TNAG-2244-FCO40-3225-Most-favoured-nation-status-for-China-impact-on-Hong-Kong-1991 — Page 77

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MDLIAN 2480

PERCENT IN OUR RE-EXPORTS OF CHINESE GOODS TO THE US IN 1991. AS REGARDS TIMING, THIS ISSUE IS THE MORE IMMEDIATE AS ACTION IS DUE BY THE US WITHIN 1 TO 4 MONTHS OF 26 NOVEMBER.

5. ON SECTION 301, THE SCALE OF THE POTENTIAL PROBLEM IS UNKNOWN BECAUSE THERE IS AS YET NO ESTIMATE OF THE ALLEGED DAMAGE TO THE US CAUSED BY CHINA'S TRADE BARRIERS. IT SEEMS POSSIBLE THAT A SIGNIFICANT AMOUNT OF OUR RE-EXPORT TRADE COULD BE AFFECTED GIVEN THE RANGE OF ISSUES UNDER CONSIDERATION. HOWEVER THE TIME SCALE FOR ACTION CONE YEAR AFTER INITIATION OF AN INVESTIGATION) IS SUCH THAT MORE TIME IS AVAILABLE TO ASSESS THE DANGERS AND PLAN

OUR STRATEGY.

WAY FORWARD

6. THE SPECIAL 301 CASE IS A TRADE DISPUTE BETWEEN THE US AND CHINA. WE SHOULD ADOPT A LOW PROFILE AT LEAST FOR THE PRESENT. IF WE WERE TO TAKE A PUBLIC POSITION THIS COULD BE PERCEIVED IN THE US AS HONG KONG SPEAKING FOR CHINA, POSSIBLY AT CHINA'S BEHEST. SOME IN THE US MIGHT THEN EXERT PRESSURE ON US TO PRESS THE CHINESE TO RESPOND TO US DEMANDS. THE CHINESE IN TURN COULD BECOME SUSPICIOUS THAT WE ARE SEEKING TO PROMOTE OUR INTERESTS AT

THEIR EXPENSE.

7. WE ARE NEVERTHELESS TAKING STEPS TO ADVISE OUR TRADING COMMUNITY IN A LOW KEY MANNER ABOUT THE POTENTIAL PROBLEMS. WE ALSO PROPOSE TO RAISE OUR CONCERNS, PRIVATELY AND IN GENERAL TERMS, WITH THE US ADMINISTRATION. THE DIRECTOR GENERAL OF TRADE WILL TAKE THE OPPORTUNITY OF A VISIT TO THE US NEXT MONTH TO DO

THIS. OTHER APPROPRIATE OPPORTUNITIES CAN BE TAKEN AS THEY ARISE.

8. WE UNDERSTAND THAT THE HEAD OF HKETO IN WASHINGTON HAS

DISCUSSED THIS SUBJECT WITHIN THE EMBASSY AND THAT THERE IS AGREEMENT ON THE DESIRABILITY OF SUCH A LOW KEY APPROACH AT THIS

STAGE.

9. THE LINE ALREADY TAKEN PRIVATELY BY WASHINGTON WITH

ADMINISTRATION CONTACTS SHOULD HELP TO ENSURE THAT THE HONG KONG

DIMENSION IS BORNE IN MIND. REMARKS MADE BY ASSISTANT USTR KRISTOFF VIA A USIS SATELLITE LINK ON 24 SEPTEMBER AND REPORTED IN THE PRESS HERE INDEED INDICATE THAT THE ADMINISTRATION DOES NOT WISH TO HARM HONG KONG IN ANY POSSIBLE RETALIATION AGAINST CHINA. WE THEREFORE DOUBT THAT ANY INITIATIVE NEEDS TO BE TAKEN AT THE PRESENT TIME. SHOULD THE SELECTION OF PARTICULAR PRODUCTS FOR RETALIATION BE IMMINENT, THE HKETO WOULD CONSULT FURTHER AS

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