TNAG-2469-FCO40-3593-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 68

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131306 MDHIAN 682

BY 20 JANUARY. I SAID THAT WE HOPED THAT HEADS OF AGREEMENT SHOULD BE CONCLUDED BY THEN, BUT DETAILED NEGOTIATION WOULD CONTINUE

THEREAFTER.

BERGER SHOWED NO DISPOSITION TO QUESTION THE TERMS OF THE EC/U.S. AGREEMENT.

FORMER YUGOSLAVIA

5. I SAID THAT WE WERE AWARE THAT CLINTON FAVOURED A MORE ACTIVE POLICY ON YUGOSLAVIA. BERGER SAID THAT HE CERTAINLY HAD DONE SO AT A TIME WHEN THE BUSH ADMINISTRATION HAD SEEMED TO BE DOING VERY LITTLE ABOUT IT. CLINTON DID NOT FAVOUR ANY LARGE-SCALE ENGAGEMENT OF GROUND FORCES. BUT WE HAD TO DISSUADE THE SERBS FROM MAKING

FURTHER TROUBLE IN KOSOVO. ON THE NO-FLY ZONE IN BOSNIA, I SAID THAT WE WERE JUST AS CONCERNED ABOUT THE VIOLATIONS BUT THE SERBIAN AIRCRAFT WERE NOT AT PRESENT ENGAGED IN GROUND ATTACKS. WE HAD TO CONSIDER EXTREMELY CAREFULLY THE EFFECTS ANY ACTION COULD HAVE ON THE POSITION OF OUR OWN FORCES AND UN RELIEF OPERATIONS GENERALLY.

CHINA/MFN/HONG KONG

6. BERGER SAID THAT CLINTON WOULD NOT BE PREPARED TO CONTINUE THE BUSH POLICY TOWARDS CHINA. HE AGREED THAT THERE WERE NON-ECONOMIC WAYS IN WHICH STRONG POLITICAL SIGNALS COULD BE GIVEN TO THE CHINESE. BUT IN CLINTON'S VIEW PRESSURE MUST BE EXERTED ON CHINA OVER HUMAN RIGHTS AND WEAPONS PROLIFERATION. I SAID THAT IT WAS IMPERATIVE THAT THIS SHOULD NOT BE DONE IN WAYS THAT COULD IMPACT ADVERSELY ON HONG KONG. IF THERE WERE ANY QUESTION OF THREATENING PARTIAL WITHDRAWAL OF MFN FOR CHINA, THIS MUST BE DONE IN A MANNER THAT GAVE THE ADMINISTRATION MAXIMUM DISCRETION AND WHICH WOULD NOT AFFECT EXPORTS OR RE-EXPORTS THROUGH HONG KONG. MORE GENERALLY WE BELIEVED THAT ECONOMIC PENALTIES VIS-A-VIS CHINA WOULD BE LIKELY TO FRUSTRATE THE PROCESS OF ECONOMIC CHANGE THERE WHICH OFFERED THE BEST HOPE FOR POLITICAL PROGRESS. BERGER WAS CONCERNED ABOUT THE THREATENING ATTITUDE THE CHINESE HAD BEEN ADOPTING TO HONG KONG AND EXPRESSED SUPPORT FOR THE GOVERNOR'S PROPOSALS FOR THE EXTENSION OF DEMOCRACY. I SAID THAT THE GOVERNOR WOULD BE VISITING WASHINGTON IN THE NEW YEAR AND WOULD HOPE TO SEE THE PRESIDENT.

TAXATION OF FOREIGN COMPANIES

7. I SAID THAT WE HAD BEEN IN TOUCH WITH THE ECONOMIC ADVISERS TO THE CLINTON TEAM ABOUT THIS. WE HAD BEEN TOLD THAT THEY DID NOT ENVISAGE NEW LEGISLATION, BUT BETTER I.R.S. ENFORCEMENT. IF THAT WERE SO, THE SOONER IT WERE MADE CLEAR THE BETTER. WE ALSO WERE CONCERNED THAT THE ADMINISTRATION SHOULD CONTINUE TO RESIST PROPOSALS LIKE THOSE IN THE GRADISON/ ROSTENKOWSKI LEGISLATION BEFORE CONGRESS.

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