CONFIDENTIAL
eliminating discrimination against Hong Kong "in
our technical contacts on the adaptation of our
scheme to that of the Community" as well as,
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after enlargement, "in the annual reviews in which
we shall participate as full Members". He added
"We shall not let those opportunities go by".
4. The Government of Hong Kong have now reminded
us of these promises which were made public, and
have asked us to honour them. They argue that the
effect of discrimination by us against our own
colony would be politically very damaging; that
USA, Canada and Japan would use this as a
precedent for discriminating against Hong Kong,
not only in textiles, but also, for example, in
electronics; and that discrimination would
inevitably divert trade away from Hong Kong.
There is truth in all these assertions, even
though the amount of material damage may not be
great, at least at first.
5. If we are seen to discriminate against Hong
Kong, and to make no effort to avoid this, the
effect on our relations with Hong Kong and
therefore on our interests there, would be serious
At the same time we shall begin phasing out our
Commonwealth preference for Hong Kong. This would
make things worse. All this comes at a time when
we have a number of difficulties with Hong Kong,
some of which, including Sterling, are of
substantial importance to the UK. The Prime
Minister has asked that outstanding issues with
Hong Kong should be resolved before his visit there
CONFIDENTIAL
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