TNAG-0182-FCO40-218-Defence-contributions-1969 — Page 107

element of separate treatment of the costs of the fighter unit, having regard to the origins of the decision to make one available; and the Governor told me last year that, though he wanted the fighter unit "buried" in the over-all negotiations, he nevertheless wanted the contribution in respect of it to be separately calculated. While you are in Hong Kong it would therefore be desirable to discuss with the Governor the tactics of a separate negotiation.

9.

The following opening and fall-back positions seem to be

indicated :-

i)

The first position would consist of a flat rejection of

the capital charge for the aircraft; a rejection of the view that Hong Kong should bear the full running costs; and, if the question arises, the stipulation that Hong Kong could not meet any costs arising up to March, 1971.

(ii) If costs are to arise before 1971, the second position would

be a concession that Hong Kong would be prepared to take into account its contribution to running costs prior to that date in the negotiations for a new defence contribution.

(iii) The second position (if costs will not arise before 1971) and the third position (if they will) might be to concede Hong Kong's full responsibility for running costs and/or the capital charge for aircraft. (Whereas Hong Kong's long term financial advantage may be in conceding the

capital charge before the running costs, there is perhaps a

stronger case to argue against the raising of the capital

charge and the Governor has strongly represented the political objections to it).

There could be no concession on meeting costs arising up to 1971

prior to that date.

10. The following are the arguments that could be used in any

negotiations :-

(a) Capital Charge for Aircraft: first and foremost we would,

I think, rely on the Governor's point about the strong

sense of outrage in Hong Kong public opinion and the effect

this would have on the possibility of obtaining funds for

the unit in particular and for a revised defence

/contribution