TNAG-1493-FCO40-2051-Future-of-Hong-Kong-General-Agreement-on-Tariffs-and-Trade-(-1986 — Page 146

GRS 500

CONFIDENTIAL

FM HONG KONG

TO PRIORITY FCO

TELNO 1634

OF 28101OZ MAY 86

CONFIDENTIAL

356

29 MAY 1986

HKCK 122/1

RECEIVED I

INFO PRIORITY PEKING, TOKYO, WASHINGTON, UKMIS GENEVA

UKMIS GENEVA PLEASE PASS-COPY TO CARTLAND.

MIPT: HONG KONG AND THE GATT

1. TEXT OF SPEAKING NOTE #S AS FOLLOWS:

BEGINS.

1. HMG'S ARTICLE XXVIN(5)(C) DECLARATION BY WHICH HONG KONG ACQUIRED SEPARATE GATT STATUS, AND THE PARALLEL CHINESE DECLARATION REGARDING THE POSITION OF HONG KONG SAR AS FROM 1 JULY 1997, HAVE GONE DOWN WELL WITH OUR MAJOR TRADING PARTNERS. WE ARE VERY GRATEFUL FOR JAPAN'S READINESS TO MAKE A PUBLIC STATEMENT :IN SUPPORT.

2. CONCERNED THAT ''JAPAN WOULD LIKE TO CONTINUE TO EXAMINE THE STATUS OF HONG KONG IN THE GATT, INCLUDING LEGAL ASPECTS, AFTER JULY 1997 WHEN INT BECOMES A SPECIAL ADMINISTRATIVE REGION OF CHINA.''

3. THE JAPANESE RESERVATION, IF IT BECAME PUBLIC KNOWLEDGE, COULD HAVE THE MOST UNFORTUNATE CONSEQUENCES BOTH FOR HONG KONG'S CURRENT STABILITY AND CONTINUING FUTURE PROSPERITY. OF JAPAN WITH HITS VAST INVESTMENTS AND STAKE IN HONG KONG, IN BOTH THE INDUSTRIAL AND SERVICE SECTORS, HELD SUCH RESERVATIONS ABOUT THE VIABILITY OF THE GATT ARRANGEMENT BEYOND 1997, OTHER HONG KONG TRADERS WOULD ASSUME (PROBABLY RIGHTLY) THAT OTHER COUNTRIES HARBOURED SIMILAR DOUBTS, AND THE WHOLE CAREFULLY CONSTRUCTED EDIFICE OF INTERNATIONAL SUPPORT FOR HONG KONG'S CONTINUING IN ITS PRESENT TRADING STATUS COULD CRUMBLE, POSSIBLY EVEN BEFORE 1997.

4. THE SINGLE MOST IMPORTANT FACTOR AFFECTING CONFIDENCE IN HONG KONG'S FUTURES THAT EFFECTIVE ARRANGEMENTS SHOULD BE MADE FOR THE TERRITORY TO CONTINUE TO PARTICIPATE FULLY AND FREELY IN THE COMMERCE OF THE FREE WORLD, AND ENTS TRADING INSTITUTIONS, OF WHICH THE MOST IMPORTANT IS THE GATT. THIS PRINCIPLE WAS ENSHRINED IN THE JOINT DECLARATION, WHICH JAPAN WELCOMED.

5. BEFORE EMBARKING ON THE ARTICLE XXVH(5)(C) ROUTE TO SECURE THE RETENTION OF HONG KONG'S PRESENT GATT STATUS BY THE HONG KONG SAR AFTER 1997, THE MATTER WAS CAREFULLY STUDIED BY LEGAL EXPERTS N LONDON AND IN CONJUNCTION WITH THE BATT LEGAL ADVISER, MR LINDEN. ALL THESE AUTHORITIES ARE OF THE VIEW THAT THERE WOULD BE NO QUESTION

CONFIDENTIAL

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