Registry No.
CURITY CLASSIFICATION
POPRAWER
SCMXX
Confidential.
** RESIMINED.
Untified.
ACY MARKING
In Confidence
CONFIDENTIAL
DRAFT
Type 1 +
From
To:- Mr Cortazzi
AIR SERVICES AGREEMENT WITH CHINA
R C. Samuel
Telephone No. Ext.
Department
DSR 11
1
B
1623
618
600
PROBLEM
1.
Peking telegram No 663 sets out proposals for a UK statement on our attitude to China Airlines. There involve three stages an opening hid and 2 fall back positions. The Department of Trade accept stages 1 and 2, but are adamant that stage 3 poses too great a risk in commercial terms to Cathay Pacific's revenue from its services to and via Taiwan. (Mr Stable's letter of 31 October). Hong Kong also regard stage 3 as risky (Hong Kong Telno 1241), but do not come out categorically against it and appear willing to consider it if the gains are judged commensurate with the risk.
2. We now have the views of all the parties on the UK side. The DOT view as expressed in Mr Stable's letter had Mr Roger's backing and the DOT do not regard an inter-departmental meeting as necessary. What should the FCO position be?
BACKGROUND AND ARGUMENT
3.
The options are:-
(a) Accept the DOT view
This would commit us to re-opening negotiations with the Chinese with a final position (Peking stage 2) whic falls well/short of the type of settlement which the
Assistant Foreign Minister indicated to you would meet Chinese concerni There is, therefore, a serious risk that negotiations would result in a fresh impasse. In-political terms, this could be more damaging to
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