eir approaches and the Chinese had not pressed, indicating that they accepted the strength of our argument against formal establish- ment in Hong Kong. Sir Murray MacLehose said that since land leases in the New Territories were only granted until 27 June 1997, the problem could not be ignored indefinitely. But, provided that political will was prescut in Peking and London he was sure a formmla could be found. He would record his views on how the next Pop hould be taken before he left Hong Kong.
10. There was some discussion of the trade balance between Hong Kong and Britain and Sir Murray MacLehose said that this was one of the most important factors in Hong Kong/UK relations. An increase in British trade and an equalising of the balance would be the most important subject in overcoming the criticism heard in Britain of Hong Kong. He raised the textiles question "for the record". Dr Owen said that we had been a leading member of that part of the Community which drafted the negotiating mandate for the Commission and he was afraid that there was no hope of any significant improvement for Hong Kong. Sir Murray MacLehose explained his concern that the attitude of the EEC was completely in breach of the international rules of trade and that he was afraid that once this breach was made it would widen into other sectors of the trading system. He mentioned the threat from the United States that they would go back on the agreement recently signed between them and Hong Kong and pressed for much stricter restrictions on Hong Kong.
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11. Dr Owen said that any form of negotiated agreement would be better than unilateral measures against Hong Kong which could mean that Hong Kong would have no quotas in textiles for export to the Community. Sir Murray MacLehose said that he could visualize a worse situation in that Hong Kong would have very limited quotas into the Community but that their other markets would adopt strictly protectionist measures. Dr Owen thought that until world trade improved the employment situation in Europe and Britain was such that short-term protection measures were inevitable.
He was sorry
for Hong Kong but he was even more sorry for nations like Sri Lanka who were much worse off than Hong Kong. He reiterated that, in his view, there was no hope of getting better quotas.
HONG KONG & GENERAL DEPT
Distribution:
PS(2)
PS/mr Judd
Py Lord Goronwy-Roberts
LITE
Cortazzi Mr Murray
Mr Stewart HKGD Mr Samuel FED Mr Jenkins BID(E) Mr Macoun OPA
HE Sir Murray MacLehone HE Sir Edward Youde (Peking) IE Sir Donald Maitland
(Perm. Rep. Brussels) Hong Kong Government Office
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