CONFIDENTIAL
5.
Trade in both directions increased in value in 1973-74, though increases in price rather than in volume, particularly on the United Kingdom side, will have accounted for this growth. The first half of 1975 showed a decline in trade in both directions. United Kingdom exports to Hong Kong have fallen by 11% over the corresponding period of 1974 and Hong Kong's exports to the United Kingdom have declined by 10%.
6. The Secretary of State for Trade, who visited Hong Kong on 6-11 September, described the widening imbalance of United Kingdom/Hong Kong trade as "a cause for anxiety". He said that Hong Kong's trade with Britain should be more evenly balanced and that the right way to achieve this was by the expansion of business rather than by restriction. He added that Britain was not asking Hong Kong for special treatment but he expressed the belief that more British companies, benefiting from the floating pound, could compete successfully in Hong Kong and that some of those which were already in the market could do more. He denied reports that British industry was uncompetitive on a wide scale in export markets.
7. Sir Michael Palliser will find that the Governor is anxious to see British industry do better in Hong Kong and any suggestions for supplementing our present efforts, e.g. trade missions, the British Industrial and Technological Exhibition in Hong Kong in hovember etc. would be welcome. In any discussion with the heads of the major trading houses and representatives of the Hong Kong General Chamber of Commerce, Sir Michael Palliser may wish to underline what the Secretary of State for Trade said on his recent visit. Subject to the advice of the Governor and the Senior British Trade Commissioner, he might also deploy privately the argument that it helps with the Chinese if ilong Kong is seen to be demonstrably & British colony in which British economic interests predominate, and that if Hong Kong wunts continuing British support over such matters as textiles and the GSP, she should remember that there must be a two-way relationship.
dong Long & Indian Ocean Dept.
22 September 1975
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