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the Benelux request for restraint was the result of a threat to the Benelux textile industry or of actual damage. Mr. Verhagen replied that there was now a severe crisis in the Benelux textile industry and a threat of increased imports. For this reason the Benelux had introduced on 17th May an import quota system based on a 1/6 roll- back on the previous year's performance. He confirmed that the imposition of import controls did not prejudice the use of Hong Kong statistics should an export control system be eventually agreed; and once the levels were decided, he would consider with sympathy a request for export restraint.
40.
Mr. Haddon-Cave considered the difficulties that might arise in changing from the present import control to an export restraint system. Mr. Verhagen confirmed that there were outstanding Benelux import licences which had been issued both before and during the import control period. Once Hong Kong implemented export controls, these licences would no longer be usable without an equivalent Hong Kong export licence. Mr. Haddon-Cave pointed out that a degree of trade disruption would result and suggested back-to-back licensing. Mr. Raulier rejected this idea because of Belgian juridical difficulties.
41.
Mr. Verhagen thought that it would probably be necessary to provide for a reserve for each category to cover imports from third countries and the re-export trade. As had been the case with the shirts undertaking, he visualised Hong Kong would provide copies of export licences which the Benelux authorities would check against import licences to ascertain whether imports had actually taken place or whether the consignments had been re-exported. Mr. Haddon-Cave was anxious that such an arrangement would not be used to question the integrity of Hong Kong's export control system. A comparison between Benelux imports and Hong Kong exports would inevitably reveal differences because of shipping time, conversion factors and the re-export trade and he wished to avoid such disputes. Mr. Verhagen assured Mr. Haddon-Cave that import and export licences would be compared only to assess the third country and re-export trades.
42.
Mr. Haddon-Cave informed Mr. Verhagen that the Department had suspended the issue of export authorisations for nightwear so as to avoid shipments in excess of the quantities the Benelux Governments were prepared to admit, but were still issuing licences against outstanding authorisations. Mr. Verhagen confirmed that any difficulties arising from the failure of Benelux importers to obtain import licences for authorised Hong Kong exports would be dealt with on an ad hoc basis.
Third Working Session : 10.00 a.m.. Friday.
7th July, 1967
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43.
Mr. Haddon-Cave summarised the position reached during the previous day's discussions and emphasised again that Hong Kong was not attracted to the idea of an Article 3 arrangement of short duration as this would disrupt the trade, especially since conversion from import control to export control was involved. He preferred an agreement for shirts for one year containing a clause enabling either side to seek consultations to revise the arrangement.
This would avoid the need for further negotiations before the end of December.
44.
He suggested that discussions might resume on the coverage and categorisation of the items in question. He stated that although there was some confusion on the subject of the conversion factors,
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