TNAG-2243-FCO40-3224-Most-favoured-nation-status-for-China-impact-on-Hong-Kong-1991 — Page 154

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7. For our part, the Prime Minister mentioned to the

President on 13 March his concern over the impact on Hong

Kong of the loss of MFN status for China. The President

indicated that it might be useful for the Hong Kong Chamber

of Commerce to visit the US and indeed this has now

happened. Washington have also been active in lobbying and coordinating with the Hong Kong External Trade Office.

Shielding Hong Kong

8.

It is difficult to see how Hong Kong could be shielded

from the effects of a US decision not to renew. MFN acts to

keep tariff rates low. If it was removed these rates would

increase by a factor between two and ten. The effect would

be to reduce significantly China's exports to the US. A

large percentage of these exports go through Hong Kong.

Thus Hong Kong would be hit firstly because there would be a

reduction in the reexports of China origin goods to the

United States, secondly because there would be a reduction of imports from China which preceded those reexports, thirdly because there would be a reduction of exports from

Hong Kong to China of the raw materials and

semi-manufactures for producing the reexports, and fourthly there would be reduction in imports into Hong Kong of raw materials and semi-manufactures which precede the corresponding exports to China.

9.

There does not seem to be any realistic way that this effect on Hong Kong could be limited but we have asked Hong Kong, Washington and Peking to reflect further in time for

your meeting.

One possibility could be to exempt Guangdong

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