CONFIDENTIAL
LORD CAITHNESS' BREAKFAST FOR US DELEGATION TO BAPG
50th ANNIVERSARY CELEBRATION, 0800 3 JULY
H4130994
China Most Favoured Nation (MFN) Status
:
Background
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1991
1. US POSITION
The President has unconditionally renewed MFN, but Congress
and the Senate can veto that decision if they are able to
muster a two thirds majority, or they can seek to add
onerous conditions on renewal next year. The US trade
deficit has expanded enormously, and China now has the third
largest bilateral surplus with the US. The US also has
disputes with China on textile quotas and intellectual
property and is concerned about China's performance on human
rights and its role in arms proliferation.
2. DAMAGE TO HONG KONG IN EVENT OF NON-RENEWAL
Withdrawal of MFN status would affect Hong Kong because of
the huge volume of China/US trade which goes through Hong
Kong. Damage would include loss of US$9-12 bn in trade and
perhaps 40,000 job losses and a halving of GDP growth.
3.
RENEWAL WITH CONDITIONS
Renewal with conditions could also damage Hong Kong, as it
would introduce uncertainty which would act as a
disincentive to investment in the territory.
4
•
DAMAGE TO US INTERESTS IN HONG KONG
The US is one of Hong Kong's largest investors with a total
investment of about USD 6 bn, involving about 900 US
companies, including over 140 factories.
BRIAEU/2
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