TNAG-0046-FCO40-82-Britain-s-entry-into-EEC-effect-on-trade-with-Hong-Kong-1967 — Page 211

CONFIDENTIAL

arise in relation to Hong Kong's imports of Canadian plastics.

STERLING

12. On sterling, Mr. Haddon-Cave asked about the implications

of British nembership as they were important to Hong Kong which

was the second largest holder of sterling. Mr. Ryrie said that

as far as could be seen British membership of the Community was

no obstacle to retaining sterling as a reserve currency. The

question had never been seriously raised during the 1961/1963

negotiations. Nevertheless the Chancellor of the Exchequer had

said repeatedly that he was prepared to discuss the question.

Once Britain entered the E.E.C. there might be some chances of

a move towards a European currency; but from the point of view

of the sterling holder, this was nothing to be afraid of.

Mr

Sedgwick asked whether Hong Kong's free market status would be

affected by British membership. Mr. Ryrie replied in the negative;

the Six had adopted a liberal policy on monetary matters and

there would be no pressure to impose exchange controls.

PASSIVE ATTITUDE

A

13. Mr. Audland recalled Mr. Haddon-Cave's reference to the

possibility of adopting a "passive attitude" on Hong Kong in

the context of the negotiations. Hong Kong feared that if

we sought special arrangements for her, the E.E.C. would demand

"safeguard" measures in return; that might well be so.

"passive attitude" might be considered as either the strategic

answer to this or as a tactical gambit. If Britain said nothing

to the Six about Hong Kong, the Six would almost certainly raise

the question themselves. It should then be possible to

manoeuvre them into the position of demandeurs which would

give Britain a tactical advantage. Mr. Haddon-Cave took note

of this. Sir A. Snelling commented that such a course of

action would be likely to end up at the same point, but by

a different route.

CONFIDENTIAL

/140