TNAG-1401-FCO40-1873-Future-of-Hong-Kong-continued-participation-in-the-General-A-1985 — Page 65

CONFIDENTIAL

67

INTERNATIONAL TRADE POLICY DIVISION

HKK 04/24

OMENT OF TO.

19 VICTORIA STREET

LONDON

Tower hund » Direc, diality .:

(SwHerbðurt) 771-115

5400

10 May 1985

J A Shepherd Esq

European Community Department Foreign and Commonwealth Office

London

SW1A 2AH

Mr. Elyon

thecretical

Pretty

ward for policy,

Am. 1415

Yer

Pylest

Lief

Laict 1975

pe

Dear Johm,

CHINA AND THE GATT

47

Many thanks for your letter of 29th April and the revised version of your paper. We shall be looking at this. I certainly agree that it ought to be discussed inter-departmentally at some stage, However I see no connection between this issue and that of commercial relations with Japan, and therefore no need to synchronize discussion of the two issues.

2.

I imagine the major issue is how to weigh the foreign policy arguments, which we understand very well both generally and as they affect Hong Kong, against the UK trade and industrial interests. You will appreciate that as seen from here, it is important not to regard the GATT as a club to which countries might be admitted according to whether they are in or out of favour politically, but as a Treaty within the framework of which countries exchange concrete commitments; and that these commitments are of a kind which can meaningful only on certain broad assumptions about the role of the state in their internal domestic economic affairs.

3.

4.

Perhaps we can study your paper and come back to you?

In the meantime, I will comment briefly on one point in your letter. You say that more factual and analytical material is necessary to establish that the negative effects of Chinese member ship of the GATT are not outweighed for the UK by the size of China's market and of her potential growth of imports in sectors of interest to the UK. We shall be glad to discuss the statistics further to whatever extent you think would be useful. But we may to some extent be at cross purposes. The worry the DTI is expressing is not that Chinese exports to the UK are likely to exceed Chinese imports from the UK. We would not necessarily worry if they were. Bilateral trade balances do not enter into our trade policy, and we see the whole point of the multilateral trading system as being to enable bilateral imbalances to occur, and to be financed, where that is the result of comparative advantage. Our worry about China is not an im- balance of trade but an imbalance of commitments, and it arises

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