CONFIDENTIAL
044665
MDHIAN
34
PUBLIC DIFFERENCES WITH BUSH OVER CHINA, WE DO NOT BELIEVE THAT CLINTON WILL SIMPLY MAINTAIN THE PRESENT POLICY. HIS RECORD SUGGESTS THAT HE WILL TRY TO GO INSTEAD FOR A COMPROMISE. IN THAT EVENT, OUR AIM MUST BE TO PERSUADE THE ADMINISTRATION TO DEVISE A PROCEDURE WHICH WOULD GIVE THE PRESIDENT MAXIMUM DISCRETION AND FLEXIBILITY. WE SHOULD NOT ABANDON IN PUBLIC OUR CALL FOR UNCONDITIONAL RENEWAL. BUT, IN OUR PRIVATE CONTACTS, THE POINT MAY COME NEXT YEAR WHEN WE WILL HAVE TO WORK WITH THE ADMINISTRATION TO FIND SOME MIDDLE GROUND.
6.
ONE APPROACH WILL BE TO TRY TO GAIN AN EXTRA YEAR BEFORE DECISIONS ARE TAKEN THE NEW ADMINISTRATION WILL BE LIKELY TO HAVE A MORE SOPHISTICATED APPROACH TO CHINA IN EIGHTEEN THAN IN SIX MONTHS TIME. THIS WOULD ENTAIL DELAYING THE APPLICATION OF ANY NEW LEGISLATION TO 1994, PENDING A REPORT BY THE NEW ADMINISTRATION. THIS COULD BE DONE BY CLINTON ISSUING AN EXECUTIVE ORDER, OR BY MODIFICATION OF THE ORIGINAL PROPOSED LEGISLATION. SUCH A PROCEDURE WOULD AT A MINIMUM BUY US MORE TIME IN WHICH TO WORK ON THE ADMINISTRATION. IT COULD ALSO GIVE CHINA THE OPPORTUNITY TO SHOW EVIDENCE OF PROGRESS, WHICH MIGHT MAKE RENEWAL LATER EASIER TO ACHIEVE.
7.
THE NEW ELEMENT, OF WHICH WE ARE MAKING FULL USE, IS THE GOVERNOR'S PLAN FOR FURTHER DEMOCRATISATION. THIS IS ATTRACTIVE TO THE CLINTON TEAM AND WE SHALL URGE THEM TO DO NOTHING THAT MIGHT UPSET IT. CHINESE ATTITUDES TO THE GOVERNOR'S PROPOSALS WILL BECOME PART OF THE LINKAGE HERE. IF THE CHINESE REMAIN OBSTRUCTIVE, THAT WILL INCREASE THE PRESSURES AGAINST THEM.
CLARK CASSISTANT SECRETARY) HAS TOLD ME THAT CHINA'S ACCESSION TO GATT MIGHT HELP DEFUSE SOME OF THE BILATERAL TRADE TENSIONS, AND POSSIBLY IMPROVE CHINA'S IMAGE ON THE HILL. BUT IT WILL NOT MEAN THAT THE U.S. WILL GRANT CHINA UNCONDITIONAL MFN STATUS: THE AMERICANS HAVE ALREADY MADE CLEAR THAT IF CHINA ACCEEDS TO THE GATT THEY WOULD BE OBLIGED TO INVOKE ARTICLE 35 IN ORDER TO PRESERVE THEIR RIGHT TO CONTINUE TO WITHHOLD MFN.
9.
AT THE SAME TIME WE WILL HAVE TO LOOK PRIVATELY, IN THE WORST CASE, AT WAYS OF FURTHER WEAKENING THE IMPACT OF ANY CHANGE ON HONG KONG'S INTERESTS. WE SHOULD BEAR IN MIND THAT WHAT THE CLINTON ADMINISTRATION WOULD BE TRYING TO ACHIEVE WOULD BE A LARGELY DEMONSTRATIVE EFFECT. MUCH WOULD DEPEND ON THE WAY ANY PARTIAL WITHDRAWAL OF MFN PRIVILEGES WAS INTERPRETED HERE. IF WE CAN THINK OF WAYS OF FURTHER MODIFYING THE LEGISLATION PROPOSED IN CONGRESS'S
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