TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 228

IMMEDIATE

CYPHER CAT A

SECRET

Discussed

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HKK 5/1 (1973) holl send

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DESKBY 222359Z

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TO IMMEDIATE TOKYO TELNO 75 OF 22/16 74.

SECRET

PERSONAL FOR PHR MARSHALL FROM CAMBRIDGE:

STERLING.

(MF 9/528/ 1).

RE

REGISTAT 6.51

24 JAN:1974

PA.

2

HRK 5/10.

232

1. BARRATT AND WALKER OF HM TREASURY HAD EXPLORATORY DISCUSSIONS IN

ROME LAST WEEK WITH AUSTRALIAN AND NEW ZEALAND OFFICIALS ABOUT THE

POSSIBILITY OF REACHING GENTLEMEN'S AGREEMENTS ON A PROGRAMME OF

PHASED DIVERSIFICATION WITHOUT GUARANTEES, TO COME INTO EFFECT WHEN

THE PRESENT GUARANTEE ARRANGEMENTS EXPIRE AT THE END OF MARCH, THE

RESPONSE WAS CAUTIOUS BUT REASONABLY ENCOURAGING. A NEW POINT TO

EMERGE IS THAT, BECAUSE THEY DO NOT WANT TO BE TIED IN TO VERY SPECI OBLIGATIONS, THE AUSTRALIANS ARE NOT INTERESTED IN A NEW GUARANTEE ARRANGEMENT. THE NEW ZEALANDERS STILL HANKER AFTER A GUARANTEE, BUT ARE UNLIKELY TO BEHAVE IRRESPONSIBLY IF NOT GIVEN ONE. AUSTRALIA

WOULD BE WILLING TO CONSULT AND CO-OPERATE WITH US IN THE RESPONSIBLE

MANAGEMENT OF ITS STERLING AND NEW ZEALAND WILL PROBABLY TAKE A SIMILAR LINE EVEN IF NO GUARANTEE IS OFFERED.

2. THERE REMAINS THE DIFFICULT QUESTION OF GIVING THE CONTENT TO

GENTLEMEN'S AGREEMENTS WHICH WE NEED, PARTICULARLY ON THE TOTAL AMOUNT AND TIMING OF DIVERSIFICATION FOR WHICH WE SHOULD BE LIABLE, SINCE ON THESE POINTS AUSTRALIA AND NEW ZEALAND FIND IT DIFFICULT TO

COMMIT THEMSELVES. THIS QUESTION IS STILL UNRESOLVED AND WE AWA IT FURTHER REACTIONS FROM WELLINGTON AND CANBERRA.

3. IN THE MEANTIME, FOLLOWING HIS EARLIER PERSONAL DISCUSSION, BARRATT HAS WRITTEN TO HADDON-CAVE IN HONG KONG SEEKING HIS VIEWS, ON A STRICTLY CONFIDENTIAL BASIS, ON THE POSSIBILITY OF SUCH A GENTLEMEN'S AGREEMENT WITH HONG KONG. (TEXT OF LETTER IN MIFT.) 4. SO THAT WE CAN JUDGE WHETHER THIS OPTION IS LIKELY TO BE VIABLE, WE NEED AS QUICK AND AS CLEAR A RESPONSE FROM HONG KONG AS WE CAN

GET. AT TODAY'S SARC BARRATT AND OTHERS FELT THAT IT WOULD BE

PARTICULARLY USEFUL IF YOU WERE TO TRAVEL BACK VIA HONG KONG TO

OBTAIN HADDON-CAVE'S VIEWS AT FIRST HAND. WE SHALL STILL OF COURSE

NEED HIS WRITTE# REPLY AND YOU WOULD NOT (NOT) BE EXPECTED TO ENTER

NEGOTIATIONS WITH HIM: BUT YOU MIGHT BE ABLE TO JUDGE THE GENERAL

ATMOSPHERE AND FILL OUT HIS REPLY IN OTHER WAYS. YOU COULD TRAVEL

SECRET

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