TNAG-0249-FCO40-285-Effect-of-entry-of-UK-into-EEC-on-exports-from-Hong-Kong-1970 — Page 148

CONFIDENTIAL

36.

The Colony's reaction to such a refusal might be lively.

However, with a 5 year Agreement Hong Kong could not make

a lower sterling proportion a condition of continuing the

Agreement and is thus prevented from using the size of her

sterling balances as a potential weapon against the UK.

Nor, because of her colonial status, is the Colony in a

very strong position to end the Agreement and move the

balances. It is therefore more likely that Hong Kong

would first seek to put political pressure on the UK by

claining that the UK was taking advantage of Hong Kong's

colonial status to protect her own position to the

detriment of Hong Kong's legitimate interests.

VI

Non-trade Mitigations

37. Hong Kong does not publish balance of payments figures,

but an estimate of her balance of payments, showing the

relative importance of invisibles, is attached as Annex

Her earnings from tourism can be expected to continue to

increase provided the pace is peaceful and reasonably

prosperous, as can earnings from banking, insurance and

other commercial services.

38.

Though the steady growth of invisibles can be expected to

contribute to maintaining Hong Kong's prosperity, it' cannot

be expected to replace any substantial damage to her export

trade. This is mainly because a failure of exports to

grow at a sufficient rate would result in a failure of

industry to give enough employment, and this would make

the explanation of invisible earnings more difficult.

39.

It has been suggested that Hong Kong's earnings from civil

/aviation