CONFIDENTIAL
19. Line to Take: Hong Kong and the whole world have benefited from the stability secured by the sterling agreements. The delay in reaching agreement on the cxtension of the guarantee
from September was because Hong Kong itself needed to consider
the application of our unilateral offer to their special
problems. The agreement that has now been reached is voluntury
and is plainly in the interest of both of us. We have taken no
decisions yet about possible arrangements for the period after
March. We are consulting Hong Kong and other sterling holders
on this and aim to indicate our conclusions in good time beforc
expiry of the present arrangements.
HONG KONG AND THE DEC GENERALISED SCHEME OF
FREFERENCES (GSP) (Brief no. 4)
20. Our alignment with the Community's GST scheme on
tors.
1 January 1974 means discriminating against Hong Kong's textiles and footwear in favour of some of its major competi-
Since we could not re-negotiate the terms of entry, the
Chancellor of the Duchy informed the Council of Ministers that
we would press resolutely for the elimination of this discrimi-
nation during the 1974 annual review. This statement has been
published.
21.
Possible Criticisms: The political damage took place at
the moment of alignment. Importers also place their orders
ahead in the light of the actual situation and Hong Kong fears
that this will result in diversion of trade. This is a
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CONFIDENTIAL
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