TNAG-2918-FCO40-4193-The-internationalisation-issue--Hong-Kong-Department-paper---1993 — Page 37

CONFIDENTIAL

10.

In the case of the US, China's trade deficit and China's need of the US market give the US power to affect Chinese behaviour. The US/Hong Kong Policy Act 1992 passed last September (known generally as the McConnell Bill and attacked unremittingly by the Chinese every step of the way) translated Congressional interest into legislation. It requires the

Administration to report (probably at 18 month intervals) to the Congress on a number of aspects of US relations with Hong Kong and on the development of democratic institutions in Hong Kong.

The threat of witholding MFN is a powerful lever (but the execution would of course cause hardship in Hong Kong). There

are other areas where the US administration has potential

leverage

for instance in restricting Chinese access to hi-tech or by not backing Chinese bids for loans from domestic or

international financial institutions.

11. In the case of Japan, there exist inhibitions which make it doubtful that we could count on willingness to use levers against

China.

12. If we wanted to orchestrate multilateral pressure, our options include lobbying through the G7 Summit; in the EC; at

the Commonwealth Heads of Government Meeting (CHOGM). Details at

Annex. Chinese reaccession to GATT is another potential pressure

point. Ultimately if relations with the Chinese deteriorated

to the extent that we had nothing to lose we could use the

United Nations (UN) and the International Court of Justice (ICJ)

to generate support for our policy.

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Assessment

13. Our aim in cranking up international support to a higher level and breaking new ground in some of the ways suggested would

be to engineer a change in the way the Chinese were behaving, or

at the very least to make sure that they realise that they would pay a high price in international terms higher than they would

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internat.NAT

JEB

CONFIDENTIAL