TNAG-0377-FCO40-423-Defence-and-Oversea-Policy-Committee-review-of-UK-relations--1973 — Page 55

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friction.

There would inevitably come a time when

you would be under heavy local pressure to get out of

sterling, and we would equally be under pressure to

tell you not to do so. A formal agreement, with all

the strains of negotiation and maintenance, would be

better than a constitutional row.

EEC GSP

I hope we can play the Chancellor of the Duchy's

statement in Brussels as a success. It would of course

have been easier to do so if we had been able to say

clearly that we tried to insist on the change being

made from 1 Janaury 1974 but had been defeated in the

Council of Ministers. As it is, we have to fluff this

by pointing to our declaration of principle and our

determination to get a change in the 1974 Annual Review.

Given that this was the best that we could get, I am

sure it is in Hong Kong's direct interest, for example

with the Americans and the Japanese, as well as the

interest of our relations, to emphasise the positive

side of this.

Mass Transit System

By the time you get this, the Anglo/Italian

bid will be in and, we will fervently hope, validated.

Although they would never admit this publicly, both

DTI and the industry are clearly relieved to be in with

the Italians rather than carrying the risk of the whole

contract themselves. They also genuinely believe that

the package is technically and financially attractive.

Everyone realises (because we have reminded them, if

they did not know it already) that the lack of a fixed

price from the start will give you problems, They

are in fact working on the assumption that the joint

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