TNAG-0240-FCO40-276-Entitlement-of-Hong-Kong-to-generalised-tariffs-preferences--1970 — Page 183

will certainly not include Hong Kong as a beneficiary in her scheme unless the

Community also does so but that, if the Community includes Hong Kong, the United

States will find it much harder to exclude her, and pressure can be put on the

U.S. Administration not to do so. The Community's attitude on this question

thus presents itself as one of the main keys to Hong Kong's future position in

the American market. Furthermore, if both the EC and the United States were

to include Hong Kong, most, if not all, other donors would probably do so as well.

10. A further advantage is that this single action on behalf of the Community

would to a very long way to settling the problem of Hong Kong in the enlargement

negotiations. The Community have already stated in these negotiations that,

L

in view of the nature of Hong Kong's economy and her export trade, they do not

consider that association under Part IV of the Treaty of Rome would be suitable

Inclusion of Hong Kong in the generalised preferences system,

in her case.

however, would -

11.

(a) safeguard Hong Kong's position in the United States' market, which is far

and away the first priority,

(b) provide sʊme alleviation for the phasing out of Commonwealth Preference

in the United Kingdom and

(c) present an easier solution for the existing Community than would

alternative action, as well as being more efficacious in spreading the

burden by global action rather than action confined to the Community

as such.

It has been argued that this solution is unacceptable to at least some

Member States of the Community because Hong Kong is too competitive and presents

a threat to their industries.

There are a number of answers to this. The

first is that the duty free quota system, plus the 50% cut off limit, adopted

by the Community in its offer under the G.S.P., provides an automatic safe-

guard system for all products deemed to be sensitive.

12. The second is that Hong Kɔng's costs and prices are rising. Her land

costs, capital costs (need for rapid iepreciation of equipment and buildings and

high interest rates) and transport costs for both exports and imports are

already high. To this is now being added rapidly increasing wages arising

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/from the