TNAG-0546-FCO40-641-Strength-of-garrison-in-Hong-Kong-1975 — Page 175

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Mr Male

Sir Duncan Watson

PS/Lord Goronwy-Roberts PS/PUS

HICK Coll...

HONG KONG DEFENCE COSTS AGREEMENT AND IMPORT RESTRICTIONS

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In his minute of 9 December to the PS/PUS Mr O'Keeffe dealt with the timing of an announcement of the Defence Costs Agreement with Hong Kong in the context of the still to be resolved question of whether HMG will impose restrictions on imports of Hong Kong woven shirts.

2. I am afraid that in the rush of Mr O'Keeffe's departure to Seychelles yesterday evening and of our prior attendance before the Defence and External Affairs Sub-committee aîà11H8¤ also deal with a point made to me by the FS/FUS about the timing of an announcement on the Defence Costs Agreement in the context of an anticipated statement on public expenditure cuts, including possible further defence cuts. As he observed, the Defence Costu

cment with

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Hong Kong might represent the one significant new saving on the Defence budget which the Secretary of State for Defence will be brought to accept and the most will have to be made of it publicly.

3. It is difficult at this stage to judge whether or not an announcement of the Defence Costs Agreement in this wider context, if that is what is eventually envisaged, would be open to the objections raised in the Governor's letter of 8 December to the Minister of State for Defence. It is possible, I suppose, that by the time the public expenditure cuts are announced a decision will have been taken on restrictions on Hong Kong woven shirts. If the decision is to exclude these imports and that the Secretary of State for Industry seems to have conceded some ground in his minute of 8 December to the Prime Minister - there will be no probl announcing the Defence Costs Agreement either a part of the expenditure cuts or on its own. On the other hand, if a decision on import restrictions has gone the other way or the matter is still pending, a statement on public expenditure cuts might, I imagine, include some suitably veiled reference to anticipated savings on the Hong Kong garrison without going into details.

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4. You wondered, in particular, whether Mr Rodgers was likely to circulate a minute to members of OPD saying, in effect, that he could not meet the Governor's objections and that an early announcement of the Defence Costs Agreement would have to be made. Mr Rodgers has been keen on an early announcement if only for the very under-

tandable reason that the Agreement might be called in question in Hong Kong as time goes by and we know from MOD officials that he gave the Defence and External Affairs Sub-committee yesterday evening a preview of what he described as the "likely agreement". On the other hand, he said in his minute of 5 December to the Prime Minister that unless he could give the Governor a confidential assurance that no restrictions would be imposed on Hong Kong imports it would be necessary to hold up the announcement envisaged for 9 December. The Prime Minister has not felt able to give Mr Rodgers the necessary authority - Mr Wright's letter of 8 December and the announcement has therefore been held up.

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CODE 18.77

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