TNAG-0240-FCO40-276-Entitlement-of-Hong-Kong-to-generalised-tariffs-preferences--1970 — Page 122

PREFERENCES

16. In UNCTAD during October the developing countries accepted the preference arrangements worked out by each of the developed countries. The latter agreed to seek the necessary legislative approval for their proposals with the aim of implementing them in 1971. The countries that are to benefit from the preferences, however, have still to be decided between the developed countries, who are continuing their discussions in the OECD.

17. One problem is Hong Kong, which other major preference- giving countries are reluctant to include, basically because their domestic industries fear Hong Kong competition. It would, however, be very damaging to Hong Kong to be excluded while her developing country rivals, many of which like Taiwan and South Korea are already very competitive, gained duty free access to her main markets.

18. The inclusion of Hong Kong in the preference arrangements of the EEC would be a way of ensuring that Hong Kong did not lose all her advantages in the UK on our entry into the Common Market. The main market for Hong Kong's exports ia, however, the USA (taking 42% of her total experts, compared with 11.6% in the UK, 11.5% in the EEC and 31% in Japan). Neither is likely to be willing to include Hong Kong unless the other does so, and preferably Japan also (Japan, however, is reluctant to do anything that would help Hong Kong.to compete with her in the US market). The EEC, however, have to tackle this problem as part of enlargement.

19.

We are pressing Hong Kong's case in all three (the Prime Minister will recall speaking to Mr Sate in New York on 21 October) and are hopeful that the EEC will include her, at least for goods other than textiles and feetwear which are excluded completely from the American offer of preferences. The reaction from the American administration, who have probably already sought guidance from the White House, has not so far been very encouraging and at this critical stage a word with the President could tip the balance.