TNAG-0045-FCO40-81-Britain-s-entry-into-EEC-effect-on-trade-with-Hong-Kong-1967 — Page 177

lopes to

ith Hatt ith Carter

BECKET

2/4/11

Minister of tate

VISITS OF THE PRIME MINISTER AN FOREIGN SECRETARY TA.E.C. CANIMALS

I am not sure whether you will have seen the attached eubmission to the Secretary of State, together with the related briefs. But I think you should certainly see the brief fined D. which deals with the problems which British entry into the Common Market would rolso in relation to the Dependent Territories The main difficulties would arise in respect of Hong Kong; and since possible British entry into the 2.5.C. could become one of the main que-tions affecting our rolations with Hong Kong I thought it might be helpful to you to have something of the background. The background

2. tiong Kong's exports have been increasing in the last few years by 12-15% per year. But her exports to Britnin have been expending less rapidly in the last year or two then they eid previously, This has partly been because Hong Kong have deliberately been seeking to diversify their markets in recent years, and partly the e. fect of imports surcharge. At present about 17-127 of Hong Kong exports gu to Britain, as compared with over 30% to the United States. Her exports to the E..C., though they increased by about 24 times between 1962 and 1955, particularly to Western Germany, still account for under 10% ef

her total exports.

3. Most of Hong Kong's exports to Britain enter our market dity free, and receive a preference in that we charge a tariff on imports from non-Commonwealth sources. If we entered the f.f.C. the rules would require that all Hong Kong's exports to us should pay the common external tariff, whereas goods from other E. F.C.- countries would enter duty free. Hong Kong would then not only Lose her free entry, but would have to face reverse preferences in the Br, tish market in favour of the other member countries of the enlarged Community. !!ow this would affect liong Kong would Le a matter of conjecture, but during the Brussels negotiations in. 1962 the Hong Kong Government thought that up to half of their exports to Britain would face difficulties.

4. The calculation of the value of the preferential margin to Hong Kong in quantitative terms is as follows. In 1965, Mong Kong's exports to all destinations amounted to just over $5,000 million (£313 million). of these $260 million (just under

£54 million),