TNAG-0239-FCO40-275-Entitlement-of-Hong-Kong-to-generalised-tariffs-preferences--1970 — Page 133

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4.

CONFIDENTIAL

(ii) a number of countries generally

accepted as developing have per

capita income equal to or higher

than Hong Kong.

(c) Hong Kong is "competitive"

(i) Hong Kong is not seeking assist-

ance in becoming competitive, but

the avoidance of discrimination.

(ii) the total exclusion of a country

on grounds of competitiveness was

rejected by the OECD in 1967.

(iii) A safeguard system will be

operated under the preference

scheme and this could be applied

to any products on which Hong Kong

is considered to be competitive.

In recent years Japan has been running a large and rapidly mounting trade surplus with

Hong Kong. (US $295 million in 1967;

US $413 million in 1968 and US $546 million

-in 1969). In 1969 Japan only absorbed 3.4%

of Hong Kong's total exports whereas the US took 42% and the EEC 10%. Japan is an

important source of raw materials for Hong Kong,

She is Japan's third largest buyer and her exclusion could adversely affect Japan's

export potential. Hong Kong's.trade deficit

with Japan is greater than her surplus with the USA which means that the USA is virtually financing Hong Kong's deficit with Japan. A Japanese decision to exclude Hong Kong

which encouraged the USA and others to do likewise would clearly have adverse effects

on the territory's economy and thus on

Japanese exports to Hong Kong.

15.