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Mr Murray
HONG KONG AND THE MULTI-FIBRE ARRANGEMENT
1. In paragraph 4 of your minute of 6 September to Mr Cortazzi and PS/PUS you said that you were asking departments to examine the Hong Kong Government's case as set out in the Governor's letter of 3 September and the enclosed memorandum and added that the effects of what are believed to be the Commission's present ideas might not be as great as the Governor fears.
2. We spoke about this yesterday afternoon and agreed that it would be difficult to produce a considered assessment of the Hong Kong case until the Commission table their proposals. (The Hong Kong Government's memorandum quite correctly refers to the "Consequences of EEC policies as they are apparently developing" we and Hong Kong are still somewhat in the dark about the Commission's intentions). The meetings that departments will be having with Mr Van Tran, the Commission's Special Representative for Textiles Negotiations, tomorrow, 9 September may shed further light on the Commission's plans. (I attach a copy of Mr Stern's minute of 8 September to Mr Jenkins about the points that the FCO will be raising with Mr Van Tran). Subject to this qualification, I offer the following provisional comments on some of the general points in the Governor's letter and the accompanying memorandum.
3. We are, of course, particularly concerned about the possible effect of a cut-back in Hong Kong's textiles exports to the Community and elsewhere on the Hong Kong Government's plans for improvements in social conditions. The Governor hints in paragraph 10 of his letter (and the same point is touched on in paragraph 6.4 of the detailed memorandum) that the Commission's ideas would have adverse consequences for social progress in Hong Kong. It is not the first time that the Hong Kong Government have made this point in connection with the future of the MFA. Paragraph 11 of Hong Flag CO Kong telegram no 131 of 4 February, which was sent on the eve of
the annual UK/Hong Kong textiles consultations, said that the fulfilment of Hong Kong's social programmes was dependent on continued economic growth and that any further reduction in growth potential imposed on Hong Kong's textiles and clothing industry could put these programmes at risk. In paragraph 5 of your letter of 7 March to the Governor, in reply to Hong Kong's telegram, you said that while we fully accepted that economic growth was important for Hong Kong, it was difficult to believe that the kind of restrictions on Hong Kong's imports that might emerge from the renegotiation of the MFA could significantly affect growth and that we were not disposed to accept that such restrictions would really put the fulfilment of Hong Kong's social programmes in jeopardy. do not think that anything that has happened in the intervening months need cause us to change our view. Any falling off in the rate of growth in Hong Kong's GDP (Paragraph 6.4 of the memorandum suggests that the Commission's ideas could result in a reduction in the growth rate from 7% to 5% 6% in the 1980s) ought not to affect the amount
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