CONFIDENTIAL
3 -
DSR 11C
? HK's luh Iretaliatiny
Labability
ation against the UK over the Arab-Israel and Southern African
situations has been sufficiently discussed elsewhere to make
detailed comment in this paper unnecessary).
But the
possibility of these problems leading to economic pressure
against the UK seems to have increased in recent years. First,
the oil producers are increasingly aware of their own strength:
OPEC countries enjoy huge spending power (which can be
diverted to benefit one source of imports rather than another);
and the low absorbers have substantial financial assets in the
West, which give them power to disrupt financial markets by,
for example, shifting deposits. Second, there has been a
change in the balance of economic power in favour of newly
industraïlised countries (NICs) such as Brazil, Mexico, South
Korea, Taiwan, Hong Kong, Malaysia and Singapore. These
developments have increased the capacity of such countries to
hurt the UK and have enhanced, to some extent, their ability
to withstand counter measures.
7.
In most cases oil producers and NICs are unlikely to resort
to trade discrimination against developed countries. They need
Western markets and Western investment. Moreover, the developed
countries enjoy comparative advantage in numerous goods and
services which they require. Action against any one of them
will thus be detrimental to most LDCs' own interests. But there.
is sometimes scope for purely opportunistic resort to economic
that their commercial importance to levers where, for example,
rceive/a
LDCs perceive a given Western country far outweighs its
importance to them and that the likelihood of retaliation is
small. Such opportunism in bilateral relations is particularly
difficult to counter since other OECD countries will regard it
as providing an opening for their own exports, rather than an
issue over which to make common cause with the target of
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