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(c)
it was largely for Hong Kong to decide wheth it wanted to run such risks, although HMG had an interest in improving BA's terms.
The arguments in air services terms favour terminating the RR CMU and trying to negotiate a CMU that will bring about a very necessary improvement in air services between Hong Kong and China. From the political point of view, there are clearly risks involved in a course of action which could lead to a confrontation in mid-1983, and a souring of the atmosphere in the meantime. Despite (b) of paragraph 10 above, it is argu- able whether the prospective benefits are important enough to justify the political risks.
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But one point is clear, if notice of termination is served, CAAC are likely to go to the brink and possibly beyond before they are prepared to concede a new CMU that would be reasonably close to what DoT are seeking (summarised in paragraph 5 above). For HMG then to back-pedal (as suggested in para- graph 10 (b) (iv) above) would have serious consequences for Hong Kong's credibility in the wider context.
Tianjin and Nanjing
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Meanwhile, CAAC are circumventing the terms of the ASA and of the RR CMU, by increasing their flights to Peking and Shanghai by "bending" traffic over Tianjin and Nanjing. CAAC are flying four services per week to Tianjin when their permit (footnote 4) only allows for two services per week.
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The Embassy have told CAAC that DoT are prepared to consult with CAAC but propose meanwhile to keep the restiction on CAAC's scheduled Tianjin flights to two a week (but, to give CAAC time to sort out their passengers, DoT will grant two extra flights a week up to a specified date, probably the end of June). CAAC have declined to accept any restriction on their services but have expressed willingness to consult.
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Footnote 4:
Although there is no limitation on CAAC's flights to seven cities in China, the flights are required to conform with British and Hong Kong law. One consequence is that they can land in Hong Kong only with a permit issued by the DoT. Nor- mally the DoT would issue permits for as many flights as CAAC wanted to operate. DOT's argument for limiting Tianjin flights to two is that CAAC is illegally carrying passengers directly on the same aircraft on to Peking.
SECRET