TNAG-1154-FCO40-1434-Visits-by-Members-of-Parliament-(MPs)-to-Hong-Kong-1982 — Page 235

IN CONFIDENCE

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imports of Hong Kong textiles, the territory's major export commodity,

ultimately benefits developed rather than other developing suppliers,

contrary to the principles of the Multi-Fibre Arrangement (MFA). The present MFA was renewed at the end of 1981. Bilateral agreements under the MFA are to be renegotiated during 1982. Hong Kong attaches

a great deal of importance to their renegotiation. Another cause of

strained relations was the decision in March 1980 by the Civil Aviation

Authority to license British Caledonian to fly the London to Hong Kong

route, previously monopolised by British Airways. The Hong Kong

Authority had earlier agreed to license both BCal and Cathay Pacific,

Hong Kong's flag carrier. The resentment caused by the CAA decision,

which was the subject of appeal to the Trade Secretary, was relieved

by the latter's announcement that BCal, Cathay Pacific and Laker

Airways should all be allowed to operate the route. Laker did not,

however, receive a licence to fly to Hong Kong from the Hong Kong

Civil Aviation Authority.

DEFENCE

5.3 In view of Hong Kong's unusual position, security and defence are

live issues and the armed forces play a significant role in the

territory's affairs. The garrision in Hong Kong consists of four-

infantry battalions (three Gurkha and one British), a Gurkha engineering

squadron, five naval patrol craft and two squadrons of helicopters.

There is provision for ad hoc short term reinforcement.

5.4 A new Defence Costs Agreement was signed in October 1980 by Mr

Barney Hayhoe, Parliamentary Under-Secretary of State for Defence, and

the Governor of Hong Kong, and came into effect in April 1981. It will

run for seven years initially, and will be renewable for further

periods of five years on the same terms unless either government

wishes to vary them. Hong Kong's contribution to costs under the

Agreement remains at 75%, but a new, comprehensive system of accounting

costs will be introduced which will, in effect, increase Hong Kong's

share by more than 50%. Part of this covers the cost of enlarging

the British garrison in Hong Kong by one infantry battalion.

IN CONFIDENCE

/NATIONALITY