TNAG-0042-FCO40-78-Future-Sovereignty-of-Hong-Kong-Defence-Review-Working-Party-1967 — Page 49

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(a)

that imports from Hong Kong would be entirely

replaced by imports from third countrics and

(b) that the resources used for exports to

Hong Kong would be put to no use - 1.e. be

unemployed.

On this basis the effect on the trade balance would be:-

Loss of exports

66

less:

Import content of exports

(say 25 per cent)

* 16

say

50

Disregarding secondary effects (which in view of the

smallness of the figure is reasonable) this £50 million

would roughly measure also a loss of real income (11

would be an underestimate in so far as replacement

imports from third countries as is likely to be the

case were more expensive than imports from Hong Kong).

Adding in the assumed net loss of £5 million on

invisible account (paragraph 6 above) the effect of loss

of Hong Kong on the balance of payments (pending

S.

U.A.

re-deployment or increased use of U.K, rescurces) would

to the extent of some £55 million

be adverse On worst assumptions there would be a

prolonged loss at this rate.

9. At the opposito extreme the most optimistic

assumptions might be:-

(a) that the resources currently used for exports

to Hong Kong would all be rapidly re-deployed

to uses beneficial to the balance of payments

(additional exports to third countries or

import saving domestic use); and

(b) that a significant proportion say one half

of our imports from Hong Kong would be replaced

by increased domestic production (using

resources hitherto unemployed) rather than by

imports from thiră countries.

2

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