HWB. 6/18.
CONFIDENTIAL
Dependent Territories Division,
50
21 August, 1967.
BU219. 1519.
As you may know, consideration is being given to the position of Hong Kong in the event of Britain securing entry to the Common Market and especially to ways and means of reducing the damage to her trade which might ensue.
2. One threat to Hong Kong lies in the possibility that the .E.C. or a Member State would disregard her rights under the G.A.T.T. Hong Kong's participation in the G.A.T.T. is through the accession of the United Kingdom, the Metropolitan power, so that redress for Hong Kong would have to be sought by Britain. But, as a member of the enlarged Community, we might find it difficult to speak up in the G.A.T.T. against a fellow member of the Community. Amongst various courses which have been suggested whereby Hong Kong could be protected against such a development, and one which has perhaps fewost negotiating objections, is for Britain to devolve full autonomy in the conduct of its external commercial relations upon the Colony. It would be enabled thereby to become a Contracting Party to the C.A..T. in its own right and to fight its own battles. Devolution would be affected by Britain sending a formal declaration to the G.A.T.T. Secretariat that Hong Kong now had full autonomy in the conduct of its external trade rolations and the Secretariat would then advise the other contracting parties accordingly. Such autonomy world onable Hong Kong to take independent rotaliatory action against any member of E.".C. who discriminated against her.
3. When this possibility was raised at recent talks with Hong Kong Govern- ment officials, they felt that the risk of strong Chinese reaction, on the grounds that this was another attempt "to make Hong Kong a country", was so great as to preclude its adoption. You will recall that when the possibility of similar Chinese reaction to Hong Kong membership of the Asian Development Bank was considered earlier this year, the Foreign Office viow, as expressed in Arthur de la Hare's unreforenced letter of 8 May to Arthur Galsworthy, was that, although it was a possibility, it should not be taken so seriously as to away the Hong Kong Government against joining the Bank if other considerations were in favour of their doing so.
4. We do not know, of course, when this question of Hong Kong's membership of 0.A.T.T. may have to be facod. It is morcover impossible to foresee what changes in the Chinese attitude towards Hong Kong may emerge from rocent events in the Colony. It would, however, be a reasonable assumption in my view that the Chinese attitude will be more critical and less passive than in the past. On the other hand, membership of the G.A.T.T. would perhaps be less offensive in Chinese eyes than membership of the Asia Development Bank.
5. It would be unfortunate if fears of China were needlessly to discourage us from pursuing a course which is attractive on many grounds. I should therefore be grateful for your views both on the likely Chinese reaction and
E. Bolland Esq.,
Far Eastern Department,
Foreign Office,
London, S.W.1.
Ton
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