TNAG-0132-FCO40-168-Tariff-preferences-for-developing-countries-1969 — Page 133

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CONFIDENTIAL

Note by Hong Kong Government on Proposals for a Generalised System of Preferences for Developing

Countries

Basic Position

As a consequence of Hong Kong's extreme dependence on exports and on the protection against trade discrimination afforded by the G.A.T.T., a generalised scheme of preference would not suit Hong Kong because it might bring about:

2.

(a)

(b)

further weakening of the m.f.n. principle of G.A.T.T.;

a reduction, to a greater or lesser extent, of the value of Commonwealth Preference;

(c) possible diversion of trade and investment resulting from

Hong Kong's partial or total exclusion by any donor.

On the assumption that some generalised scheme will, however, materialise, Hong Kong's desiderata are as follows:

(a) Beneficiary Countries

For obvious reasons, we would wish to see firm adherence to the

principle of self-election.

(b) Safeguards and Exclusions

In descending order of undesirability, the possibilities appear to be:

(i)

exclusion by country;

(ii)

exclusion by country by product in initial exceptions list as well as safeguard procedures;

(iii)

(iv)

exclusion by country by product only in accordance with safeguard procedures;

exclusion by product on a non-discriminatory basis, both for initial exceptions and safeguards.

This

3. We are aware of the recent proposal by the E.E.C. Commission which would fall under (i). We should hope that the E.E.C. can be dissuaded from this line by the possible political implications of unravelling the previously agreed 0.E.C.D. Ministerial policy on, inter alia, self-election. argument would seem to have more prospect of success than any based on the 'developing' status of Hong Kong which would, in any case, appear invalid as the Commission proposal seems to be based on a concept of 1.d.c. over- competitiveness rather than on any argument that Hong Kong is not 'developing'.

4. If, however, Hong Kong's exclusion from a generalised scheme or from a large number of Australian type schemes proves inevitable, it would be in Hong Kong's interests that the scheme or schemes should be as limited as possible. To this end we would advocate that vis-a-vis a generalized preference scheme,

(a) the U.K's exceptious list should cover as many as possible

of the more important items subject to Commonwealth preference;

(b) the principle be established that products currently

under quantitative restriction should automatically be excluded from the scheme; and, as a corollary,

(c)

the depth of preferential tariff cuts should be as shallow as possible.