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CONFIDENTIAL
on HMG to compensate Hong Kong within the context of the UK GPS
(at least until such time as we enter the EEC, and have to merge
our scheme with theirs). The Hong Kong officials are likely to
press that HMG give firm undertakings to eliminate some of her
main rivals as beneficiaries under our scheme, and possibly also
to eliminate certain products in the scheme of major
interest to Hong Kong.
4.
Ministers have agreed to the proposal in EPC (70) 13 (para-
graph 10, (c)) that we might, if necessary, warn other major donors.
that if they excluded Hong Kong, the UK would have to exclude her
major competitors, Taiwan and South Korea. However, these threats
were never publicly made as their efficacy was thought to be
dubious.
5. Hong Kong may however press for a commitment to take this
action in the last resort, and we have acknowledged that HMG has
been considering such a step. However, this was before Ministers
decided to eliminate virtually all textiles from the UK scheme.
This step means that only about a quarter of South Korea's
£4 million exports (1969) to the UK would qualify for our prefer-
ences, and three-quarters of these preferential items comprise
ores and scrap metal which Hong Kong does not export. For Taiwan,
the figures are similar.
6. Hong Kong will no doubt argue the great export potential of
those countries in other sectors covered by the GPS, but it is
questionable whether HMG would wish to exclude these countries,
with whom we enjoy trade surpluses. It is also possible that
Hong Kong would press for the exclusion of other rivals such as
Israel or Mexico. The latter would certainly lead to acrimony in
UNCTAD with the Group of 77.
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