TNAG-1173-FCO40-1465-Future-of-Hong-Kong-special-study-by-FCO-for-the-Prime-Minis-1982 — Page 6

SECRET

OVERSEAS TRADE DIVISION 4/2

W Morris Esq

DEPARTMENT OF TRADE

1 VICTORIA STREET

LONDON SW1H OET

Mr feeland

H Donald

Mr Rushford

Hobe Kong and General Department Foreign and Commonwealth Office

London

SW1

4 1218

COPY NOS-30F 8

5242

Telephone Direct Line 01-215

Switchboard 01-215 7877

12 August 1982

No- he has got

it won

Se

not attached.

Dea

Mani

FUTURE OF HONG KONG: SPECIAL STUDY

I enclose, as you suggested, 1+2 copies of a note prepared here on various trade issues in connexion with the UK/HK and China, following Donald's meeting last Thursday. The note is pretty impressionistic, I fear; I do not see how it can be other, with all the uncertainties there are and the limited resources and information we have available for crystal ball gazing. But if there are gaps in it to fill or you want us to try to elaborate on anything we shall, of course, do our best to.

2.

As for further work for the study, I plan to be away for 4 weeks leave from tonight (but may be in the office tomorrow). The Under-Secretary in this division, Peter Corley, will be back on Monday (see letter of 5 August from our Permanent Secretary to yours).

You can also during my absence contact the Principal in my branch for China and Hong Kong, Charles Cruickshank. He is aware of the study.

3. Because of its format, in examining various issues, the note does not pull together its arguments into an express conclusion. It will, however, be clear enough from the text that in the matter of trade our strong preference is for there to be no or a minimal change in existing arrangements any change being subject to the test that it should not damage the HK economy and thus its capacity to absorb our exports. The management of our textile trade policy would be easier if we no longer had formal responsibility for HK's external relations, though even if the HK textile sector effectively came under Chinese control it would be a moot point whether we could automatically afford to become that much more protectionist against "Chinese" textiles: we cope on the whole with HK's complaints about our textiles policy (which has not prevented our exports to HK from rising in recent years) and on balance the problems of textiles do not to any major degree offset the view that our trade interests imply a strong preference for no change in the constitutional

relationship.