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Reference
5. We have always known that concern for the damaging effects on Hong Kong was a strong argument to help persuade the US to renew MFN, but that it would never on its own be a decisive argument if, say, China was behaving badly. The Governor has argued (though with no apparent effect on the Chinese thus far), that he will carry more weight as a lobbyist in Washington on MFN if Hong Kong is seen to be making progress towards democracy. That may yet be true, but my guess is that Hong Kong's role in China's trade surplus may undermine US reserves of goodwill (despite the corresponding reduction in Hong Kong's own trade surplus). The protectionist lobby may ask why the US should care if Hong Kong's economy (which contributed to the "Red" tide of exports) should suffer by non-
(or conditional-) renewal of MFN.
6.
we
This factor may not prove to be decisive in terms of whatever conditions may be attached to MFN renewal in 1994; have enough to worry about with China's performance over human rights and arms proliferation, etc. But thus far we have always counted on US goodwill, and I think we should take Washington's (and Hong Kong's and Peking's) advice on whether we can continue to do so. (But Washington should not consult the Administration; if these hares are hibernating at present, we should not start them running). In any event the risks outlined above give all the more reason for Hong Kong to show itself whiter than white over issues such as textile quota fraud, diversion of strategic materials to China etc.
If you agree, I will distil the above into a telegram. (Grateful for any comments which copy addressees may have).
Than
JC Morris
Hong Kong Department
1 March 1993
CC: Mr Davies, FED
Mr Pellew, NAD
Mrs Barnes Jones
Mr Whitney
Mr Lane, Econ Advisers
mfh.renewal.MORRIS
JEB
CONFIDENTIAL