEGOTIATIONS
3. Against this background, I have little doubt that the sort of offer which DOT are thinking of tabling will cause dismay, alarm, and perhaps a great deal of emotion. This is not simply because the chief Malaysian negotiator, Mohd Noor, is personally committed, but..... because the Malaysian Government has persisted in looking at their civil aviation relations with the UK in unrealistic and political
terms. Mr John Steel, Deputy Under-Secretary in the DOT, who is leading the present negotiations in London, is a skilled and careful negotiator and, solely on tactics, I think we should be prepared to accept his judgement that the time has come to put a piece of paper
on the table, even though the Malaysians will certainly regard this as unsatisfactory The question is: what will happen then? Mr Steel's proposal will in fact hold something back to concede to the Malaysians in negotiation. If he can negotiate this with Mohd Noor in the present round, well and good. It is quite possible, however, that the Malaysians will break off the present talks and that the next move will be a political approach at Ministerial level.
The DOT are aware, of course, that the Minister of State,
Mr Parkinson, will be in Kuala Lumpur next week. If the break occurred, it would be open to Mr Parkinson to assure his hosts that
he would do the best he could to improve our offer, in which case DOT would improve it.
4.
But the key problem at this second stage is that the DOT's
"last ditch" would still involve a reduction for the Malaysians on
what they personally enjoy on the regional route through Hong Kong (ie the loss of 5th Freedom Rights through Hong Kong to Tokyo). Frankly, I believe the Malaysians would not settle for anything less than the status quo; and I would expect it to take very hard bargaining and much political "angst" to get them to this point. The point at issue between the FCO and DOT, therefore, is whether the Hong Kong Government and CPA can be convinced to tolerate this, given that CPA expects to suffer some losses on other routes and is not yet sure of gaining a good slice of the China traffic. The Department's submission argues that there could be sufficient "give" in the Hong Kong position to allow them to accept this, or /that we