CO129-558-11 Mission of Sir F. Leith-Ross to China- proposals for a Hong Kong - China customs... 29-9-1936 - 30-12-1936 — Page 67

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might have various repercussions. It would do something

to reduce Hong Kong's powers of competition with Shanghai

in such matters as shipping repairs and port services

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generally, for which there is always intense competition.

It would also reduce the competitive powers of Hong Kong's

manufacturing industry, both in China and still more in

foreign countries.

Other Implications of a Customs Union.

9. Politically, a Customs Union must mean some loss

of sovereignty and must strengthen the tendency of

Chinese politicians to assimilate the position of Hong

Kong to that of a treaty port and to look forward to an

will as the eventual time when Hong Kong and other treaty ports will

revert to the full control of China.

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10. It has been assumed that purely administrative

difficulties, although considerable, could, with goodwill,

be surmounted; but an extremely difficult politics-

financial problem would arise. On what basis would the

revenue collected in Hong Kong be divided between the

Colony and China? That might be theoretically solvable,

but it is certain that the position would give rise to

endless wrangling, as it is impossible to say precisely

how much of Hong Kong's imports are intended for

consumption in the Colony.

11.

The Alternative of a Customs Agreement.

On balance, therefore, it seems extremely

improbable that a full Customs union could be in the

Colony's interests. The two things Hong Kong wants from

China are free entry for Hong Kong manufactured goods and

increased facilities for the conduct of Chinese coastal

trade