CONFIDENTIAL
7
Association with the EEC
2. He said that like other dependencies Hong Kong was theoretically eligible for Associate status with the Community in accordance with Part IV of the Treaty of Rome. Hong Kong was clearly a special case, however, and one that could present a number of difficulties in the negotiations. But he hoped that the enlarged Community, assuming that the four present applicants gained entry, would evolve a liberal policy of trade which would in the long term be to the advantage of Hong Kong. He said he was aware of other problems facing Hong Kong, such as possible exclusion from the Generalised Preference Scheme and the possibility of restraints on exports of non-cotton textiles to the United States. The Financial Secretary said that if United Kingdom entry to the EEC occurred in isolation, then the effects upon Hong Kong need not be too great. Hong Kong could probably continue to sell, albeit with reduced profits, over the common external tariff. Taken in possible juxtaposition with exclusion from the GPS, the United States textiles problem and the announced United Kingdom policy to raise a tariff on woven cotton textiles in 1972, the situation for Hong Kong was much more critical. The Financial Secretary said Hong Kong should not be regarded by Britain as a special case". If it was, and special treatment was accordingly sought, then the EEC would be in a position to demand reciprocal concessions. There was nothing special in Hong Kong seeking to be treated on all fours with everybody else.
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General Preference Scheme
3. As regards Hong Kong and the GPS Britain was, it seemed to him at the present moment, in a position to assist if she would be prepared to say that exclusion of Hong Kong by other major donors would mean that the United Kingdom would have to undertake a major review of her offer both in regard to beneficiaries and product coverage. He well realised that there were other political factors which the United Kingdom would have to consider but he felt that the impact of such a statement now could be beneficial and could provide a useful bargaining point later. If it resulted in the acceptance of Hong Kong as a beneficiary it would remove one major problem from the entry negotiations so far as Hong Kong was concerned. However, a delay in making such a statement would limit its usefulness. Mr. Rippon said that he had some reservations regarding timing. The United Kingdom had recently announced that all textiles were to be excluded from its " offer" and this to some extent would help Hong Kong. He was not, however, directly involved in the preferences issue although he could see Hong Kong's point of view. There were, of course, as the Financial Secretary had said, other issues to be considered. Mr. Jordan pointed out that exclusion of Hong Kong would cause diversion of trade to other suppliers who were included which would in fact mean that preferences were being granted at the expense of Hong Kong's trade, not that of the so-called "donors ".
United Kingdom tariff on imports from Commonwealth countries
4. The Financial Secretary referred to the former British Government's decision to replace quotas on woven cotton textiles with a tariff on imports from the Commonwealth from January 1972. In addition to the fact that this would mean lower earnings in Hong Kong and corresponding benefit to the United Kingdom Treasury, one of Hong Kong's major fears had always been that quotas would be reimposed on top of the tariff. He could not understand how the announced policy could continue in the light of Britain's entry application when that of the EEC entailed quotas on all cotton textiles. Mr. Haddon-Cave noted that the United Kingdom decision on cotton textiles was taken in the context of
CONFIDENTIAL
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