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

assumptions therefore the economic loss would be at an initial annual rate of £35-40 million. (This inter alia

would reflect, in the cessation of IPD payments, a loss of

U.K. capital assets in Hong Kong, which may be of the

order of £80 million.)

8. At the opposite extreme the most optimistic

assumptions might be:-

currently

(a) that the resources/used for exports to Hong Kong

(b)

all

would be redeployed in uses beneficial to the

balance of payments (additional exports to

third countries or import saving domestic use);

and

<<

of

say one half that a significant proportion -

our imports from Hong Kong would be replaced by increased domestic production (using resources

hitherto unemployed) rather than by imports from

third countries.

On these assumptions (and assuming that the increased production under (b) had an import content of 25 per cent),

the net effect on the visible account would be positive at

21

Bay +£23 million (2

25% of

}. (Income would

have increased because of increased U.K. production, though

in real terms this would be partially offset because

domestic production and imports from third countries could

be assumed to be more expensive than the Hong Kong imports

displaced.) Adding in the £10 million from paragraph 6

above we get a balance of payments improvement of say

£30 to £35 million.

9.

Paragraphs 7 and 8 yield a range for the balance of

payments effects from minus £35-40 million to plus

£30-35 million.

optimism:-

There are two factors sugesting relativ