TNAG-1494-FCO40-2052-Future-of-Hong-Kong-General-Agreement-on-Tariffs-and-Trade-(-1986 — Page 51

Foreign and Commonwealth Office

London SW1A 2AH

M Johnson Esq

Лукбола

Crt 17/2

си

Telephone 01-

233 4004

International Trade Policy Div 1 Department of Trade and Industry 1 Victoria Street,

London

SW1H OET

Your reference

Our reference

༨

(441)

See 443

HKK 122/1

Date 2016 September 1986

-7OCT 1986

*

INDEX

PA

on Taken

Dear Michael,

CHINA AND THE GATT

1.

8007/x

John McDonnell, the Australian ex-official advising the Chinese on GATT membership came to see me on 15 September (Peter Collecott's letter to John Shepherd of 2 April, copied to Tony Lane, gives the background). He had already spoken at length to John Beck and Raymond Phan van Phi in Brussels. We had a long and interesting talk about the prospects for the Chinese negotiating the resumption of their seat in the GATT.

2. Firstly, the background. McDonnell had gone to Peking in May/June 1986 to help the Chinese prepare their memorandum of application to GATT, and train their key negotiators. There were two major gaps in the memorandum where economic policy-making was still in a state of flux currency convertibility and the price. system. As far as transparency was concerned, the Chinese were considering drawing up an Appendix to their memorandum, listing all foreign trade by Brussels nomenclature and explaining whether it was subject to price control or foreign exchange inhibitions. In the first stage of their application, the Chinese might seek tariff negotiations from other Contracting Parties, agree to bind substantial parts of their tariff at existing levels and indicate their willingness to join the Customs Valuation and Import Licensing Codes. At the end of this process, they would probably seek a declaration that they were now a participant in the GATT, ie more than an observer, different from a de facto member in that they intended to join, but less than a Contracting Party. (McDonnell said that there were precedents, most notably Japan). This would entitle them to discuss not only tariffs, but the changes to GATT rules that might be consequent on a new Round - and the fact that the tariff negotiations would probably last for the duration of the new Round would mean that they would need only one Trade Reform Law (rather than two, to cover realignment of the tariff and any consequences of the MTNS).

•

3. McDonnell said that the Chinese view was that the legal questions - was China a market or non-market economy? was it a developing country? was it resuming membership or acceding afresh? should be resolved at the end of this process. They would be less contentious then - and, indeed, could only be answered when the picture of Chinese economic reform was clearer.

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CONFIDENTIAL