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CONFIDENTIAL
4. THE ONLY PROSPECT OF NEGOTIATING A REASONABLE DEAL ON THE REGIONAL ROUTES THEREFORE SEEMS TO BE TO CONTINUE TO
TIE THEM IN WITH THE TRUNK ROUTE AND TO USE SUCH LEVERAGE AS WE HAVE ON THE LATTER (ESPECIALLY THE APPARENT CHINESE DESIRE TO CONCLUDE THEIR ASA WITH US) TO ASSIST THE FORMER. ALTHOUGH IT IS NOT REALISTIC TO SUPPOSE THAT WE CAN ACHIEVE THE OPPORTUNITIES FOR WHICH HONG KONG WAS HOPING, WE WOULD EXPECT TO COME OUT BETTER ON THE REGIONAL ROUTES THAN IF WE WERE
TO LEAVE THEM OVER FOR SEPARATE NEGOTIATIONS,
5. THERE ARE OF CORSE RISKS IN THIS. WE MAY COME OFF WORSE
ON THE TRUNK ROUTE THAN IF WE WERE TO DEVOTE OUR WHOLE BARGAINING LEVERAGE TO THAT. AND IF HONG KONG - PEKING
REALLY IS A STICKING POINT WE MAY PUSH THE CHINESE TOO
FAR AND LOSE BOTHE DEALS. THIS BRINGS US ON TO QUESTION
B IN PARA 1 ABOVE.
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6. IT APPEARS FROM HONG KONG TELNO 617 THAT HONG KONG ARE
PREPARED TO ACCEPT A SOLUTION UNDER WHICH, ONCE BA'S TEMPORARY SERVICES ON THE TRUNK ROUTE WERE WITHDRAWN, CAAC WOULD HAVE A
PERMANENT MONOPOLY ON THE HONG KONG-PEKING ROUTE, THIS WOULD
APPEAR TO REFLECT THE REALITIES OF HONG KONG'S COMMERCIAL
AND POLITICAL INTERESTS. OUR BARGAINING POSITION ON THE
REGIONAL ROUTES IS WEAK. EVEN IF WITHOUT ANY PRIOR
AGREEMENT THE CHINESE WERE TO APPROACH US TO ALLOW CAAC TO
OPERATE BETWEEN HONG KONG AND PEKING WITHOUT A RECIPROCAL BRITISH SERVICE, WE COULD HARDLY REFUSE. MOREOVER, SO FAR
· AS THIS AND OTHER REGIONAL SERVICES ARE CONCERNED, THE CHINESE COULD EXPLOIT OUR SYSTEM BY APPLYING FOR PROGRAMMED CHARTERS WHICH DCA/HONG KONG WOULD FIND IT VERY HARD TO REJECT.
AND ONCE CAAC HAD STARTED A SERVICE TO HONG KONG ON WHATEVER BASIS IT IS HARDLY CONCEIVABLE THAT WE WOULD STOP IT BECAUSE
THE CHINESE REFUSED TO LICENSE A COMPETITIVE BRITISH CARRIER.
7. HOWEVER, AS SEEN FGOM HERE THE CHINESE POSITION OVER THE HONG KONG-PEKING ROUTE IS ILLOGICAL IN POLITICAL TERMS,
AND PROVIDED WE KEEP UP THE PRESSURE THERE IS A PROSPECT THAT
THEY THEMSELVES WILL ACCEPT ITS ILLOGICALITY. WE THEREFORE PROPOSE TO CONTINUE PRESSING FOR A MORE EQUITABLE PACKAGE.
THE AMBASSADOR WOULD FURTHERMORE BE WILLING TO SUPPLEMENT THIS
APPROACH IF YOU AGREE BY INTERVENING AT HIGH LEVEL IN MFA.
/HE
2 CONFIDENTIAL