TNAG-2918-FCO40-4193-The-internationalisation-issue--Hong-Kong-Department-paper---1993 — Page 21

CONFIDENTIAL

13. On MFN, it seems unlikely that President Clinton will be willing to maintain the Bush policy of unconditional renewal -

although he and the key players in Congress may be willing to

settle for renewal in 1993, but setting out conditions which

would have to be met before further renewal in 1994. Our policy

is conditioned by the vital importance for Hong Kong of US/China

trade (70% of which flows through Hong Kong). Estimates of the

damage which would be done to Hong Kong if MFN status were

removed indicate that it could cost Hong Kong 60,000 jobs and a

halving of GNP growth. We have therefore made it clear that we

are against any linkage between MFN renewal and China's treatment

of Hong Kong. The best outcome for us would be to keep the threat of withdrawal hanging over China, but to avoid stringent

conditions (for instance linking MFN to human rights) likely to

lead to the withdrawal of MFN because the Chinese could or would

not meet them. It will be tricky to achieve this. We may need to consider lobbying in due course for conditions whose

implementation was delayed pending bilateral US/China

negotiations, and/or token conditions which did not hurt Hong

Kong.

14. On GATT, the working party formed in 1986 is in the initial stages of preparing a protocol setting out terms of Chinese

.-adherence to GATT. Negotiations could be completed by as early

as the end of 1993, although considerable differences of view do

remain between China and key GATT parties over the terms of the

protocol. While there is scope to influence the timing of

Chinese re-accession, and indeed the outcome, there are

constraints on us. Our traditional position has been to avoid

taking positions in GATT on the basis of political

considerations. We also have to work through the Commission, who

represent the Community and have competence in this area.

internat.NAT

JEB

CONFIDENTIAL