TNAG-0056-FCO40-92-Evacuation-plan-1967 — Page 102

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by a corresponding monetary inflow). While this debit would be reduced in so

far as releases from the balances were made to United Kingdom residents, for present purposes we assume that a debit of £15 million would continue.

The overall result on invisibles therefore would be that we would show a total

net deficit of £15 million, as opposed to £10 million in 1966 i.e. a net

loss to the balance of payments of £5 million.

7. The effects of the loss of Hong Kong on the visible account would depend to a major extent on the use (if any) to which the resources currently used for exports for Hong Kong were put (and at what speed) and how far

United Kingdom resources were fully employed at the time. The extreme

worst assumptions might be:-

(a) that imports from Hong Kong would be entirely replaced by

imports from third countries and

(b) that the resources used for exports to Hong Kong would be

-i.e. be unemployed.

put to no use

On this basis the effect on the trade balance would be

less:

Loss of exports

• 66

Import content of exports

(say 25 per cent)

+ 16

say

-

50

Disregarding secondary effects (which in view of the smallness of the figure is reasonable) this £50 million would roughly measure also a loss of

real income (it would be an underestimate in so far as replacement imports

from third countries as is likely to be the case were more expensive

than imports from Hong Kong).

8.

Adding in the assumed net loss of £5 million on invisible account (paragraph 6 above) the effect of loss of Hong Kong on the balance of

payments (pending re-deployment or increased use of United Kingdom resources)

would be adverse to the extent of some £55 million. On worst assumptions there

would be a prolonged loss at this rate.

9.

At the opposite extreme the most optimistic assumptions might be (a) that the resources currently used for exports to Hong Kong

would all be rapidly re-deployed to uses beneficial to the balance of payments (additional exports to third countries or import saving domestic use); and

(b) that a significant proportion say one half of our imports

from Hong Kong would be replaced by increased domestic

production (using resources hitherto unemployed) rather than by

imports from third countries.

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