The Downing Street Years (84 page)

But it is still necessary to have a clear idea of the potential and the limits of statesmanship. The twin, opposing, temptations of the statesman are hubris and timidity. It is easy to subscribe to ringing declarations and ambitious global plans. It is a great deal harder to balance vision with practical measures and persistence. Under some circumstances, to try definitively to ‘solve’ a long-standing problem will be to make it worse. Under others, even a brief delay will mean an opportunity lost. The statesman has to be able to distinguish between the two, always knowing the destination; never presuming that the path is open; then, when it is, pressing ahead with every means available.

And in all this one should never lose sight of the importance of the personal chemistry which exists between those who conduct their
nation’s affairs. I found myself liking and respecting — and sometimes heartily disliking and distrusting — heads of government not just as politicians but as people. I did so irrespective of colour, creed or political opinion. Personal relations must never become a substitute for hard-headed pursuit of national interests. But nor should any statesman ignore their importance. Foreign visits allowed me to meet, talk to and seek to influence heads of government on their own ground. These visits gave me insights into the way those I dealt with in the clinical atmosphere of great international conferences actually lived and felt. Moreover, it gave others a chance to know me. Longevity has its drawbacks and difficulties in domestic politics, where the media are always longing for a new face. But in foreign affairs there is a huge and cumulative advantage in simply being known both by politicians and by ordinary people around the world.

All of these elements were present in my dealings with and visits to the Far East, the Middle East and Africa. In these regions — in the last case a whole continent — the struggle between East and West was being waged by influence and by arms. But in each that contest also worked upon other issues particular to the region.

In the Far East, the dominant long-term questions concerned the future role and development of a political and military super-power, the People’s Republic of China, and an economic super-power, Japan; though for Britain, it was the future of Hong Kong which had to take precedence over everything else.

In the Middle East, it was the Iran-Iraq War, with its undercurrent of destabilizing Muslim fundamentalism, which cost most lives and threatened most economic harm. But I always felt that the Arab-Israeli dispute was of even more abiding importance. For it was this which time and again prevented the emergence — at least until the Gulf War — of a solid bloc of more or less self-confident pro-western Arab states, no longer having to look over their shoulders at what their critics would make of the plight of the landless Palestinians.

Finally, in Africa — where, as in the Middle East, Britain was not just another player in the great game, but a country with historic links and a distinct, if not always favourable, image — it was the future of South Africa which dominated all discussion. For reasons which will become clear, no one had a better opportunity — or a more thankless task — than I did in resolving an issue which had poisoned the West’s relations with black Africa, left isolated the most advanced economic power in that continent and been used, incidentally, to justify more hypocrisy and hyperbole than I heard on any other subject.

My visit to China in September 1982 and my talks with Zhao Ziyang and Deng Xiaoping had had three beneficial effects.
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First, confidence in Hong Kong about the future had been restored. Second, I now had a very clear idea of what the Chinese would and would not accept. Third, we had a form of words which both we and the Chinese could use about the future of Hong Kong which would provide a basis for continuing discussion between us. But there was a real risk that each of these gains would be transitory. Confidence in the colony was fragile. It was by no means clear how we could persuade the Chinese to be more forthcoming with their assurances. And — what I found most worrying — the Chinese proved very reluctant to get on with the talks which I had envisaged when I left Peking. For months nothing happened. I asked the advice of that old China hand, Henry Kissinger: his response was ‘don’t worry — that’s just their way.’ But I was worried and became more so as time passed.

On the morning of Friday 28 January 1983 I held a meeting with ministers, officials and the Governor of Hong Kong to review the position. We had learnt that in June the Chinese were proposing unilaterally to announce their own plan for Hong Kong’s future. We were all agreed that we must try to prevent this happening. I myself had been doing some fundamental rethinking about our objectives. I proposed that in the absence of progress in the talks we should now develop the democratic structure in Hong Kong as though it were our aim to achieve independence or self-government within a short period, as we had done with Singapore. This would involve building up a more Chinese government and administration in Hong Kong, with the Chinese members increasingly taking their own decisions and with Britain in an increasingly subordinate position. We might also consider using referenda as an accepted institution there. Since then legislative elections have demonstrated a strong appetite for democracy among the Hong Kong Chinese, to which the Government has had to respond. At that time, however, nobody else seemed much attracted by my ideas: and in the end I had reluctantly to concede that since the Chinese would not accept such an approach it was not then worth
studying further. But I could not just leave things as they were, so in March 1983 I sent a private letter to Zhao Ziyang which broke the deadlock and got Anglo-Chinese talks off the ground again. This went marginally further than I had in Peking. There I had told Mr Deng that I would be prepared to consider making recommendations to Parliament about Hong Kong’s sovereignty if suitable arrangements could be made to preserve its stability and prosperity. I now subtly strengthened the formulation:

Geoffrey Howe and the Foreign Office wanted to go further: they argued strongly that I should concede early in the talks that British administration would not continue. I saw no reason to make such a concession. I wanted to use every bargaining card we had to maximum effect. Just how few such cards there were, however, quickly became apparent.

There were three rounds of talks over the summer in which no progress was made. When we took stock of the situation at a meeting on Monday 5 September it was clear that the talks would break down when they resumed on 22 September unless we conceded administration as well as sovereignty to the Chinese. One particular problem was that the timing of the talks was publicly known and it had become the practice at the end of each session to announce the date of the next. If the Chinese decided to hold up progress or break off altogether it would immediately become apparent and damage would be done to confidence in Hong Kong.

This is indeed what happened after the 22–23 September talks. Intensified Chinese propaganda and anxiety at the absence of any reassuring element in the official communiqué caused a massive capital flight out of the Hong Kong dollar and a sharp fall in its value on the foreign exchanges.

Early on Sunday morning, 25 September, I received a telephone call from Alan Walters, who was then in Washington and had been unable to track down either Nigel Lawson or the Governor of the
Bank of England. Alan was convinced that the only way to prevent a complete collapse of the currency and all the serious political consequences that entailed was to restore the currency board system — backing the Hong Kong dollar at a par value with the United States dollar. (The Hong Kong Government’s reserves were big enough to make this possible.) Although I was largely convinced by Alan’s arguments and accepted the urgent need for action, I still had some concerns — mainly whether our exchange reserves would be put at risk. But I informed the Treasury of what I considered was a dangerous crisis that needed immediate defusing, and they got in touch with Nigel and the Governor of the Bank. The following Tuesday I met Nigel, the Governor and Alan at the Washington embassy. Although Nigel was at first reluctant and the Governor had reservations, they eventually agreed with me that a restoration of the currency board was the only solution. As always this news soon leaked out to financial markets, confidence was restored and the crisis of the Hong Kong dollar was over. We sealed it later on 16 October 1983 by fixing the Hong Kong dollar at an exchange rate of 7.80 Hong Kong dollars for a US dollar. The financial press thought it was ‘an unalloyed success’. And so time has proved it to be.

But it was also necessary to see that Anglo-Chinese talks began again. On 14 October I sent a further message to Zhao Ziyang expressing our willingness to explore Chinese ideas for the future of Hong Kong and holding out the possibility of a settlement on those lines. I had by now reluctantly decided that we would have to concede not just sovereignty but administration to the Chinese. On 19 October the talks were accordingly resumed.

I hoped that by pointing out in my message those aspects of the Chinese negotiating position which might conceivably lead to as much autonomy for and as little change in the way of life of the people of Hong Kong as possible, we might make some progress. In November I authorized that working papers on the legal system, financial system and external economic relations of Hong Kong be handed over to the Chinese. But their position hardened. They now made it clear that they were not prepared to sign a treaty with us at all but rather to declare ‘policy objectives’ for Hong Kong themselves. By now I had abandoned any hope of turning Hong Kong into a self-governing territory. The overriding objective had to be to avoid a breakdown in the negotiations, so I authorized our ambassador in Peking to spell out more clearly the implications of my 14 October letter: that we envisaged no link of authority or accountability between Britain and Hong Kong after 1997. But I felt depressed.

At this time I received further advice from someone whose experience in dealing with the Chinese I knew to be unequalled. At the Commonwealth Heads of Government Meeting (CHOGM) in New Delhi I discussed our problems in dealing with the Chinese with Lee Kuan Yew, the Prime Minister of Singapore. Unfortunately, the discussion was interrupted on several occasions and Mr Lee telephoned through to me his full advice later. This was that we should send a very senior minister or emissary to convey our proposals at the highest possible level of the Chinese Government. It was crucial, he said, that we should adopt the right attitude — neither defiant nor submissive, but calm and friendly. We should say clearly that the fact was that if China did not wish Hong Kong to survive, nothing would allow it to do so. This, of course, was precisely the point that Deng Xiaoping had put to me in September 1982. I had managed then to persuade him that there was an international price to be paid if he simply took over without any regard for the prosperity and system of Hong Kong. But I now had to accept that China’s concern for its international good name would allow us only so much latitude. Mr Lee’s advice therefore confirmed me in the course upon which I had decided the previous month. The question remained: what would be the basis of the Chinese administration? From now on we must concentrate on the questions of autonomy and preservation of the existing legal, economic and social system after 1997.

Whatever concessions we had to make, I was determined that the representatives of the people of Hong Kong — the ‘unofficial’ members of the Hong Kong Executive Council (EXCO) — should be consulted at each crucial stage. Geoffrey Howe and I met them on the morning of Monday 16 January 1984 at Downing Street. As always, I was struck by their common sense and realism about the highly unpalatable options they knew we had to consider. They basically shared our objective, which was the highest degree of autonomy for Hong Kong we could get backed by the best possible Chinese assurances. After this meeting I began to think hard about how best we could give undertakings of a right of entry to the United Kingdom to those in Hong Kong who would be putting themselves and their families at risk through sensitive work for the Hong Kong Government in the period up to 1997. When I discussed the matter with ministers and officials in July I said that we should err on the side of generosity. It must never be said that the United Kingdom repaid loyalty with disloyalty.

The single most difficult issue which we now faced in negotiations with the Chinese was the location of the ‘Joint Liaison Group’ which
would be established after the planned Anglo-Chinese Agreement had been signed to make provision for the transition. I was worried that during the transition this body would become an alternative power centre to the Governor or, worse, that it would create the impression of some kind of Anglo-Chinese ‘Condominium’ which would have destroyed confidence. But I also insisted that it should continue for three years after 1997 so as to maintain confidence after the handover of administration had taken place. I wrote to Mr Zhao to this effect.

Geoffrey Howe had visited Peking in April and now returned in July, accompanied by Sir Percy Cradock, and successfully reached a compromise on the Joint Liaison Group, which would not operate in Hong Kong before 1988. Geoffrey’s patient negotiations eventually secured agreement. It was no triumph: but nor could it be, considering the fact that we were dealing with an intransigent and overwhelmingly superior power.

The terms had three main advantages. First, they constituted what would be an unequivocally binding international agreement. Second, they were sufficiently clear and detailed about what would happen in Hong Kong after 1997 to command the confidence of the people of Hong Kong. Third, there was a provision that the terms of the proposed Anglo-Chinese Agreement would be stipulated in the Basic Law to be passed by Chinese People’s Congress: this would in effect be the constitution of Hong Kong after 1997.