TNAG-1401-FCO40-1873-Future-of-Hong-Kong-continued-participation-in-the-General-A-1985 — Page 151

Mr Warren, ECD (E)

CHINA AND THE GATT

CONFIDENTIAL

27

Reference...L.A.KK 04. $24.

75

37

R&R Top Priest. HIS

Rad

14 1. Mr Lane's letcer to Mr Renwick 727 March 1984) encloses a DTI paper on their view of possible Chinese accession to GATT.

24/4

2. The main problem with the paper is that very restrictive positions are reached without much supporting evidence. If improved access to the UK market is to be denied to Chinese exporters on economic grounds, detailed analysis of the following type of question is required;

which sectors face competition from Chinese goods

how far will low-cost Chinese goods displace imports from other sources rather than UK production

what proportion of increased Chinese imports resulting from increased foreign exchange earnings will be from UK suppliers

- what are the costs to UK consumers (and prolucers, who b not benefit from higher lisposable real income) of relatively high prices of protected goods.

3.

The DTI paper offers only assertion where it treats these questions: the fact of competitive foreign suppliers is taken to justify protection; access to UK markets is to be restricted if it becomes "embarrassing

་་

(para 11).

4.

The sweeping remarks about 'State-Trading' economies and the GATT imbalances between rights and obligations and so on (paras ll and 12) - seem beside the point when the special terms the DTI wishes to see imposed within GATT rules for China are examined. These (set out in, para 19) would have the effect of making GATT membership of little value to the Chinese, since any GATT members could release themselves from commitments "..whenever these became an embarrassment".

5. It is surely just as dangerous to the continued existence of an organisation pledged to support a multilateral trade system if a potential member is excluded because of the bilateral trade effects on an existing member.

22 April 1985

CC:

MAshton, Far Eastern Department Mrs Priest, HKD

Mr Burroughs, Legal Advisers ✓ Mr Woolley, Planning Staff

Nick Hallett

N Hallett

Economic Advisers 233 5335

CONFIDENTIAL