TNAG-0868-FCO40-1078-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 83

CONFIDENTIAL.

IN THE INTERESTS OF IMPROVING GOODWILL WITH HONG KONG AND HONG KONG COMPANIES THE CHINESE ARE MOVED AT SOME FURTHER STAG TO

GIVE A BETTER DEAL ON THE THE REGIONAL SERVICES THAN WE HAVE SO FAR MANAGED TO OBTAIN, I DO NOT SEE WHY IT IS LESS PLAUSIBLE THAT THIS SHOULD BE CONCEDED AS A RESULT OF THE REVIEW OF THE OPTION A ARRANGEMENTS, RATHER THAN THROUGH SEPARATE NEGOTIATIONS. THE CHOICE ON THE REGION APPEARS TO BE BETWEEN:-

(1) SOMETHING NOW, THE GUARANTEE OF SOMETHING BETTER LATER (HONG KONG BASED CARRIER TO PEKING) AND THE POSSIBILITY OF SOMETHING MUCH BETTER THROUGH REVIEW (OPTION A).

(11) LESS NOW (OPTION B) OR NOTHING NOW (OPTION C), NO GUARANTEE OF ANYTHING IN THE FUTURE AND THE POSSIBILITY OF

SOMETHING MUCH BETTER THROUGH A POSSIBLE SEPARATE DEAL.

3. I CANNOT AGREE WITH THE ARGUMENTS IN PARAGRAPH 5 OF T.U.R. RELATING TO SOVEREIGNTY. IN THE 1973 AGREEMENT HONG KONG/PEKING AND LONDON/MANCHESTER WERE OPTICALLY BALANCED WITH RECIPROCAL RIGHTS FOR THE TWO AIRLINES, WHICH DID INDEED IMPLY SOME ACCEPTANCE OF THE CHINESE VIEW OF HONG KONG STATUS. (THE CHINESE ARE NOW NO LONGER ASKING FOR MANCHESTER.) IN OPTION A, IN ADDITION TO STOPOVER RIGHTS, FOR BA ANOTHER BRITISH CARRIER WOULD BE ABLE TO OPERATE HONG KONG / SHANGHAI AND, MORE IMPORTANT, WOULD BE ABLE TO OPERATE HONG / PEKING AT A FUTURE DATE. THIS

IMPLIES, IF ANYTHING, A CHINESE RECONCILIATION WITH OUR VIEW OF THE STATUS OF HONG KONG. THE IMBALANCE IN POINTS AND CAPACITY, THOUGH NOT WITHOUT POLITICAL OVERTONES, REFLECTS PRINCIPALLY THE COMMERCIAL REALITIES OF THE RELATIVE BARGAINING STRENGTH

OF THE TWO SIDES.

4. OPTION C, WITH B.A. COMPLETELY BLINDED ON THE HONG KONG/ PEKING SECTOR, AND WITH NO PROVISION FOR ANY BRITISH CARRIER. TO FLY ANYWHERE ELSE IN CHINA (WHILST CAAC OPERATE AT LEAST CHARTER SERVICES) COMES MUCH CLOSER TO AN ACKNOWLEDGEMENT OF

THE CHINESE VIEW.

9 CONFIDENTIAL

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