TNAG-0042-FCO40-78-Future-Sovereignty-of-Hong-Kong-Defence-Review-Working-Party-1967 — Page 63

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(a) that imports from 1ong Kong would be entirely

replaced by imports from third countries 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

Disre, arding secondary effects (which in view of the smallness of the figure is reasonable) this £50 million would roughly measure also - loss of real income (it would be an underestimate in so far as replacement imports from third countries - as is likely to be the casey were more expensive than imports from Hong Kong). 8. Adding in the assumed net loss of £5 million on invisible account (para-raph 6 above) the effect of loss of Hong Kong on the balance of payments (pending re-deployment or increased use of U.X. resources) would

to the extent of some 955 million be adverse. On worst assumptions there would be a

prolonged loss at this rate.

9. At the opposite extreme the most optimistic

assumptions might be;-

(a) that the resources currently used for exporta 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 third countries.

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