TNAG-2978-FCO40-1470-Trade-relations-between-Hong-Kong-and-the-UK-1982 — Page 45

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CONFIDENTIAL

TRADE DISCRIMINATION BY DEVELOPING COUNTRIES AGAINST THE UK.

Introduction

1.

DSR 11C

In recent years, Britain has been subjected to several

unexpected acts of discrimination against its exports by

Third World countries.

The most striking instances (see

Appendix 'A') have concerned Saudi Arabia, Indonesia and

Malaysia. This paper looks at the nature of the threat and

considers the following questions:

How vulnerable is the UK to further economic sanctions?

Which other developing countries may be tempted to take

such action?

What preventive measures and counter moves are available

to us?

Economic Levers

2. The use of economic levers in diplomacy is a huge subject

This paper concentrates narrowly on the use of economic

levers by developing countries against Britain and other

members of OECD. The record (see Appendix 'A') shows that

apart from OPEC's oil weapon, of which much has been written, th

the economic lever that is most likely to be used in this

context is discriminatory government procurement policy. But

developed countries may also be vulnerable to other restrictions

on the free flow of goods; to threats against direct investment;

or to financial sanctions such as the withdrawal of bank

deposits.

3.

The problem may be exacerbated where LDCs are not signat-

ories of the GATT itself (like several of the oil producers)

or, more particularly, of the GATT Government Procurement

Agreement. Some are only marginally susceptible to pressure

and influence in other multilateral fora and place little

value on an open trading system. Most will be careful to

avoid blatant discrimination against the UK over World Bank

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