TNAG-2469-FCO40-3593-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 143

CONFIDENTIAL

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but there is no prospect of Chinese acquiescence in the Governor's proposals or anything like them. Encouraging

Congress to erect this into a new condition for MFN renewal

would therefore ensure that MFN was not renewed;

such a move could intensify Chinese determination to

oppose the Governor's proposals. They would interpret linkage

to the MFN issue as confirming their suspicions that the

democracy proposals were a UK/US plot to internationalise the

Hong Kong issue;

any boost to confidence in Hong Kong through a gesture of US support on these lines would be more than outweighed by

the blow to business confidence, and the economic damage which

removal of MFN would bring.

We are developing a strategy on the MFN issue in coordination

with the Governor and Sir Robin Renwick. We envisage two

parallel tracks:

intensive lobbying of the incoming Clinton team and the new Congress to ensure that they get the simple message that withdrawal of MFN would damage Hong Kong;

working up ideas privately on how the Administration could give itself maximum flexibility on the issue, given that President Clinton would be unlikely to veto legislation imposing conditions on MFN for China. Possibilities include amendments to minimise the damage to Hong Kong, or encouraging the

its Administration to use an Executive Order of the President

rather than legislation in Congress. When and how to deploy our thoughts with the new Administration would need careful

judgement.

In our campaign on MFN, the popularity of the Governor and his

mfn.SAkr

CONFIDENTIAL