CONFIDENTIAL
6. I thanked Tran for this information and said that we were, of course, very pleased that the Community's restrictive attitude on the beneficiaries had been s oftened, at least to the extent of leaving the door open to countries outside the Goup of 77. But I was puzzled that the French, of all people, should have taken the lead on this; could he explain why they had done so. Tran said this was a perfectly fair question; the answer was a little complicated. The French were, of course, anxious about the treatment that might be given to their over- seas territories. They also realised that there was a real problen with regard to Greece and Turkey, which were not members of the Group of 77 but which were associate members of the Community; they would never accept that the rest of the under-developmd world should get tar- iff free entry to the Community while they, associate members, were still paying tariffs. Then there was the problem of Israel; 12 the Israelis could be included in the scheme their request for association with the Community could be buried rapidly; but, if they were excluded, it would be an albatross round France's neck for years. Finally, he thought there was a genuine committment among the French officials concerned (and this was particularly true of Mlle Guyot) to the prin- ciple of self-selection as put forward by Kojêve; to exclude Hong Kong would be to reject this.
7. Turning then to what might be done for Hong Kong, Tran said that he thought a solution was beginning to take shape along the following lines. Hong Kong would be included in the scheme and its exports would be divided, like those of the other countries participating, into the three categories referred to in the Commission paper, non-sensitive, semi-sensitive and sensitive. For non-sensitive products there would be effectively no control unless the safeguard mechanisms were invoked; for semi-sensitive products there would be surveillance and perhaps some form of voluntary restraint from the Hong Kong side; for sensitive prod- ucts there would be a specified percentage of the Community tariff quota with, no doubt, an intra-Community sharing arrangement of this amount. In reply to my question, Tran said that there had as yet been no multi- lateral discussion of this solution within the Community. He had discuss ed it with the French who had not been unfavourable. They had of course quoted a very low percentage or the quotas on densitive products which might be allocated to Hong Kong (5%); but thought they could be drawn up on this, perhaps as far as 10%.
8.
Finally, Tran Baised the question of possible action from the U.K. side. In the light of the development reported in paragraph 4 above, he would now strongly recommend that we do nothing before the Community put in their offer to 0.2.C.D. If we raised the Hong Kong point now we would simply alert people outside the narrow circle of officials concerned to the fact that Hong Kong was not specifically excluded; they might well wish to change this, and, if any publicity was given to our approach, Community industries would certainly lobby hard for specific exclusion. As it was the Community would come back to 0.E.C.D. uncommitted and we should have our chance then. I said that I could not, of course, say how we would decide to play it; but I would keep him informed. 9. I am inclined to think that Tran's advice is good. We should know, virtually for certain, whether or not the exclusion of written reference to the beneficiaries has been accepted after the meeting of the Committee of Permanent Representatives on 20 February; and I will report then.
TAI
(D).ILA „Manony).