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Dd. 737115 750M 4/70 Hw.
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....In Confidence
Junari
To:- Draft message from PM to
Mr Sato
Type 1 +
From
Telephone No. & Ext.
Department
HONG KONG AND THE JAPANESE GENERALISED PREFERENCE
SCHEME
You may recall that during our most useful
meeting in New York last October, I stressed the im- portance of Hong Kong's inclusion in the Japanese scheme of generalised preferences. I was extremely pleased therefore, to read your recent statement in the Diet recognising Hong Kong's suitability as a beneficiary.
2.
However, I understand that the proposed Hong Kong product list, now under consideration in Tokyo, is giving rise to difficulties. I do not believe that such problems could be so great as to prevent a meaningful generalised preferences offer to Hong Kong. In your Diet statement, you said that local industry would have to be protected from injury. In the light of Japan's large trade surplus with Hong Kong, the most harmful situation for Japanese industry would arise where discrimination against her trade provoked economic instability in Hong Kong, with grave conse- quences for South-East Asia going beyond the purely economic.
3. I am confident therefore that you will find it possible to follow the example of the EEC, and include Hong Kong and other dependent territories in the first stage of the Japanese preference scheme, soon to be implemented.
4.
I know that the Hong Kong Government stand ready to send officials to Tokyo to discuss with your officials problems such as product coverage and safe- guards. My belief is that such discussions might lead to a rapid resolution of your difficulties, and I would venture to suggest that they should take place before
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