CONFIDENTIAL
FILE
BRIEFING FOR HMA WASHINGTON (DESIGNATE)
HONG KONG: MOST FAVOURED NATION (MFN) STATUS
US Position
1.
The President has unconditionally renewed MFN, but Congress and the Senate can overcome that decision in
certain circumstances (see para 6 below), or they can seek
to add onerous conditions on renewal next year. The US
trade deficit has expanded enormously, and China now has the
third largest bilateral 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 its role in arms proliferation.
Damage to Hong Kong in event of non-renewal
2. Withdrawal of MFN status would affect Hong Kong because
of the huge volume of China/US trade which goes through Hong Kong. Damage would include loss of US$9-12 bn in trade and perhaps 40,000 job losses and a halving of GDP growth. (A detailed assessment of the impact on the Hong Kong economy of non-renewal of MFN is attached.)
Renewal with conditions
3.
Renewal with conditions could also damage Hong Kong, as
it would introduce uncertainty which would act as a
disincentive to investment in the territory.
Damage to US interests in Hong Kong
4.
The US is one of Hong Kong's largest investors, with a
total investment of about US$ 6 bn, involving about 900 US companies, including over 140 factories.
BRIAEU/2
CONFIDENTIAL