TNAG-0464-FCO40-529-Entitlement-of-Hong-Kong-to-EEC-Generalised-Scheme-of-Prefer-1974 — Page 24

CONFIDENTIAL

Mr Jordan

8 Mr Jordan was not certain that this represented any real improvement for Hong Kong over the 1974 position. He had hoped it would be possible to point to something more positive. Mr Ingram said in reply that there should be some concessions on footwear, a product for which Hong Kong had not previously been eligible for preference. More generally, Hong Kong could be expected to benefit from the reduction in the number of items classified as "sensitive". said he was sceptical on this point. He did not feel that the advantages of semi-sensitive classification (as against sensitive) were very striking. Hong Kong had not suffered noticeably from the application of the key for allocation to Member States which sensitive status involved. The introduction of the "supercompetitive" concept, by contrast, could have a very definite effect on Hong Kong. He was concerned not only about the effect on trade, but with the possible effects on investment. The modification of the "butoir" system introduced a new element of uncertainty into commercial prospects. How could investors now be sure that the terms of the GSP for Hong Kong would not change drastically from year to year?

9 Mr Ingram pointed out that a degree of variability was inherent in the year-by-year determination of the scheme. On the whole this was a welcome feature: it enabled the UK and the other Member States who favoured liberalization to move step by step towards goals which they could not hope to achieve in a single move, Mr Preston added that it should be kept in mind that there would be provision

He against any actual cut back below present levels in Hong Kong's access. thought therefore that Mr Jordan's fears about the effect on investment were exaggerated. Mr Denman pointed out that other Member States would insist on controls on the supercompetitive as the price for any liberalization in other areas. He did not think we could more than put the Hong Kong point of view to Ministers, and in advising them we should have to take into account the overall merits of the package, which was of interest to others beside Hong Kong.

C

10 Mr Jordan

He asked returned to the presentational aspect of the problem. what he could tell the Hong Kong public if they asked what progress had resulted

It from the Foreign Secretary's statement. Several points were made in reply. was emphasised that the UK would continue to make representations on Hong Kong's behalf we would be seen to be active in seeking progress. Beyond this, there would be certain real improvements. There should be some concession on footwear. There would also be a general liberalization of the scheme which could be favourably presented. On the supercompetitive proposals, it was not yet clear how far they would affect Hong Kong if the Commission's latest ideas were accepted. In any case it should be stressed that there would be no actual decline in the preferential trade allowed. More generally, there was no doubt that UK membership of the Community had been a barrier against the protectionist moves which other Member States would otherwise have urged against Hong Kong. Finally, it should be remembered that liberalization was a long term process. If, as Hong Kong claimed, the Community was not threatened by her trade, this should become more apparent in - the coming year. There was a strong chance of substantial improvements for the

1976 scheme. In particular, it would be easier for some concession for textiles to be included once the bilateral restraint arrangements had been made under the MFA.

11

There were two There was a discussion of the immediate presentational needs. great difficulties: Ministers had not yet taken their decision; and even when they had there would be limits to what could be said before the final Council decision. Some play could be made with Sir Michael Palliser's statements in If Mr Jordan COREPER, though of course this could only be in general terms. wished, we could give him confidential advice on the line taken by Ministers. But a more detailed line for public consumption would have to wait until the Council had reached a decision. We would supply briefing item. In the meantime the Hong Kong authorities would have to use their own judgement.

CONFIDENTIAL

3