TNAG-0868-FCO40-1078-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 100

CONFIDENTIAL

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HONG KONG AND PEKING AND OTHER POINTS IN CHINA IF THESE ARE NOT

ARRANGED NOW. FOR POLITICAL AND COMMERCIAL REASONS EXTENDING

BEYOND NARROW AIR SERVICES CONSIDERATIONS, AND INVOLVING HONG

KONG'S WISH TO CONTINUE AS A JUMP-OFF POINT FOR TOURIST AND

COMMERCIAL TRAVEL TO CHINA, HONG KONG IS GOING TO BE UNDER

IRRESISTIBLE PRESSURE TO APPROVE CHINESE REQUESTS TO OPERATE

ONE-SIDED CHARTER' SERVICES TO HONG KONG. THIS SEEMS TO

ME TO BE THE FUNDAMENTAL WEAKNESS IN THE HONG KONG, AND AS A

RESULT THE UK POSITION. IF THERE WERE NO AGREEMENT OR IF WE

ACCEPTED A PARTIAL AGREEMENT THE CHINESE COULD STILL PRESS

FOR CHARTERS INTO HONG "ONG AND HONG KONG WOULD VERY PROBACLY

FEEL BOUND TO AGREE. EVEN

EVEN IN THE HIGHLY UNLIKELY EVENT THAT

HONG KONG WERE TO REFUSE, THE CHINESE WOULD STILL BE ABLE TO CARRY

ALL THE TRAFFIC ON THEIR DOMESTIC SERVICES THROUGH GUANGZHOU.

I THEREFORE DO NOT SEE HOW WE COULD HOPE TO SECURE A BETTER DEAL

ON REGIONAL TRAFFIC BY TAKING OPTION B NOW AND TRYING TO

NEGOTIATE REGIONAL ROUTES SEPARATELY. SHORT OF GRANTING CAAC A MONOPOLY IT MAY NOT BE POSSIBLE TO GET SERVICES STARTED AT ALL.

4.

WE MUST ALSO PPRECIATE THE CHINESE POSITION THAT BY ALLOWING

US TO OPERATE ANY SERVICES BETWEEN HONG KONG AND POINTS IN CHINA

THEY ARE IN EFFECT GIVING US A SLICE OF WHAT IS AT PRESENT AND

COULD CONTINUE TO BE THEIR OWN CAKE. THE MAIN REASON THEY ARE

!OW PREPARED TO LET US HAVE A SHARE OF THE REGIONAL TRAFFIC IS

THEIR WISH TO REACH AN AIR SERVICES AGREEMENT WITH BRITAIN PRIOR TO, AND PERHAPS FOR SIGNATURE DURING, PREMIER HUA'S VISIT.

5. THE VALUE OF OPTION A IS THAT IN ADDITION TO THE COMMERCIAL AND OTHER BENEFITS OF STARTING SERVICES BETWEEN CHINA AND

DOTH BRITAIN AND HONG KONG, IT ALSO ALLOWS SOME CARRIAGE OF TRAFFIC BY BRITISH AIRLINES BETWEEN HONG KONG AND BOTH PEKING AND SHANGHAI, ESTABLISHING THE PRINCIPLE OF A HK BASED CARRIER

OPERATING THE REGIONAL SERVICE. THE CHINESE HAVE A GENUINE POLITICAL

PROBLEM HER: HONG KONG IS TO THEM A POINT IN CHINA. HAVING

CONCEDED OUR RIGHT TO OPERATE ON REGIONAL ROUTES THE CHINESE

MAY WELL BE PERSUADED THAT THEIR COMMERCIAL FEARS ARE

EXAGGERATED, AND THAT WE SHOULD BE ALLOWED A LARGER SLICE OF THE CAKE. THEIR WILLINGNESS TO HAVE AN LARLY REVIEW GIVES

GROUNDS FOR OPTIMISM ON THIS SCORE. I M. 3HT ADD THAT THE GUANGZH JU/HONG KONG POSSIBILITY IN OPTIO! B IS NOT POLITICALLY

AS