CONFIDENTIAL
to which industry can improve quality and productivity and diversify
both its products and its markets. There are signs that industry
recognises and is prepared to grapple with these problems.
Basically, however, Hong Kong's economy rests on the opportunity to
trade; it is, and always will 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.
28. For these reasons Hong Kong depends heavily on the maintenance
of the most favoured nation principle in trade and other GATT rules
and she values highly her rights under the GATT 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 exposed to unfavour-
able discrimination.
HONG KONG DEPARTMENT
9 April 1970
10.
CONFIDENTIAL
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