ROBAFF
G.
HONG KONG/US DOLLAR LINK
RESTRICTED
1. Contribution to stability
Since October 1983 the Hong Kong/US dollar link has brought about stability and maintained confidence by creating a predictable financial framework. Any change in the link would be a matter for the Hong Kong Government. They have expressed the conviction that
such an action would cause uncertainty and speculation in the years ahead, which could seriously harm Hong Kong. We endorse this view.
2. Risk of protectionist measures against Hong Kong
We seek to put Hong Kong's case as robustly as we can. The merits of the case are clear. Hong Kong's overall trade remains more or less in balance. Hong Kong operates an open trade regime fully in accordance with the General Agreement on Tariffs and Trade. The Hong Kong/US dollar link was introduced in 1983 following a period of severe exchange rate instability. It has been maintained ever since while the US Dollar has both risen and fallen, providing clear evidence that the link is not intended as an instrument of trade policy. Any protectie measures against Hong Kong in retaliation against maintenance of the present dollar link would be patently unjust and unjustified. I believe that we are succeeding in getting this message across to the international community.
RESTRICTED
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