TNAG-0576-FCO40-709-Visits-of-UK-officials-to-Hong-Kong-1977 — Page 167

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2.

4. The MTA has approached the main bidders to see whether they

would wish to group individual tenders into package deals.

It may be possible for some of the higher cost of rolling stock to be absorbed in the management costs as part of a package. The continuing decline of sterling is also advantageous to the British bidders for not only does it lower the price of their tenders but the MTA may be reckoning on a continued decline in the value of

sterling.

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5. It may be, therefore, that the British will be successful on purely commercial considerations; but there is a danger that the Japanese may put in a pre-emptive bid as they did in 1972. It is therefore important that the broader arguments for the granting of contracts to British firms should be fully realised in Hong Kong. 6. It is important in the overall context of Hong Kong's exports to the UK that the contracts in question should go to British firms. There is strong pressure on HMG from MPs representing textile constituencies to limit the imports of woven shirts and other Hong Kong products. A British success with the Mass Transit contracts

would offset the damage being done to the British textile industry by providing employment in other sectors and helping the balance

of payments. If British firms are not successful there will be

growing hostility to Hong Kong in British industry generally and the pressures for action against Hong Kong textile and other imports in the future will be far stronger. Furthermore, there is the political argument that China can be expected to prefer no continuing diminution in the proportion of the British commercial stake in

Hong Kong; since it is on the strength of our commitment to the

Colony that the present status quo to some extent rests.

7. Other things being equal, both Governor and Mr Thompson, the # General Manager of the Mass Transit Authority, would like to see a

British success but there is a limit to the extent to which they

can temper purely commercial considerations in Britain's favour. It is hoped, however, that the broader economic political arguments will prevail.

Line to Take

8. As the Governor knows we have been unhappy at the attempts to

seek further restrictions on shirts over and above those in the Community/Hong Kong Agreement but HMG is under great pressure from

CONFIDENTIAL

/MPS