CONFIDENTIAL
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MAB 040/4
CONFIDENTIAL
FM FCO
TO IMMEDIATE WASHINGTON
TELNO 1087
OF 11170OZ JUNE 91
AND TO IMMEDIATE HONG KONG
INFO IMMEDIATE PEKING, UKREP JLG HONG KONG
147507
MDHOAN 5383
996 LSIG O ADOS DOL
CHINA/US RELATIONS: MFN STATUS: MESSAGE TO BAKER
1. PLEASE DELIVER THE FOLLOWING MESSAGE FROM ME TO SECRETARY BAKER AS SOON AS POSSIBLE.
BEGINS
I AM GLAD THAT PRESIDENT BUSH HAS DECIDED UNCONDITIONALLY TO RENEW MFN STATUS FOR CHINA. AS YOU KNOW JOHN MAJOR HAS BEEN KEEPING IN CLOSE TOUCH WITH THE PRESIDENT AND I ALSO DISCUSSED THE MATTER WITH BRENT SCOWCROFT AND
LARRY EAGLEBERGER WHEN I MET THEM IN WASHINGTON AT THE END OF MAY. I KNOW THAT THERE IS OPPOSITION TO RENEWAL IN CONGRESS, SO I THOUGHT I SHOULD WRITE TO YOU TO UNDERLINE THE IMPACT ON HONG KONG IF CHINA'S MFN STATUS WAS NOT RENEWED, OR IF CONDITIONS WERE ATTACHED TO RENEWAL.
WE ARE HAVING CRUCIAL TALKS WITH THE CHINESE OVER HONG KONG'S PLANS FOR A NEW AIRPORT. THESE HAVE BROADENED TO ENCOMPASS THE GENERAL QUESTION OF HOW TO MANAGE HONG KONG UP TO 1997. VIETNAMESE MIGRANTS CONTINUE TO POUR IN. INFLATION IS HIGH AND GROWTH LOW. NON-RENEWAL OF CHINA'S MFN STATUS WOULD THEREFORE COME AT A PARTICULARLY DIFFICULT TIME.
HONG KONG'S ECONOMY IS NOW INEXTRICABLY LINKED WITH THAT OF CHINA'S. MORE THAN TWO THIRDS OF CHINESE EXPORTS TO THE UNITED STATES ARE ROUTED THROUGH HONG KONG. WE ESTIMATE THAT NON-RENEWAL OF CHINA'S MFN WOULD RESULT IN A LOSS OF SOME 43,000 HONG KONG JOBS, A DROP OF UP TO HALF IN HONG KONG CURRENT GDP GROWTH AND A LOSS OF USDLRS 9-12 BILLION IN TRADE.
I APPRECIATE THAT THERE ARE A NUMBER OF OTHER IMPORTANT
FACTORS WHICH CONGRESS WILL TAKE INTO ACCOUNT IN REACHING A DECISION, NOT LEAST THE CHINESE RECORD ON HUMAN RIGHTS AND THE US TRADE DEFICIT WITH CHINA. THERE HAVE BEEN
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