Reference..
SECRET
201
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Mr Jackson, Defence Dept.
HONG KONG: DEFENCE COSTS AGREEMENT
1.
You asked for a brief on where we stand in the negotiations on a new Defence Agreement with Hong Kong to show to Mr Thomson.
2.
As you will have seen from the draft OPD paper prepared by the Ministry of Defence, we are recommending a negotiating position on cost-sharing which is at once flexible and entirely in accord with the Prime Minister's minute of 20 February. The_MOD_consequently hope to have the paper taken by the DOPC out of Committee and to have Ministers' views in about ten days time. I have passed our comments on the draft orally.to DS6.
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You will also have seen the comments made by the Chief of the Defence Staff: the first seems acceptable but the second, apart from being logically untenable, is clearly a non-starter in view of the Prime Minister's minute.
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I have told the Governor that we shall be telegraphing DOPC's decisions as soon as possible and warned him that it is unlikely that we shall be able to complete the negotiations by 1 August (FCO telno. 524). This is partly because the cost-sharing exercise will take some time and partly because we are hung up on the draft Memorandum of Understanding, since the Governor, presumably as a bargaining tactic, prefaced his comments on our draft by saying that they were written on the assumption that Hong Kong would not be required to contribute more than 50% of the cost. The Governor knows very well that we are proceeding on no such assumption; and it follows that we cannot go much further with the Memorandum until we are clearer on cost-sharing.
3 July 1975
Milk
PL O'Keeffe
Hong Kong & Indian Ocean Dept.
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