CONFIDENTIAL
ANNEX 'C'
TALKING POINTS FOR USE WITH THE GOVERNOR AND OFFICIALS
If and when a decision is reached to re-open negotiations we shall have to give the most careful thought to the question of our negotiating position on Hong Kong. While it is perhaps tempting to think
at we might be able to start with a clean slate, putting forward once more the case for associated status, I think we must reconcile ourselves to the virtual certainty that we shall get no better terms for Hong Kong than those in prospect in 1963. This means that the Six will insist on the Common External Tariff being applied by Britain to imports from Hong Kong and that we shall once more have to fight hard to find ways and means of softening this blow. In 1963 the ameliorating provisions envisaged were firstly that the C, E, T. should be applied over a transitional period of several years; and secondly, the inclusion of an undertaking to keep under review the effect of the progressive application of the Common External Tariff on Hong Kong's exports to Britain, with a view to remedial action where damage was being caused. In return for this latter provision we would no doubt have to accept the converse i.e. an undertaking that remedial action would be taken if it could be shown that Hong Kong's exports were causing disruption to industry in the Community.
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We realise that in the case of cotton textiles exports the position is particularly vulnerable. While the only common protection on imports of cotton textiles by the Community as a whole remains the Common External Tariff, the effective restrictions on these imports
are the quantitative restrictions under the G. A. T. T. Long Term
Arrangement. Until such time as the E.E.C. establishes a common commercial policy and they have not made very much progress so far quantitative restrictions on imports from outside the Community are a
matter for the individual Member states. If we were in the Market we
might come under pressure, in the context of formulating a common commercial policy, to follow the restrictionist policies of E.E.C.
contries. It is conceivable, on the other hand, that in these circumstances we would be in a position to influence the other countries in the direction of following more liberal policies. As things stand at present however it would not seem that we would need to impose more stringent control on our imports of cotton textiles as part of our arrangement for entry. However, to safeguard against a sufflen shift of community policy in this respect it may be advisable to seek some special arrangement to cover the import into Britain of cotton textiles from Hong Kong, at least for a transitional period.
No doubt you are giving some thought to the consequences for your trade with Britain of having to pay the Common External Tariff and to plans that would help to overcome this disability should it ever arise. I suggest also that you should continue to cultivate the friendly members of the E. E. C. I know that you have done much in this direction in the past 2
3 years and I think it is a policy that will pay dividends in the long run, whether or not Britain enters E. E. C.
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