CONFIDENTIAL
levels in the US Administration, and our Washington embassy and the Hong Kong Government have lobbied on Capitol Hill. Last year the Prime Minister discussed the issue with
President Bush who said how useful this lobbying had been in
the run up to his decision and there is no doubt that the
lobbying contributed to his decision being maintained in the
face of subsequent adverse voting in the Senate and House.
4. If MFN for China is not renewed this year the effects on
Hong Kong's economy could be very serious. Even conditional renewal could be damaging as it would bring about
uncertainty in the markets and lead to an erosion of
confidence in Hong Kong as a major trading and financial
centre. The US is still Hong Kong's biggest market, and in
1991 re-exports of China origin to the US amounted to
HK$104 billion, representing 19% of Hong Kong's total
re-exports. Non-renewal of MFN could result in:-
5.
i) a loss of 44,000 60,000 Hong Kong jobs ii) GDP growth rate cut by one third to a half
iii) a loss of income by Hong Kong of HK$12-16 billion
iv) a loss of HK$91 123 billion in overall trade
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I attach our timetable showing recent events and
possible future ones based on information from Washington,
together with a telegram containing their assessement of the
likely outcome. Although it is almost certain that
President Bush will renew MFN this year it is less certain how his decision (which will probably be annouced before the end of this month) will fare on Capitol Hill. Washington believe Congress will challenge it by introducing a joint resolution of disapproval. This has to be voted on before
31 August, and the Veto debate is likely to take place in early September. It is also likely that Congress will introduce a bill setting conditions for MFN.
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CONFIDENTIAL