TNAG-2750-FCO40-3965-Most-favoured-nation-status-for-China-Hong-Kong-interests-1993 — Page 292

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HK/D

BRITISH EMBASSY,

WASHINGTON, D. C.

Limetti)

ل عامين ول وصلة

معلم سلام

&

28 December 1992

Sir John Coles KCMG

DUSS

FCO

хей

Dear John,

CHINA/MFN

1.

2.

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Thank you for your letter of 20 November.

It is still too early to say how Clinton will handle MFN. But, as we have reported, it is very unlikely that Clinton will simply continue President Bush's policy of automatic renewal. He will have to do something to fulfil his campaign pledge to link MFN to progress on human rights. At the same time, he will not want to spark a US/China trade war, and will be sensitive to the concerns of US importers (who have already started to lobby him) and the problems caused for Hong Kong.

3. Clinton may decide to get ahead of Congressional pressure by setting conditions himself, either by an Executive Order, or a Presidential statement. Many observers think such conditions need not be too onerous. Clinton could, for example, demand progress on prisoner release, rather than insist on the release of all those detained since Tiananmen. There is a chance that the Chinese might respond constructively since they will not know for certain how far Clinton - unlike Bush is prepared to use MFN as a weapon. Some think Clinton may want to play for time perhaps by deferring any conditionality until 1994.

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We will continue to argue that any attempt to condition MFN would badly damage Hong Kong's economy. But if it becomes clear that it is impossible to avoid some conditionality, we will need to think carefully about how to minimise the impact on Hong Kong. One approach - which is a variant of that mentioned in your letter might be to persuade the Americans that exports from China which were certified to have transited Hong Kong would continue to enjoy MFN treatment. This would require the Hong Kong authorities to issue appropriate certificates or stamps for the benefit of US customs. There would be no question of Hong Kong claiming the goods were of Hong Kong origin which would fall foul of GATT rules.

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