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are large and that traffic rights at Kai Tak
Airport represent a valuable bargaining counter
in international air services negotiations.
However, the advantages of the financial and
commercial relations between the UK and Hong
Kong are by no means one-sided. Moreover it
seems unlikely that the policy of controlling
traffic rights and exchanging them with other
governments is working against Hong Kong's dual
interest in encouraging the growth of air
traffic at Kai Tak airport and supporting
Cathay Pacific Airways.
10.
If you wish to comment on devaluation of
the pound you could say:
"It is true that Hong Kong suffered a loss when
the pound was devalued in 1967; but so of
course did every other overseas holder of ster-
ling. It was as a consequence of this that
arrangements were subsequently agreed with the
Hong Kong Government whereby virtually 90 per
cent of its officially held sterling now enjoys
a dollar value guarantee, so that
that in the event
of a further sterling devaluation Hong Kong
would suffer very little, almost the whole of
the adverse effect being borne by the UK. The
potential loss from this course is therefore
not a serious factor to be taken into account
today in assessing the defence contribution."
11. You could also point out that whereas in
November 1968 (shortly after the sterling agree-
ment was signed) Hong Kong's sterling reserves
stood at £358 million (of which £322 million
was guaranteed), in January 1971 they stood at
C554 million (of which £498 million was
guaranteed).
12.
If Unofficial Members pursue the line
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