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stability. No compromise (eg Hong Kong's participation
through the PRC) would maintain confidence.
16.
Whether or not Hong Kong retains GATT status, Chinese
bilateral trading agreements (eg with the EC, US and Japan)
might theoretically apply to Hong Kong's external trade
if Chinese sovereignty over Hong Kong is accepted. However,
retention by HMG of responsibility for the conduct of Hong
Kong's external relations would make it much more likely
that the present arrangements would continue.
Hong Kong as a Special Administrative Region (SAR)
17. Under existing EC regulations, a range of sensitive
products (including eg TV sets) are denied entry from China
and there are annual quotas restricting the import of other
products such as shoes. Textiles are the only Hong Kong
·
products subject to EC quantitative restraints.
If Hong
Kong became a Chinese SAR, provided that British administration
continued, it should be possible to argue in the EC that Hong
Kong products should continue to benefit from the existing
regime for access to the EC markets.
18. Among the other commercial issues that would need to
be considered if sovereignty over Hong Kong passed to
China are:
a) Export Credit
Hong Kong is ECGD's biggest single exposure, accounting
at present for some £3.2 billions, little of which is
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