TNAG-0243-FCO40-279-Conduct-of-Hong-Kong-commercial-relations-1973 — Page 36

HICKE

Reference..

Miss Elliott

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CRE 1

HONG KONG AND GATT

As you know, for some years it has been accepted doctrine in CRE 1 that in the event or Hong Kong's GATT rights being infringed, only Hong Kong, and not the UK on her behalf, could legally retaliate. This doctrine had been based on a Foreign and Commonwealth Office Legal Adviser's opinion which had evidently been seen in CRE 1 in 1957, and which had formed the basis of advice given then and subsequently on this subject, both within Whitehall and to Hong Kong officials.

2.

One occasion when such advice was given was when an interdepartmental team met a Hong Kong delegation headed by Mr Cowperthwaite to discuss Britain's application to join the EEC, on 24 October 1967. My predecessor, Mr Muir, is reported as having said that the only permitted sanction against the infringement of Hong Kong's rights was retaliation by Hong Kong. There could be no question of retaliation by Britain on Hong Kong's behalf. This had always been the case. Kr Cowperthwaite confirmed in reply that it was his understanding, too, that Britain could not retaliate in GATT on Hong Kong's behalf.

3.

•

In recent months this doctrine has been repeated in two contexts:

1. The Board of Trade's paper for the Working Group on Europe (WGE(70)37 of 26 August) says in para 18 at the bottom of page 7 "Hong Kong cannot for the reasons given in paragraph 24 below effectively threaten retaliations against the EEC and we are advised that we cannot legally retaliate on her behalf."

ii. The brief prepared for the Secretary's attendance at the four power talks 11. in Geneva on 31 July and 1 August says in paragraph 48:

"As regards damage done to Hong Kong's exports, the view of the FCO Legal Advisers is that UK cannot properly retaliate against a country in respect of action which the country takes to restrict its imports from Hong Kong",

Some of us have never been entirely happy about this rather convenient doctrine, and we have therefore on yeral occasions tried to find the FCO advice on which it was based. This was not out of curiosity: it has sometimes been necessary to know the context in which the advice was given to measure the scope of the doctrine. Since no trace of the original advice could be found either here or in the FCO, the. FCO put the point to their Legal Advisers again, with the result that their view of the matter has changed. We must now therefore accept that there is no legal or GATT impediment to UK retaliation on Hong Kong's behalf against a country which restricts its imports from Hong Kong. Needless to say, the policy objections to such a course remain. The terms of the FCO advice are contained in the attached exchange of correspondence.

5. No doubt Mr Ingram will wish to consider whether to have a revision made in WGE(70)3? to oorrect the words underlined in 3(1) above. I suggest it would be appropriate simply to remove the se words, as it is self-evident that the UK could not in any circumstances retaliate against fellow members of EEC on behalf of Hong Kong. You will wish to consider whether there is any need to have the Secretary's brief amended for the record, or whether it is sufficient to take note of the legal position for the future.

6.

The question remains of what, if anything, should be said to Hong Kong. must be for the FCO to decide. If Hong Kong were to be told that we have now had second thoughts about the legal position, as conveyed in 1967 and no doubt on other oocasions, it would of course be appropriate to make it clear that the other objections to such a course remain no less overwhelming. Mr Cowperthwaite's response in 1967 quoted in para 2 above can be interpreted as much an acknowledgment of the de facto position as the legal one. Apart from our own reluctance to get

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