CONFIDENTIAL
TELELETTER
Hong Kong is seen to be making progress towards democracy.
Against that there is a risk that Hong Kong's role in China's
trade surplus (if the protectionists detect it) may undermine US
reserves of goodwill. The protectionist lobby may ask why the US
should care if Hong Kong's economy should suffer by
conditional-renewal of MFN. Might there even be a risk that Hong
Kong products, (at least those associated with HK companies
manufacturing in South China) could come under pressure for
protectionist measures? (At the very least, the risks outlined
above underline the need for Hong Kong to show itself whiter than
white over issues such as textile quota fraud, diversion of
strategic materials to China etc.)
6.
A number of major US companies, of course, are also
contributing to the US/China trade imbalance by virtue of their
manufacturing involvement in South China. But neither this, nor
arguments about the virtues of free trade, we suspect, would cut
much ice with Congressmen susceptible to protectionist rhetoric.
7. It is hard for us to judge from here whether Hong Kong's role
in the US/China deficit is likely to play any part in conditional
renewal of MFN in 1994. But thus far we have always been able to
count on US goodwill towards Hong Kong, and we should welcome
your views (and any thoughts from copy addressees) on whether we
can continue to do so. Subject to your own views, however, we
don't think you should consult the Administration at this stage.
If these hares are hibernating at present, we should not start
them running.
SIGNED J C MORRIS, HKD
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