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attitude. He assured Mr. Verhagen that the Hong Kong side was sincerely endeavouring to be as reasonable as possible in this matter but he had been taken by surprise that the Benelux side
He reiterated should find difficulty with the principle involved.
that this was the first occasion in negotiations with other Governments that Hong Kong had met with any difficulty over the inclusion of some measure of flexibility in a restraint agreement. In all previous agreements with the United Kingdom, the United States, Canada, and the Federal Republic of Germany certain degrees of flexibility had always been allowed. He quoted some of these arrange- ments in detail. The Hong Kong Government had not, therefore, expected that any difficulties would arise on the principle of flexibility, although there might be room for argument over the quantum. Accordingly he had sought further instructions, as a result of which he had teen instructed to reiterate the great importance the Hong Kong Government attached to the inclusion of some form of flexibility in any under- taking under Article 3 of the Long Term Arrangement. He himself hoped that the principle of flexibility could perhaps be safeguarded while the practical difficulties of the Benelux side were met by some minor readjustments, as had been necessary in one or two previous cases. However he could not fully understand Mr. Verhagen's objections based on the maximum acceptable intake for the different products, more particularly since the provisionally agreed restraint limits were in fact lower than the Benelux import figures for the reference period, which were the minimum as well as the maximum intake the Benelux industries might expect.
83.
Mr. Verhagen stated that, as far as he was concerned, the fundamental difference of opinion lay in the interpretation of Article 3. The Benelux view was that flexibility provided under the Long Term Arrangement could only be applied to sub-items within each category. This attitude had been fully explained in an earlier session. The Hong Kong contention that flexibility should apply across the board was not acceptable.
84.
Mr. Miller repeated that some form of flexibility existed in all the previous agreements concluded by Hong Kong. He thought that Mr. Verhagen was already aware of Hong Kong's wish to get on to
a common basis of control with all the Member States of the E.E.C. in the face of the gradually emerging common policy in the sector of cotton textiles. It was therefore a matter of both political as well as commercial significance that no less than the minimum rate of flexibility under the Long Term Arrangement should be provided in any agreement reached with the Benelux. It was not just a doctrinal point. If this could not be conceded by the Benelux side the Director would wish to consult the Cotton Advisory Board before deciding how to proceed further. Mr. Verhagen conceded that the agreed arbitrary limits were lower in some cases than the Benelux import figures but pointed out that this had been insisted upon by Mr. Haddon-Cave to overcome presentational difficulties. acceptance of the minimum degree of flexibility of 5% would in some cases put the levels above those considered by the Benelux side as the maximum tolerable intake.
85.
An
Mr. Miller suggested that, following this latest exchange of views, both sides should give, the matter further thought and he proposed that the discussion of this item be adjourned to a subsequent meeting, while work on the drafting continued.
/Seventh Working Session :
CONFIDENTIAL