Mr. Chairman, Your Excellency,
May I start by saying how pleased I am to be in Hong Kong again. The atmosphere is always stimulating perhaps because for generations Hong Kong people have looked not to Governments for their standard of living, but to their own personal efforts.
Mr. Chairman, the prosperity of Hong Kong is built upon a principle in which I firmly believe—that the powers of Government should be limited to providing a framework of justice and regulation which encourage people to exercise their own talents. [end p1] Then success will be achieved, not only by men and women for themselves and for their families, but also for their community as a whole.
I am grateful for the opportunity to speak to you today because I want to tell you the commercial and industrial leaders of Hong Kong something about the ways in which we are now trying to apply the same principles in Britain. [end p2]
For many years the concept grew in Britain that Government could not only provide the climate for economic growth, but could even create it. I well recall that in the national plan of the late 1960s the expansion of public expenditure was presented as the engine of economic growth.
That fallacy was exposed by the experience of the succeeding years. If public expenditure were the way to growth, Britain would be one of the most prosperous countries in the Western world. [end p3]
When my Government came to power in the 1970s, we were determined to reduce government intervention and control and we started to establish the sort of framework for the operation of free enterprise to which I have referred.
Let me mention just a few areas where we have already seen the fruits of this approach in Britain.
Controls
For the first time in forty years Britain is free of controls over incomes, prices, dividends and foreign exchange simultaneously. [end p4]
Sound money
We have established and are maintaining a policy of sound money. The annual rate of inflation is now in single figures, and falling fast. In the last few days, the Chancellor of the Exchequer has said that it could be down to 6½%; by the end of this year. Interest rates are falling too, and are more than a third lower than they were last autumn. [end p5]
Trade Union law
We have started to tackle the problem of trade union law. Industrial relations in Britain are now good in the private sector. In 1981 we had the lowest number of strikes for forty years. [end p6]
I hope that we have ended and reversed the decline in the competitiveness of British industry. Last year saw a sharp improvement in both competitiveness and productivity. It is a sign of the growing confidence in the British economy at home and abroad that during all the anxious days of the Falklands dispute the exchange value of the pound hardly waivered.
Of course much remains to be done, but the pattern of improvement is encouraging. [end p7] A greater realism is emerging, a better understanding of the links between sensible pay settlements, productivity, unemployment and the creation of lasting jobs.
A successful trading community such as Hong Kong needs no reminding of these links. But we have to reforge the chain; reforge it through overall economic policies and the climate they create; through discipline in public spending and borrowing; and through constant encouragement to management and unions to learn the lessons of competitiveness and performance as the key to success. [end p8]
We still have many problems to tackle, particularly in the public sector. We have made some progress—although not as much as I would like—in opening up the public sector to competition and injecting private capital. I was delighted by the superb results reported by Cable and Wireless in the first year after their restoration to the private sector.
We also still have problems with our older industries, many of which are having to cope with the painful process of running down capacity. [end p9] But it is increasingly recognised in Britain that we cannot shirk such problems.
You in Hong Kong have always had a habit of enterprise, of designing new products and of forming new firms and companies. British economic success similarly depends on responding to the changing industrial world. And we are well equipped to do so by an outstanding record in scientific research and invention. In practical terms, the cathode ray tube, the computer, radar, the jet engine, penicillin, carbon fibres, nuclear power stations were all first produced in Britain by us British. [end p10] Now we need to learn to develop the follow-up and exploitation of inventions of this kind.
Last week in Japan I visited a remarkable factory, where robots had replaced much of the repetitive work done on production lines. There were even robots making robots! All this has staggering implications for the future.
We cannot turn our backs on such developments if we are to prosper. So we in Britain are shifting the emphasis of our effort towards the industries of the future—micro-electronics, fibre optics, bio-technology, information technology, and computer software. [end p11] Government support through research institutions, public purchasing and grants has substantially increased since I became Prime Minister. [end p12]
I also regard the Government as having a crucial role to play in education and training for the new technologies, particularly in encouraging schools and colleges to provide the necessary facilities. We now have micro-computers in every secondary school and have just started to put them into primary schools. We have computer training centres in every large city.
All this is part of the provision of the framework for free enterprise which I regard as the proper duty of Government. [end p13]
I want now to refer to two implications which I think that this has for economic relations between Britain and Hong Kong.
First, the framework for enterprise can also be used by overseas companies which manufacture in Britain itself. Britain has much to offer to those investing there:- — one of the most stable political systems in the world; — access through membership of the European Community to a market of 270m people; — secure energy supplies; — a first class reputation for scientific research and invention; — falling inflation and interest rates; — prudent financial policies; and —a highly skilled distribution and service economy
On top of those assets, I believe that we are now providing an environment for enterprise which those used to Hong Kong will find attractive.
The second implication is for our trade. I hope that British industry will become an increasingly formidable competitor in both British and Hong Kong markets. [end p14]
It is inevitable that in a world of high unemployment brought about by the general international recession, voices are raised in favour of increased protectionism. I am opposed to any general move to dismantle the open trading system. I believe it has been of great benefit to us all.
Of course every country has some specific problem areas for which it needs to seek protection and I have been discussing some of these during my visit to Japan. [end p15] I know that you wish that we could import more of your textiles, although I think you understand the very real difficulties affecting the United Kingdom and Community textile clothing industries. We can claim that in general the United Kingdom remains a market which is remarkably free of restrictions on access. The proportion of manufacturing imports able to enter Britain entirely duty free is almost 80 per cent: it was less than one-third in 1960. Much of this change is admittedly due to our membership of the European Community. But it does not bear out allegations of creeping, let alone galloping, protectionism. [end p16]
There is no reason to doubt that Hong Kong will continue to export a large and growing range of well-made and reasonably priced goods to Britain. Britain will want similarly to increase the volume and range of its exports to Hong Kong. We are the second best customer for your goods but only sixth in order of your suppliers.
We know that success will depend on our own efforts—and there are now many opportunities for us both. [end p17]
Mr. Chairman it will be obvious from what I have said that I greatly admire the achievements of Hong Kong.
Later this afternoon I shall be asked about the talks which I have just had with the Chinese leaders.
On the present occasion I want to say just this to you. As you will know from press reports, we have agreed now to go ahead with discussions between the British and Chinese Governments about the future of Hong Kong. [end p18]
Mr. Chairman, I share with you a justified pride in what has been achieved in Hong Kong under British administration. It is the product of a unique co-operation between the qualities of the British and the Chinese peoples. In entering the discussions with the Chinese Government we share with them the common aim of maintaining the stability and prosperity of Hong Kong.
I am the first to understand the importance of these talks. Given our common objective, it should be possible to reconcile our differences of approach with the Chinese Government. [end p19]
Above all, I give you this assurance: in conducting those talks, I shall speak not only for Britain but for Britain's moral responsibility and duty to the people of Hong Kong.