TNAG-2468-FCO40-3592-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 190

CONFIDENTIAL

levels in the US Administration, and our Washington embassy and the Hong Kong Government have lobbied on Capitol Hill. Last year the Prime Minister discussed the issue with

President Bush who said how useful this lobbying had been in

the run up to his decision and there is no doubt that the

lobbying contributed to his decision being maintained in the

face of subsequent adverse voting in the Senate and House.

4. If MFN for China is not renewed this year the effects on

Hong Kong's economy could be very serious. Even conditional renewal could be damaging as it would bring about

uncertainty in the markets and lead to an erosion of

confidence in Hong Kong as a major trading and financial

centre. The US is still Hong Kong's biggest market, and in

1991 re-exports of China origin to the US amounted to

HK$104 billion, representing 19% of Hong Kong's total

re-exports. Non-renewal of MFN could result in:-

5.

i) a loss of 44,000 60,000 Hong Kong jobs ii) GDP growth rate cut by one third to a half

iii) a loss of income by Hong Kong of HK$12-16 billion

iv) a loss of HK$91 123 billion in overall trade

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I attach our timetable showing recent events and

possible future ones based on information from Washington,

together with a telegram containing their assessement of the

likely outcome. Although it is almost certain that

President Bush will renew MFN this year it is less certain how his decision (which will probably be annouced before the end of this month) will fare on Capitol Hill. Washington believe Congress will challenge it by introducing a joint resolution of disapproval. This has to be voted on before

31 August, and the Veto debate is likely to take place in early September. It is also likely that Congress will introduce a bill setting conditions for MFN.

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CONFIDENTIAL