TNAG-0249-FCO40-285-Effect-of-entry-of-UK-into-EEC-on-exports-from-Hong-Kong-1970 — Page 9

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CONFIDENTIAL

Background

Hong Kong's rapid development in recent

years, which has more than kept pace with

her vast increasing population, has been led

by exports of manufactures, especially

textiles. She is, however, now beginning to

lose her competitive advantage because of

increasing wages, the second highest in Asia.

As a dependent territory she is eligible

for association with the Community under

Part IV of the Treaty of Rome. In 1961/3 the

Community were unwilling to offer her

association. During this round or negotia-

2*

tions the U.K. have again asked for association

for Hong Kong but there are already strong

indications that the Community will not grant

it. The Six appear to regard Hong Kong as

a special problem which will need to be

discussed in negotiations, but there are not

yet any indications of how they envisage

dealing with the Colony.

3. Hong Kong's economy is resilient, and

adaptable within limits, and she could

probably face Britain's imposition of the CET

against her without undue damage to the

economy.

11. But it would be more serious if she were

excluded from the UNCTAD Generalised

Preferences Scheme, and the developed

countries gave preferences to her competitors

(especially Taiwan and South Korea).

Ministers have agreed two negotiating aims in

respect of Hong Kong:

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