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detrimental to Bri ti sh interests if the negotiations
broke down. They think it may be difficult
for the Hong Kong Government to recede from
the position taken up.
The China Association regard the satis-
factory solution of the question as of vital
importance to British interests generally in the
Far East and regret that the matter appears to
have been treated as one affecting merely the
interests of Hong Kong. They have not seen the
revised draft but considered the original draft
desirable for the following reasons: -
(1) It reduces smuggling to a minimum, thus
removing a cause of continual friction.
(2)
It increases the value to the Chinese of
the Customs Organi sation, thus tending
to prolong its existence in its pre sent
form.
(3) The fact that inter-port transhipments are
not to lose status of origin should greatly
increase entrepôt trade.
(4)
Non-acceptance will lead to stringent
preventive cordon round Hong Kong and so
friction and delay in navigation.
They consider that at the limitation of the
privileges under Article V. to Chinese flag-vessels
would remove the danger of "incidents" and the
advantages of this outweigh the danger of any
precedent created.
The Foreign Office, (a) Details of the
revised draft:-
The