CONFIDENTIAL
that it hurt. Japanese interests it would be counter to
UK policy towards Japan. It would also, by implication,
transfer to HMG responsibility for the performance of
UK firms whom we had forced upon the Hong Kong Government.
Moreover, unless the contract in Hong Kong seems to have
been won on a commercial basis it will not provide the
reference point for future business which is one of the
main elements in the national interest case.
Technically it would be open to us to cover the Anglo-
Italian consortium against loss, eg by providing an
element of equity financing under Section 8 of the Industr
Act. We could not recommend such a course however. The
precedent it would creat would make us vulnerable to a
never-ending stream of requests for similar help to UA
firms facing major international competition.
It would,
moreover, be barely compatible with the UK's international
obligations and with the general purposes of the Industry
Act.
I suggest, therefore, that we are now in the position
where the only further action we can take which could
still save some thing for British firms even if the
Hong Kong Government decide to keep neither the Anglo-
Italian nor the Anglo-German-french groups in the
competition would be a concerted effort with the Hong
Kong and Japanese Governments aimed at securing UK
participation in the Japanese group who would then be
the sole negotiating partner with the Hong Kong Government
To pave the way for this I suggest that you should now
send a message to the Governor of Hong Kong in the terms
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