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availability of funds and by the nature of a command economy. of course Chinese economic plans tend to be gnomic, and it is hard to be authoritative about the future pattern of Chinese trade. But Chinese imports are currently growing more rapidly than exports (24.7% compared with 14.6% last year). Chinese accession would bring opportunities as well as risks. Why should the UK not be in a position to benefit?
5. It is true that the Chinese government determines import policy, but some regions appear to be exercising increasing autonomy in this sphere.
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UK exporters should be able to exploit the inevitable growth of consumer choice and market orientation that must accompany the development of an economy attuned, as is current Chinese policy, slightly more to incentive than in the past. Of course there will be no guarantee that the trading relationship will flourish satisfactorily. But there is no guarantee that any trading relationship is likely to flourish in a GATT regulated open trading system (c.f. Japan, USA at present). Success would depend on ensuring that the right balance between rights and obligations is struck. As Alan Montgomery pointed out in his teleletter of 15 January, there is no reason to be unduly defeatist about achieving this - nor even perhaps (although I can see that this would be a point of extreme political sensitivity to the Chinese) about the assumption that China would automatically receive both state trading and developing country status. We should, I think, be examining the probability of Chinese membership against a background of inevitable change in the GATT - particularly in view of a new round which is likely, in addition to extending GATT disciplines and competence to new areas of trade, to focus on the graduation of the more prosperous and competitive developing countries away from their currently unreciprocated GATT privileges, and to result in some change in the safeguards regime, which might make your suggestion (with which I agree), of a special and selective safeguard clause, perhaps qualified by a specific Chinese commitment to increase progressively the levels of imports, look less difficult than it might now.
6. I have gone into these issues at some length not for the sake of academic debate but because the economic case leads you to argue that we should lobby actively within the EC (and elsewhere) to try to discourage the Chinese from applying. The potential political cost of such a campaign gives serious cause for concern. Even if such lobbying was received sympathetically by other EC Member States (which is not wholly clear), our opposition to Chinese membership would quickly become known to the Chinese. This could have dangerous consequences. It may be technically correct, as you say in your letter, that there is no substantive link between Chinese accession to, and Hong Kong's continuing participation in, the GATT. But we need a background of harmonious UK/China relations if we are to ensure the smooth implementation of the agreement on Hong Kong's future. The mechanics of ensuring Hong Kong's participation in the GATT will be one of the first questions to which the Sino-British Joint Liaison Group (JLG), to be established when the Agreement enters
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