TNAG-1401-FCO40-1873-Future-of-Hong-Kong-continued-participation-in-the-General-A-1985 — Page 159

CONFIDENTIAL

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Mr Warren, ECD(E)

CHINA AND THE GATT

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We spoke about Mr Lane's letter of 27 March to Mr Renwick.

Like HKD (Mrs Priest's minute to you of 10 April) FED's views on Chinese accession to the GATT remain as expressed in last year's minuting on the FCO paper. Apart from Hong Kong considerations, it is in the political interests of Britain, and of the West in general, to encourage China's current outward looking policies. We also have a strong and growing economic interest: we have been working hard to exploit the considerable commercial opportunities for Britain in China. The Chinese would see any attempt to obstruct China's accession to the GATT, however misguidedly, as a rebuff for the general" open door"policy. Britain was seen to have played an instigating role, our interests in China would suffer considerably.

3.

I understand the force of some of the DTI's objections to GATT membership. However, notwithstanding political considerations, I am not convinced that the DTI paper presents the entire economic picture. Chinese imports are currently growing more rapidly than exports (24.7% compared with 14.6% last year). There is much potential business in China for most EC countries. This would be seriously jeopardised by an unhelpful attitude over the GATT. Furthermore, as Mrs Priest points out, the DTI themselves acknowledge that it would not eventually be possible to prevent Chinese accession. Indeed, I think that a judgement in paragraph 2(iii) of the DTI paper that there is scope for reducing the likelihood of a Chinese application is highly questionable. the Chinese wish to apply, they will.

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For these reasons, FED could not agree to UK instigation of or participation in any attempt to head off the Chinese application. We would find even discreet soundings on the lines advocated by DTI within the EC alarming. There would be a real risk that the Chinese would get wind of our position. And, by the DTI's own admission, they would in the end be unsuccessful.

I agree with paragraph 14 of the DTI paper that an unsuccessful attempt at a rebuff would be just as objectionable political,as a successful

one.

5. I therefore hope that we can achieve an early consensus within Whitehall that our only option is to concentrate on suitable terms of Chinese membership. Even here, however, there are pitfalls. Quantitative restrictions as outlined in paragraph 19b of the DTI paper cause me some concern. More generally, when terms of accession are under negotiation, we should not allow the Chinese to identify Britain as particularly obstructive. Indeed, given that the trade objections are common to most EC members, I hope we will not need to thrust ourselves forward. The Hong Kong issue after all gives us a special reason to let others take the lead.

Mr Hallett, Economic Adv cc: Mrs Priest, HKD-

Mr Burroughs, Legal Adv Mr Woolley, Planning Staff

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John Ashton

Far Eastern Department