TNAG-2469-FCO40-3593-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 251

R&R pls.

14 October 1992

CONFIDENTIAL

Hong Kay best.

For advice and dust off.

LL.

По Алла FEJ

Нив Haß 091/2

RIEL ET

British Embassy

J.C. 12

Washington

3100 Massachusetts Ave N.W.

Washington D.C. 20008-3600

GATT

Telephone: (202) 898 4250

Telex: RCA 211427 or 216760-WUI 64224

Facsimile: (202) 898-4255

76

Sir John Coles, KCMG

DUS

FCO

Dear John,

CHINA/MFN

1.

Although the MFN issue is behind us for the time being, it is not too soon to consider how a Clinton Administration might handle this subject. As you know, Clinton favours withdrawal of MFN unless China's human rights performance improves. Although his staff say he hopes the threat of withdrawal will produce progress from the Chinese, the chances that Peking will do enough to satisfy the concerns of a Democratically-controlled Congress are slight.

2. The Ambassador has already discussed this with Richard Holbrooke, Clinton's chief Asia expert. He told him that withdrawal of MFN would seriously damage Hong Kong's economy, as well as those members of the Chinese business community whom we should really be trying to support. Holbrooke agreed that withholding MFN was not a sensible way to proceed. But he said that the political pressures on the Democrats to strike out in a different direction from the President on this issue would be irresistible. He doubted if a Clinton Administration would reverse its policy. Human rights was a core issue for the Clinton team and this was the area Clinton had chosen to demonstrate that his foreign policy would be different to that of Bush. There was no chance that Clinton would simply do nothing and we should get nowhere if we tried to argue for that. But he wondered whether it might be possible to come up with something short of complete withdrawal of MFN which would meet the Democrats' demands, while limiting the damage to Hong Kong.

3. Separate conversations the Ambassador has had with Clinton's key foreign policy adviser, Tony Lake, and another adviser, Michael Mandelbaum, covered very similar ground. Both were sensitive to our concerns about Hong Kong, but insisted that Clinton could not be expected simply to follow the Bush line. We needed to look for some possible middle way.

CONFIDENTIAL

/4.