CON FIDENTIAL
BACKGROUND
1. The possibility of Hong Kong having some form of relationship with the OECD was first discussed with the Hong Kong Government about 18 months ago. Membership would seem a logical conclusion in the context of increasing OECD dialogue with the dynamic Asian economies. The nature of Hong Kong's economy suggests they could fairly easily fall into step with the way OECD is presently run. But the main attraction of membership would be the additional anchor that it would provide after 1997.
2.
In the strict legal sense there is some doubt that Hong Kong could become a full member in its own right.
(Membership is normally accorded to "states"). Neither would it be acceptable, because of the significant size of its economy, to join under the umbrella of UK membership (as we currently intend for the Channel Islands and the Isle of Man). Full membership would hinge on the interpretation of "Government" in Article 16 of the OECD Convention which states that "the [OECD] Council may decide to invite any Government prepared to assume the obligations of membership to acceed to this Convention". Legally, it would perhaps be better to argue for some intermediary form of association rather than full membership. Although the Convention does not provide explicitly for such a step, there is a precedent in the case of Yugoslavia. (The subject of associate or observer status, in the context of Eastern Europe, is to be discussed by the OECD Council in September). Whilst the legal problems would probably not prove too difficult, the political problems would be less easy to overcome. The chief hurdle would be the apprehension of OECD members about Chinese reactions. Some would undoubtedly argue that Peking would construe any attempt to enrol Hong Kong as
un friendly act, largely for fear of creating a precedent for Taiwan, and result in China raising problems over the OECD/DAE dialogue. The Secretary-General of OECD has been at pains to avoid offending the Chinese over the dialogue with the DAE's and he and a number of members would be loath to jeopardize the progress so far achieved. Members would also be likely to raise political objections to admitting what will become a part of China, to eavesdrop on OECD internal discussions.
3. The Hong Kong Government wish to pursue low profile contact with the OECD Secretariat to discuss how best to forge future links. As a first step, officials from Hong Kong's Brussels office recently called on H M Permanent Representative to the OECD to discuss various arrangements which could be explored to promote co-operation. Sir D Wilson, at his request, hopes to be able to meet OECD's Secretary General imformally when he visits Paris in October. But before the Hong Kong Government decide to
SG2 ACY
CON FIDENTIAL