TNAG-0863-FCO40-1073-Involvement-of-Hong-Kong-in-air-services-agreements-1979 — Page 100

CAIR 4

DEPARTMENT OF TRADE

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RECEN

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20 MAR 1979

-DESK OFFICER'

INDEX

15. 07

168

Note 3

and by

G Hall Esq

MAED/FCO (3 copies)

Dear Grage,

Our reference... ED/49/331

Date

MICK 1844.

16 March 19790 IN RES

DORK INDEX

по

20 MAR 1979

J22.2

PROHIBITION ON US AIRLINES SERVING HONG KONG AND POINTS IN THE PRC

I have already discussed with you the US request for a waiver of the prohibition set out in Note 8 of Section 5 of Annex 1 of Bermuda 2 and the recent confirmation from Hong Kong that we should give a negative response.

It may be useful to give a short history of the reason for this provision.

It was proposed by the Hong Kong representatives in the very late stages of the negotiations of Bermuda 2 and was put forward to the Americans immediately after the initialing of the draft agreement in June 1977. The 'reasons advanced at that time by the Hong Kong representatives were that it would be embarrassing both with the PRC and the Taiwan Government if an American carrier was able to combine a traffic stop in Hong Kong with a traffic or technical stop in the PRC. Our original draft was subsequently amended and then incorporated as part of the final agreed text in July 1977.

With hindsight, it might appear that the provision was somewhat unnecessary since if it had been omitted there would have been nothing that could have given offence to either Government. In any case no American airline could operate over Hong Kong into the PRC without their specific agreement. But at the time, relations remained somewhat strained between the Americans and the FRC and they were sympathetic to our possible embarrassment with both that Government and Taiwan and found no difficulty with the substance of this note.

I think it is essential to know exactly what is covered by the note. If we agreed to waive it, it would mean that any US designated airline could benefit from the provisions of Note 1, as clarrified by Note 7 of Section 5. Note 7 simply deals with non-traffic or technical stops and is I believe self-explanatory. But what is allowed under Notes 1 and 9 is simply the right to operate through Hong Kong to carry either transit traffic or on-line connecting traffic (as defined to a point or points in the PRC. There is no question of the US airline being given any "rights" to pick up traffic in Hong Kong for discharge in the PRC and vice versa and this prohibition covers "stop-over traffic". This means that eg Fan Am could not carry passengers or cargo into Hong Kong for discharge there and later pick them up on the same service after an interval of a few days and take them on into the PRC. This would guard a UK airline's interest in reserving all