TNAG-0281-FCO40-317-Visit-of-the-Chancellor-of-the-Duchy-of-Lancaster-to-Hong-Ko-1970 — Page 90

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CONFIDENTIAL

Nor,

of her sterling balances as a potential weapon against the United Kingdom.

because of her colonial status, is Hong Kong in a very strong position to end

the Agreement and move the balances. It is therefore more likely that long

Kong would first seek to put political pressure on the United Kingdom by

claiming that the United Kingdom was taking advantage of Hong Kong's.colonial

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status to protect her own position to the detriment of Hong Kong's legitimate

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interests. There is a risk that this might be reinforced by denying United

Kingdom tenderers the award of public sector contracts.

NON-TRADE MITIGATIONS

28.

Hong Kong does not publish balance of payments figures, but an estimate

of her balance of payments, showing the relative importance of invisibles, is mone Vich kong

included in the Annex. Her earnings from tourism can be expected to continue

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to increase provided the territory remains peaceful and reasonably prosperous,

as can earnings from banking, insurance and other commercial services.

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Though

the steady growth of invisibles can be expected to contribute to maintaining

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Hong Kong's prosperity, it cannot be expected to replace any substantial

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damage to her export trade. This is mainly because a failure of exports to

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grow at a sufficient rate would result in a failure of industry to give

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enough employment, and no conceivable expansion of activity in the non-indus-

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trial sector is likely to be adequate to replace the lost jobs.

29.. It has been suggested that llong Kong's earnings from civil aviation and

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from tourism might be improved if airlines other than BOAC were given landing

rights in Hong Kong. In fact, in addition to BOAC and Hong Kong's Cathay

Pacific, 24 regular scheduled airlines of other countries already serve long

Kong, 9 of them with direct flights or through aircraft services from Europe.

Air transport movements have more than trebled and (with larger aircraft) air

passengers multiplied over six-fold at llong Kong over the last ten years

considerably over the world average. To give scheduled service traffic rights

at Hong Kong to more airlines belonging to countries which cannot offer worth-

while rights in exchange under the world-wide system of bilateral bargaining

(in which EEC members act in just the same way as other countries) would sap

CONFIDENTIAL

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