TNAG-0103-FCO40-139-Briefs-and-background-notes-for-Lord-Shepherd-1967 — Page 112

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maintain a steady 12%-15% increase by value per annum.

Nevertheless,

with the full weight of the population "bulge" still to be felt (in the

1961 census 40% of the population were under 15), the maintenance of prosent

standards of living (more so any improvement in those standards) depends

on the ability to expand industriel production and exports. These in turn

depend partly on the extent to which industry can improve quality and

productivity and diversify both its products and its narkots. There

aro signs that industry recognises and is prepared to grapple with those

problems. Basically, however, Hong Kong's economy rests on the opportunity

to trade; it is, and will always be, very vulnerable in the event of any

general downturn in world trade or the adoption of more protectionist

policies by countries constituting its major markets.

11.

For these reasons Hong Kong depends heavily on the maintenance

of the most favoured nation principle in trade and other G..T.T. rules

and she values highly her rights under the G...T.T. and the Long Term

Arrangement on Cotton Textiles. Her fear is that these rules will either

be increasingly flouted or they will be changed to her detriment. If this

were to happen she could be placed in a special category of countries

(perhaps with Japan), exposed to unfavourable discrimination.

Common Market

12.

Hong Kong is also concerned with the formulation of a Common

Commercial Policy in the European Common Market (when this takes place)

and hopes that the hitherto liberal policies of e.g. Holland and Germany

will outweight the illiberal inclinations of France. (Hong Kong has a

representative attached to the British Embassy in Brussels). If Britain

were to enter the E.E.C., Hong Kong would almost certainly before long be

required to face the imposition of the Common external tariff on her

exports to Britain. In some sectors of her exports this could have

serious offects. What special safeguards night be sought for Hong Kong in forthcoming negotiations for our entry are the subject of discussions

with representatives of the Colony at the present time.

Hong Kong Department,

October, 1967.

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