TNAG-1402-FCO40-1874-Future-of-Hong-Kong-continued-participation-in-the-General-A-1985 — Page 179

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as were those of other developed countries, under the aegis of UNCTAD. Donor countries operated a system of "burden- sharing" which meant that a beneficiary excluded by one major donor would almost certainly be excluded by the others. Therefore, if the Community excluded Hong Kong it was very likely that the US its most important market

Furthermore, the signs and Japan would also exclude it. were that its major competitors, South Korea and Taiwan, were to be included and would therefore be granted preference over Hong Kong.

5.

For these reasons, the UK decided that the best way to protect Hong Kong's interests would be to press for its

With the assistance of inclusion in the Community's GSP.

the Commission, the UK overcame the initial unfavourable Community response and secured agreement in January 1971. The Community statement stipulated that "this inclusion of Hong Kong in the GSP will settle the case of Hong Kong once and for all ("definitivement") in the framework of the negotiations for accession".

6. The Community offer had considerable limitations. Textiles, footwear and certain items on "origin grounds", which accounted for 70% of Hong Kong's exports to the Community, were excluded. Certain other sensitive products were subject to a "butoir" or cut-off level and yet other items were classified as semi-sensitive and also subject to restriction. Only 14% of Hong Kong's exports to the Six stood to benefit from the Community offer (although this percentage rose after UK accession). Despite the initial reservation of Hong Kong, the UK accepted the offer on the grounds that it was a considerable improvement on what had been expected some months before, it would encourage the US and Japan to include Hong Kong in their schemes, and the UK, after accession, would be in a position to secure improvements for the benefit of Hong Kong in the

The Community's proposed annual reviews of its GSP. arrangement reached was not embodied in the Treaty of Accession, but operated from 1 July 1971 when the Community's scheme of generalised preferences was inaugurated.

7. The Six did not give any reason for their decision to include Hong Kong after their initial reluctance. However, it has always been a principle of the Community that the dependent territories of the member states should receive special treatment and the Commission and some of the member states found it hard to justify that nothing at all should be done for Hong Kong. The advantage of choosing the inclusion of Hong Kong in its GSP as a means of helping it adjust to UK accession was that the principle of "burden-sharing" between GSP donors meant that the pressure of Hong Kong exports would be spread over wider markets.

The above account of Hong Kong's inclusion in the Community's GSP bears out the first sentence of the paragraph, submitted as part of the Hong Kong Government

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