Background
CONFIDENTIAL
1.
The Prime Minister raised the MFN issue with
President Bush in Bermuda on 13 March 1991 outlining the
damage any repeal would have on Hong Kong. The President
agreed this was a good argument to use with Congress.
The Secretary of State assured the Chinese in Peking of our best efforts with the US Administration and with Congress.
2. The chances of Congress seeking to overturn a
Presidential decision to renew MFN are worse than last year.
China now has the third largest bilateral trade surplus with
the US. The US also has disputes with China on textile
quotas and intellectual property and is concerned about
China's performance on human rights and arms proliferation.
The effect on Hong Kong's economy of a withdrawal of China's MFN status would be very damaging:
3.
4.
(i) a loss of up to 43,000 jobs in Hong Kong.
(ii) a reduction of about one third in Hong Kong's
expected GDP growth.
(iii) a reduction of between 5%-7% (USD9 bn-USD12 bn) in Hong Kong's overall trade.
(iv) a loss of up to 44% (USD4.6 bn) in Hong Kong's re-exports from China to the US.
The strategy of the Hong Kong Government is to continue
to spread the message that withdrawal of China's MFN status
would damage Hong Kong and to extend their lobbying targets to secure broader-based support from within the US. The Governor is writing personally to key senators and congressmen to seek their support for unconditional renewal
of China's MFN status.
BUSAJS/2
CONFIDENTIAL