U
SECRET
4. A gross imbalance of services has developed in favour of the Chinese. In return for 2/3 CPA flights we allow more than 50 CAAC flights a week. CPA's entitlement to even 2/3 flights is vulnerable
and hemmed in with restrictions.
g B WP
5. The air-services arguments for the proposed action are clear. DOT Ministers have accepted them, subject to the concurrence of the Hong Kong authorities.
6.
Anglo/Chinese relations need not be seriously affected. The Embassy in Peking would speak to the MFA to explain the background, pointing out the need for a careful review in the light of the many changes since 1979 and our desire to achieve a more balanced agreement. The Prime Minister's planned visit to Peking should not be clouded, as the notice period will then still have 8 months to run.
7.
The Hong Kong implications of what is proposed, however, are a matter of some controversy, The Governor has pointed out that the
crunch might come when we are in negotiation with the Chinese about
the future. He suggests that it would be risky to commit ourselves
to a simultaneous show-down with CAAC on an issue which the MFA may
view as one of sovereignty.
ARGUMENT
8. Issue of notice of this kind is a normal negotiating tactic on
air service matters. CAAC, whose intransigence is well known, are
not likely to persuade the MFA that our power to suspend services
is a serious humiliation. Nor are the MFA likely to see this as a
question of sovereignty, as the Chinese accepted limits to their services in 1979. Indeed the Ambassador is concerned that any sign
of weakness in our position on concrete matters relating to Hong Kong
would encourage the Chinese to develop a stronger negotiating position
in the wider talks than we need face.
י
9. As to timing, the sooner we grasp this nettle the less likely
it is that a crunch might come at a delicate stage in the negotiations
on the future. Exchanges in the next year or so are likely to be preliminary, with concrete points of difficulty emerging thereafter.'
SECRET
/A