4.
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MEANTIME, WE TOOK THE OPPORTUNITY OF A SMALL DINNER PARTY WITH SHEN TU (DIRECTOR OF CAAC) ON 25 MAY TO DISCUSS THE SITU-
AT ON FULLY WITH HIM. THE AMBASSADOR AND LU WERE ALSO PRESENT.
5. SHEN TU HIMSELF STARTED THE BALL ROLLING BY REFERRING TO
THE PGOBLEMS WHICH HAD ARISEN IN THE NEGOTIATIONS AND DISCUSSION
ON THIS TOPIC CONTINUED FOR OVER TWO HOURS. SHEN TU HAD
EVIDENTLY BEEN WELL BGIEFED. HE WRIGGLED AND TWISTED IN DISCU~
SSION BUT WE WERE ABLE TO ANSWER ALL HIS POINTS. AT ONE STAGE
HE REFERRED TO BA'S APPLICATION FOR PERMISSION TO USE THE KUNMING
ROUTE. HE SAID THE CHINESE WOULD BE QUOTE SELECTIVE UNQUOTE
IN DEALING WITH APPLICATIONS FROM AIRLINES TO USE THIS ROUTE
AND IMPLIED THAT THEIR WILLINGNESS TO ALLOW BRITISH AIRWAYS TO
USE IT WOULD BE A BARGAINING FACTOR IN THE CURRENT NEGOTIATIONS. HOWEVER, WHEN IT WAS POINTED OUT THAT HIS WAS CONTRARY BOTH TO THE TEXT AND TO THE SPIRIT OF THE NOTAM HE WITHDREW AS GRACE-
FULLY AS POSSIBLE.
6:
HE SEEMED MORE RECEPTIVE THAN LU HAD BELF TO THE SUGGESTION
BY THE AMBASSADOR AND ROGERS THAT BOTH SIDES SHOULD BE LOOKING
FOR AN EQUITABLE BALANCE AND HE AT NO TIME REPEATED LU'S STATE-
MENT THAT ONCE BA WITHDREW FROM THE HONG KONG-PEYING SECTOR NO
OTHUC BRITISH CARRIER COULD BE ADMITTED. ON THE CONTRARY, IN
RESPONSE TO PRESSURE ON THIS POINT HE SAID THAT IF THE UK APPLIED
TO DESIGNATE ANOTHER CARRIER ON THAT ROUTE WHEN BA WITHDREW, THE
CHINESE WOULD BE PGEPARED TO QUOTE PROCESS UNQUOTE THE APPLICATION.
7. HE TWICE WENT OUT OF HIS WAY TO STRESS THE WIDER IMPORTANCE
OF CONCLUDING AN AIR SERVICES AGREEMENT AND THE CHINESE DESIRE
TO DO SO AT THIS ROUNG.
8. SEE ALSO MY SECOND IFT REPORTING LEGAL AND TECHNICAL DISC-
USSIONS.
CRADOCK
FILES
HARD
[COPIES SENT TO CHO/DCT]
FED
HKIGD,
LEGAL ADVISERS
HR CORTAZZI.
MR BUTLER MR MURRA
CRAY
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