TNAG-0047-FCO40-83-Britain-s-entry-into-EEC-effect-on-trade-with-Hong-Kong-1967 — Page 39

CONFIDENTIAL

Mr. Cowperthwaite agreed that this was important too, but said

that there must be some adverse effect on Hong Kong's exports

resulting from Britain's adoption of the c.e.t.

even if this

was only a lower growth rate than would otherwise have taken

place. The prospect of free entry into Britain was one of the

major incentives to businessmen to start new industries in Hong

Kong and there were already signs that uncertainty about how

long this would continue was having its effect. Moreover Hong

Kong's experience was that when new industries were started,

the firms concerned brought their markets with them. Mr. Audland

commented that if this was indeed a significant factor, it

tended to weaken the argument that preferential access to

markets was important to the establishment of new industries.

Sir A. Snelling said in conclusion that he felt it would be

difficult to make out a case to the Six for limited preferential

access to the enlarged Community for Hong Kong's new products.

The Financial Implications of British Entry into E.E.C.

9. Mr. Cowperthwaite said that Hong Kong was the largest or

second largest holder of sterling. As a Dependent Territory

she did not have the opportunity to diversify her foreign

exchange holdings. He was finding it more difficult to say in

public that no question arose over the implications of Britain's

entry into the Community for Hong Kong's sterling reserves. He

asked the British Delegation for its views on the Six's likely

attitude to the question of sterling.

10. Mr. Jordan-Moss said that there was nothing in the Treaty

of Rome which prohibited the maintenance of a reserve currency

by a Member State. The French franc was a reserve currency,

though in a smaller way than the pound. We had said that we

would be very interested to hear any ideas the French might

have as to how the status of sterling might be changed, but so

far we had received no response. It was not clear whether they

distinguished betwen the trading and reserve roles of sterling.

Nor did we know if they were thinking on the lines of creating

/a

CONFIDENTIAL