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problems arising specifically from the terms of the undertaking. Mr. Verhagen said he would consider whether or not the E.E.C. clause could replace a general consultation clause.
Fifth Working Session : 10.00 a.m.. Monday.
10th July. 1967
67.
Mr. Miller welcomed Mme. de Clercq of the Belgian Ministry of Economic Affairs to the negotiations.
68.
He reported that the Hong Kong Cotton Advisory Board had met on Saturday, 8th July, and that, on the Board's advice, the Director of Commerce and Industry had endorsed the points of provisional agreement between the two sides and, in addition, had temporarily suspended the issue of export licences for the sensitive items under request, with the exception of nightwear. A notice to this effect had been issued on that day. Export licences for nightwear would continue to be issued in the interim period but only against outstanding export authorisations, the issue of which had been suspended some time before the negotiations started. Export licences for shirts were still being issued in accordance with the current unilateral undertaking.
69.
Turning to the remaining items on the agenda, he referred to the matter of flexibility. The principle was set out in Article 3(4) of the L.T.A. and had been maintained in Hong Kong's previous restraint agreements. As regards the quantum, Hong Kong's views had been made known in response to the Director General of the G.A.T.T.'s invitation to exporting countries to state what measures of liberalisation of administration they would be seeking in return for agreeing to an extension of the Long Term Arrangement in its present form. Hong Kong had postulated 10% swing and had in fact secured swing of this order in agreements with the Federal Republic of Germany and the United States. But before discussing the quantum he would like to establish that the Benelux side accepted the principle of swing between all restrained products as stipulated in Article 3 of the Long Term Arrangement. Mr. Verhagen replied that, in the knowledge that this point would be raised, he had discussed it in Brussels with his Government and at length with his delegation in Hong Kong in the light of the nogotiations so far.
Their conclusion was that Article 3(4) of the Long Term Arrangement could not logically be applied to the items under discussion, since these were all distinct products. Mr. Miller said that in all Hong Kong's textile agreements with other importing countries some provision for flexibility among different products had always been included. There were sound commercial as well as doctrinal reasons for enabling the trade to respond in some measure to changing conditions in the market, thus avoiding a situation in which Hong Kong exporters were driven to export on a falling market in order to fulfil their quotas, with consequent adverse effects on the price structure, which were not in the mutual interest of either the Benelux or Hong Kong industries.
70.
Mr. Verhagen reiterated that the present negotiations, which were conducted under Article 3 of the Long Term Arrangement, related to specific individual products which were causing difficulty to distinct Benelux industries. is the products and industries were distinct the concept of flexibility between them caused him great difficulty. He could see that some measure of flexibility was desirable but considered that the agreed categorisation already
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