TNAG-1256-FCO40-1589-Third-countries-and-the-future-of-Hong-Kong-1983 — Page 159

CONFIDENTIAL

THE ECONOMIC SYSTEM OF HONG KONG

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1. Hong Kong is completely dependent on trade. With no natural resources except its harbour, the Territory must export in order to finance imports of both raw materials and consumer goods.

2. Hong Kong has important rights under the General Agreement on

Tariffs and Trade (GATT) because the United Kingdom is a founder

member. The Territory thus has most-favoured-nation status in the

markets of all contracting parties. The link with the UK is an

important factor in guaranteeing that these rights will continue.

3. Because of Hong Kong's beneficiary status under the generalised preference schemes of many developed countries, its imports into

those countries often receive duty free treatment or individual

lower rates of duty. Such status was recognised on a multi-national

basis after its initial such recognition by the EEC Generalised

Preference Scheme.

4. Hong Kong's achievements in exporting, and its development as an international financial centre have been fostered by an open business environment with an internationally recognised and impartially administered legal system.

The Territory's dependence

on trade means a limited role for discretionary policy changes, and

HKG's aim of non-intervention leaves decision-making in business to

those who bear the risks. Predictable economic policy and low tax

rates have encouraged an internationally mobile professional class to use the Territory as a base. Continued success requires confidence that the nature of the Territory will remain more or less

unchanged so that investment in Hong Kong's industry will

continue.

CONFIDENTIAL