POLICY IN CONFIDENCE
its key location at the hub of that part of the world most
likely to be the source of any non-COCOM produced high technology, it would be difficult in practice to prevent Hong
Kong from continuing to trade and use equipment at the
forefront of technology at least in a wide range of currently proscribed goods. Since one of the key stones of any export control is that it must be effective, this particular
situation seems to strike at any sensible regime for
controlling high technology exports to Hong Kong after 1997. At the very least if Hong Kong were to maintain its valuable
role (which we have persuaded ourselves is how it is seen by China) as an outpost of financial activity, it would be vital
for any controls not to damage the existing infrastructure
used by the Hong Kong financial services industry and, indeed,
to ensure that it was not handicapped vis-a-vis other Western
financial service industries.
The Extent to which Hong Kong Controls its Exports
The current position on export control seems to be that the
government of Hong Kong have made strenuous efforts to strengthen their export control system covering exports to the
proscribed destination, but have still left major weaknesses
in their trade with non-proscribed destinations which could be
both a source of current embarrassment and a weakness in
pressing for any special regime for post-1997. At the most
recent discussions of these weaknesses the UK view (OT2/3) was
that the measures in hand should ensure that in future Hong
Kong operates controls on all exports as efficiently as it
does on trade with proscribed destinations. Given that that
state of affairs can be bought into existence now and be
given, therefore, some 6 or 7 years run in, it is likely that
when Hong Kong becomes part of China the apparatus will be in place to enable a safe system of controls to be operated. Realistically, however, for such a system to work properly
would depend upon the co-operation of the Chinese government and, in particular, those agencies within it whose interest is in circumventing COCOM rules. It would seem wildly implausible to assume that such agencies would be content to
allow goods to pass through Hong Kong without seeking to take advantage of that fact. Given, however, that the reality must
POLICY IN CONFIDENCE