TNAG-0868-FCO40-1078-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 230

CONFIDENTIAL

EFFECT OF CONCEDING IT TO US NOW, IN VIEW OF THE AWKWARD PRECEDENT IT WOULD SET FOR THEIR NEGOTIATIONS WITH THE

UNITED STATES. WHILE WE HAD PROVIDED FOR THE DESIGNATION OF MORE THAN ONE CARRIER IN THE DRAFT PRESENTED TO THE CHINESE, THIS WAS VERY MUCH A TRY-ON AND THERE COULD BE NO ASSURANCE

THAT WE WOULD SUCCEED. EVEN IF THE CHINESE ACCEPTED DIFFERENT DESIGNATIONS ON DIFFERENT ROUTES, THEY MIGHT WELL JIB AT DUAL DESIGNATION ON THE SAME SECTORS (E.G. HONG KONG-PEKING) ESPECIALLY IN VIEW OF THE PRACTICAL PROBLEMS THAT IT WOULD CREATE. AT YESTERDAY'S MEETING, OFFICIALS CAME CLOSE TO SAYING THAT IF THE REGIONAL SERVICES COULD NOT BE OPERATED BY CPA THEY

WOULD NOT WANT ANY REGIONAL SERVICES AT ALL. I ASKED THEM TO CONSIDER THEIR POSITION ON THIS VERY CAREFULLY OVERNIGHT,

6. AT THIS MORNING'S MEETING, THE GOVERNOR DID NOT SUPPORT THIS LINE. BUT HE EMPHASISED THAT THERE COULD BE A POLITICAL ROW IN HONG KONG IF THE UNDERSTANDINGS REACHED DID NOT PROVIDE FOR REGIONAL SERVICES TO BE OPERATED BY A HONG KONG-BASED CARRIER. 1 EMPHASISED OUR AIMS IN THE NEGOTIATIONS, THE VERY REAL PROBLEMS OVER DUAL DESIGNATION, AND THE FLEXIBILITY OF OUR APPROACH. I TOOK THE OPPORTUNITY TO CORRECT THE IMPRESSION WHICH SEEMS TO HAVE GROWN UP IN HONG KONG THAT WE WERE SEEKING TO FURTHER THE INTERESTS OF BA ONLY. I POINTED OUT HOWEVER THAT WE HAD ALREADY HELD UP AGREEMENT BETWEEN THE UNITED KINGDON AND THE CHINESE PEOPLE'S REPUBLIC FOR SIX YEARS IN ORDER TO PROTECT CPA'S EXISTING PROFITS FROM TAIWAN. NOW THAT THE TAIWAN PROBLEM APPEARD TO HAVE BEEN SATISFACTORILY RESOLVED, WE COULD NOT REASONABLY HOLD UP AN AGREEMENT STILL LONGER IN ORDER TO ENSURE THAT CPA WERE ABLE FURTHER TO INCREASE THEIR PROFITS BY OPERATING TO CHINA. IN

DISCUSSION ARISING FROM THIS THE GOVERNOR EXPRESSED THE VIEW THAT THERE WAS NO POT OF GOLD TO BE MADE OUT OF OPERATING TO CHINA.

7. THE GOVERNOR ALSO TOOK THE INITIATIVE IN REFERRING TO THE QUOTE IN-FIGHTING UNQUOTE THAT IS GOING ON, ESPECIALLY BETWEEN THE SWIRE GROUP AND JARDINES, AS TO WHICH HONG KONG- BASED COMPANY SHOULD OPERATE INTO CHINA IF THE OPPORTUNITY ARISES.

HE THOUGHT WE NEEDED TO ALLOW TIME FOR THIS TO BE SETTLED AND VOLUNTEERED THAT THE AIRLINE TO BE DESIGNATED FOR THE REGIONAL SERVICES (IF AN OPPORTUNITY FOR DUAL DESIGNATION COULD BE MEGOTIATED) QUOTE SHOULD BE DECIDED BY HMG IN CONSULTATION WITH THE

GOVERNMENT OF HONG KONG UNQUOTE. I AGREED.

2 CONFIDENTIAL

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