TNAG-0868-FCO40-1078-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 190

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CONFIDENTIAL

4. THE ONLY PROSPECT OF NEGOTIATING A REASONABLE DEAL ON THE REGIONAL ROUTES THEREFORE SEEMS TO BE TO CONTINUE TO

TIE THEM IN WITH THE TRUNK ROUTE AND TO USE SUCH LEVERAGE AS WE HAVE ON THE LATTER (ESPECIALLY THE APPARENT CHINESE DESIRE TO CONCLUDE THEIR ASA WITH US) TO ASSIST THE FORMER. ALTHOUGH IT IS NOT REALISTIC TO SUPPOSE THAT WE CAN ACHIEVE THE OPPORTUNITIES FOR WHICH HONG KONG WAS HOPING, WE WOULD EXPECT TO COME OUT BETTER ON THE REGIONAL ROUTES THAN IF WE WERE

TO LEAVE THEM OVER FOR SEPARATE NEGOTIATIONS,

5. THERE ARE OF CORSE RISKS IN THIS. WE MAY COME OFF WORSE

ON THE TRUNK ROUTE THAN IF WE WERE TO DEVOTE OUR WHOLE BARGAINING LEVERAGE TO THAT. AND IF HONG KONG - PEKING

REALLY IS A STICKING POINT WE MAY PUSH THE CHINESE TOO

FAR AND LOSE BOTHE DEALS. THIS BRINGS US ON TO QUESTION

B IN PARA 1 ABOVE.

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6. IT APPEARS FROM HONG KONG TELNO 617 THAT HONG KONG ARE

PREPARED TO ACCEPT A SOLUTION UNDER WHICH, ONCE BA'S TEMPORARY SERVICES ON THE TRUNK ROUTE WERE WITHDRAWN, CAAC WOULD HAVE A

PERMANENT MONOPOLY ON THE HONG KONG-PEKING ROUTE, THIS WOULD

APPEAR TO REFLECT THE REALITIES OF HONG KONG'S COMMERCIAL

AND POLITICAL INTERESTS. OUR BARGAINING POSITION ON THE

REGIONAL ROUTES IS WEAK. EVEN IF WITHOUT ANY PRIOR

AGREEMENT THE CHINESE WERE TO APPROACH US TO ALLOW CAAC TO

OPERATE BETWEEN HONG KONG AND PEKING WITHOUT A RECIPROCAL BRITISH SERVICE, WE COULD HARDLY REFUSE. MOREOVER, SO FAR

· AS THIS AND OTHER REGIONAL SERVICES ARE CONCERNED, THE CHINESE COULD EXPLOIT OUR SYSTEM BY APPLYING FOR PROGRAMMED CHARTERS WHICH DCA/HONG KONG WOULD FIND IT VERY HARD TO REJECT.

AND ONCE CAAC HAD STARTED A SERVICE TO HONG KONG ON WHATEVER BASIS IT IS HARDLY CONCEIVABLE THAT WE WOULD STOP IT BECAUSE

THE CHINESE REFUSED TO LICENSE A COMPETITIVE BRITISH CARRIER.

7. HOWEVER, AS SEEN FGOM HERE THE CHINESE POSITION OVER THE HONG KONG-PEKING ROUTE IS ILLOGICAL IN POLITICAL TERMS,

AND PROVIDED WE KEEP UP THE PRESSURE THERE IS A PROSPECT THAT

THEY THEMSELVES WILL ACCEPT ITS ILLOGICALITY. WE THEREFORE PROPOSE TO CONTINUE PRESSING FOR A MORE EQUITABLE PACKAGE.

THE AMBASSADOR WOULD FURTHERMORE BE WILLING TO SUPPLEMENT THIS

APPROACH IF YOU AGREE BY INTERVENING AT HIGH LEVEL IN MFA.

/HE

2 CONFIDENTIAL