SECRET
CHINA: RENEWAL OF MOST FAVOURED NATION STATUS
We welcomed President Bush's recent decision to renew MFN unconditionally. But Congress has yet to give its support. Human Rights and the US Trade Deficit with China will be factors, but we believe that the wider international interest in supporting reform in China, and the potential damage to the Hong Kong economy, outweigh such arguments. The Prime Minister could say:
Non-renewal will mean the loss of an estimated 43,000 Hong Kong jobs; the halving of GDP growth; and the loss of $ 9-12 billion in trade this at a
particularly difficult time in Hong Kong's history; two-thirds of China's exports to the US pass through Hong Kong.
Renewal with conditions would be damaging, introducing uncertainty resulting in a disincentive to investment;
Substantial American interests and investment could also be damaged. The US is the largest investor in Hong Kong $ 6 billion, 900 companies (140 factories);
- We understand concerns about Human Rights and
Non-Proliferation. We also recognise US concerns about the bilateral trade imbalance, textile quotas and intellectual property protection. But it is easier to effect change in China by maintaining trading contacts than by isolation.
SOUTH AFRICA
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though shel
not very easy
A White House spokesman said on 20 June that the President expected to be able to lift all CAAA (Congress' Comprehensive Anti-Apartheid Act) sanctions by mid-July. Off the record, officials have mentioned 15 July as the target date. Only the fifth CAAA condition for lifting sanctions remains unfulfilled that relating to political prisoners. Over 1,000 have been released. However, if in the next few weeks the South African Government and the ANC fail to agree that all legitimately political prisoners have been released, the US will apply their own definition which is more stringent than that employed by the ANC (eg it excludes all cases where violence was used. This would enable President Bush to certify that the last condition had been met. The Prime Minister could say:
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POFAAJ
SECRET