TNAG-0546-FCO40-641-Strength-of-garrison-in-Hong-Kong-1975 — Page 148

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SECRET

Sir D Wayson Wayson

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HONG KONG DEFENCE COSTS AGREEMENT AND IMPORT RESTRICTIONS

Mr O'Keeffe's submission of 9 December refers.

1.

Flag

(464)

2.

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451

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14/12

Mr Rodgers has now said, in the light of the Governor's letter of 8 December to him, that he "sees no prospect of announcing the Agreement on Defence Costs until a firm decision is taken on the question of import controls" (Mr Sandars's letter of 9 December to Mr Wright at No. 10).

3.

Mr Kerr suggested the other day that there might be pressure ⚫to announce the Defence Costs Agreement at an early date, possibly in the context of a general statement on public expenditure cuts. The argument for doing this would be that the savings on the cost of the Hong Kong garrison may be one of the few new defence cuts to emerge from the current review of public expenditure so that the most may have to be made of it presentationally. There might also be a certain FCO interest in an early announcement of the Defence Costs Agreement in order to relieve the pressure on the MOD for further defence cuts. For the time being, however, Mr Rodgers is evidently not thinking in such terms and I think we can only take note of his view. It may be that by the time any pressure builds up for an early announcement of the Defence Costs Agreement, the position on selective import controls as they affect Hong Kong will have been clarified.

4.

In the meantime, the Executive Council in Hong Kong has approved the terms of the Defence Costs Agreement, subject to some S2) seemingly minor amendments. These were discussed yesterday between

Hong Kong Government officials and the MOD and a slightly revised text of the Memorandum of Understanding has been put to Mr Rodgers for approval. The Executive Council have advised the Governor not

/to conclude

SECRET