TNAG-2751-FCO40-3966-Most-favoured-nation-status-for-China-Hong-Kong-interests-1993 — Page 3

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WITH CONGRESS BECAUSE MFN CAME UNDER EXECUTIVE ORDER NOT LEGISLATION, AND ALSO BECAUSE THE U.S. BUSINESS COMMUNITY WAS SENDING MIXED SIGNALS.

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NON-PROLIFERATION WOULD BE HANDLED ON ANOTHER CHANNEL. THE ADMINISTRATION WAS TRYING TO RESUME NEGOTIATIONS TO SECURE BINDING COMMITMENTS WHICH WOULD ALLOW THEM TO LIFT M11 SANCTIONS. CHINA WANTED TO LINK THIS TO ARMS SALES TO TAIWAN, BUT KNEW THE ADMINISTRATION WOULD NOT AGREE TO FORMAL NEGOTIATIONS.

4. ON TRADE, LORD SAID THAT THERE WAS A CONTINUED PROBLEM WITH STATISTICS ON THE DEFICIT. THE U.S. STUCK TO ITS FIGURE OF USD 20BN. THE CHINESE ARGUED THAT SIGNIFICANT FLOWS OF RELATIVELY UNFINISHED GOODS WHICH WERE SUBSEQUENTLY PROCESSED AND RE-EXPORTED FROM HONG KONG SHOULD BE EXCLUDED. IPR AND TEXTILES WERE OTHER SERIOUS IRRITANTS.

5. LORD STRESSED THAT THE ADMINISTRATION REMAINED KEENLY AWARE OF THE IMPACT OF ITS CHINA POLICY ON HONG KONG. HE HAD ENSURED THAT THE GOVERNOR WAS BRIEFED AFTER THE SEATTLE MEETING.

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LORD CONCLUDED THAT THE REVISED POLICY WAS BEGINNING TO PAY OFF. HE COULD NOT BE SURE THAT IT WOULD BE TOTALLY SUCCESSFUL. THE CHINESE, WHO WERE SOMETIMES COMPLACENT, HAD TO UNDERSTAND THAT MOVES ON THEIR PART WERE ESSENTIAL. A FURTHER COMPLICATION WAS THE JOCKEYING FOR POST-DENG POSITIONS. NO ONE WANTED TO BE SEEN AS SOFT ON FOREIGNERS.

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PS/BARONESS CHALKER

PS/MR GOODLAD

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MR LANKESTER

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