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8. Hong Kong has, however, been prepared to consider requests from a particular importing country for restraint of exports of non-cotton textiles, on a product-by-product, fibre-by-fiðre basis, where a case is made that serious and demonstrable damage is being caused (not threatened) to that trading partner's domestic
producers by imports of such goods from Hong Kong. that Hong Kong has a major share of the import trade and that this share is high in relation to domestic production. In situations of this kind, Hong Kong has agreed to restrain exports of a limited number of non-cotton textile items to Canada, West Germany,
Norway and Sweden.
9.
This supposes
Such exceptional and limited restraints, where justified, would in Hong Kong's view be preferable to the imposition of import restrictions on Hong Kong goods by unilateral decision of the importing country.
10. Hong Kong followed the line in discussions with Mr. Stans that we had recommended to them, in accordance with which they indicated firm opposition to his proposals. Indeed, perhaps for tactical reasons, he said privately after the Hong Kong meeting that it had been the worst reception he had had (and there was no doubt that he was annoyed with the way he was cross-questioned on his statement of the U.S. case).
11. But Hong Kong assured him that they would be ready to have discussions at any time (without commitment) in any specific and defined area of trade where there seemed to be a real problem. They were not, however, prepared to agree at this stage to enter into negotiations with the Americans, either on a narrow front or across the Board. We understand in any case that a narrow, product-by-product approach would not greatly help the Americans to deal with their general problem.
12. It remains to be seen what action the U.S. Government will take after the generally united front of opposition to his proposals which Mr. Stans has encountered. He has now to make his report to the President. One possibility which he threatened was that Congress might decide to take unilateral legislative action against imports, even though this action would not be what Mr. Nixon would like. This might set off a chain reaction of protectionist pressures for legislation on behalf of other domestic industries.
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/Sweden