TNAG-1401-FCO40-1873-Future-of-Hong-Kong-continued-participation-in-the-General-A-1985 — Page 163

CODE 18-77

Mr Warren, ECD (E)

CHINA AND THE GATT

1.

27

CONFIDENTIAL

Reference..

FILE Hkk 040/24.

HKK 845/24

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Spice to Mr. Ashton For who will

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jonide for them any nuevation gamis any

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Mr Lane's letter of 27 March to Mr Renwick.

memberships applicati

2. Hong Kong Department's views on Chinese accession to the GATT remain essentially as in paras 6 9 of the draft paper enclosed with Brian Crowe's letter of 26 November 1984 to Arthur Pryor. We need a background of harmonious UK/China relations if we

to ensure the smooth implementation of the agreement on Hong Kong's future. Any action on our part to head off a Chinese application for GATT membership, however inconspicuous, would put this at risk. It follows that action to mitigate the economic disadvantages of China's participation in the GATT (i.e. by devising satisfactory terms of accession), rather than opposition to her joining, is the course to pursue. If this view needed any further support, this is given by the DTI's own admission (paragraph 3 of Lane's letter) that China could not ultimately be prevented from joining GATT even in the face of Western opposition.

3. Para 5 of Mr Lane's letter suggests that there is no substantive link between Chinese accession to and Hong Kong's continuing participation in the GATT. This is technically correct in that Section VI of Annex I to the Hong Kong Agreement provides specifically for Hong Kong's participation in the GATT without linking this to PRC membership. Nevertheless, we have to bear in mind that:

(a) In accordance with Annex II to the Agreement, the mechanics

of ensuring Hong Kong's continuing participation in GATT is a matter for consideration by the Sino-British Joint Liaison Group (JLG) to be established when the Agreement enters into force (probably in May);

(b)

we expect Hong Kong and the GATT to be one of the first questions within its term of reference to which the JLG will address themselves;

(c) we will be seeking to obtain Chinese support for our

objective of securing contracting party status for Hong Kong within the GATT before 1997.

Given these considerations it is important that the requirements of our policy towards Hong Kong are fully taken into account in determining our position in Chinese accession to the GATT. This will be so irrespective of the timing of any Chinese

CONFIDENTIAL

/application