TNAG-0239-FCO40-275-Entitlement-of-Hong-Kong-to-generalised-tariffs-preferences--1970 — Page 115

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These include:

(i) Japan.

The increase in the supplementary duty quotas from 5% to 10% of imports from non-beneficiary countries; the use generally of two digit BTN numbers to delimit duty quotas and, most important, the dropping of the "Competitive clause";

(ii) U.S. The indication that the U.S. will apply safeguards on a non-discriminatory basis instead of on a dis- criminatory basis by country by product. This will probably mean that they will be more circumspect about applying safeguards and will give a freer run to Korea and Taiwan. The same applies to Canada;

(iii) the clear indications of a political commitment to

Taiwan and South Korea by both the U.S. and Japan.

5. In addition, I have noted a tendency for the line to be increasingly peddled around that dependent territories are the responsibility of their metropolitan powers and that they should be excluded from the GPS. The reason for this, I think, is that, facile as it may be, it is the only argument in favour of the exclusion of Hong Kong that will hold any sort of water without also dragging in other countries which it would be politically difficult to exclude.

Corridor Consultations

6.

It is against this background that we must consider the information, such as it is, that I picked up in corridor con- versations in Paris. The core of the problem lies with the U.S. and/or the EEC (to give priority to one or the other is really rather like a chicken and egg argument). The Japanese I judge to be incorrigible. Most, if not all, of the others (the four Nordic countries, Switzerland, Austria, Canada, New Żealand (which already gives Hong Kong Commonwealth preference) and Ireland) will probably fall in line with the U.S. and EEC, i.e. unlike Japan, none of them appear to be irrevocably opposed to including Hong Kong, but equally none of them are exactly bursting with enthusiasm to do so.

Japan

7. A report of my conversation with Karuda of the Japanese delegation (a large part of which was devoted to textiles rather than preferences) is in UKDEL OECD telegram to FCO No.75 of

September. Please see also my letter to Laird (Hong Kong Dept., FCO), copied to Dorward about the political aspects.

EEC

8.

Lam, Morris and I had lunch with di Martino on 14 September. The conversation was in French. As usual di Martino was in a pessimistic mood. When the talk got round to Hong Kong I said that the Community hardly seemed to be acting in their own self- interest. Hong Kong's major need was not to be discriminated against in the U.S. market in favour of her real and dangerous competitors. 42% of Hong Kong's exports went to the U.S. and only about 10% to the EEC, of which most went to Germany who we knew was not opposed to including Hong Kong in the EEC scheme. If the EEC excluded Hong Kong, the U.S. would do so also. The net result would probably be greater pressure on the EEC market from Hong Kong products paying tariffs than would be the case if both the U.S. and the EEC included Hong Kong in the GPS. was especially the case given that the EEC scheme had the built- in safeguards of duty free quotas on sensitive products and the 50% cut-off. I added that Hong Kong would not object to the

/50% limit

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