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CONFIDENTIAL
The
Commonwealth preference area and EFTA would continue to do so and would not compete for a share in the quotas. It follows that the country and product coverage of our quotas, and of course their ceilings, would be different from those proposed by the E.E.C. ceiling of each of our quotas might be determined by the value of imports from non-Commonwealth developing countries in 1967 plus 5 per cent of imports from all other countries except EFTA and the Commonwealth preference area. We might also, if we wished, adopt the proviso that no single developing country outside the Commonwealth preference area should be allowed to fill more than a certain percentage of the quota.
TARIFF REDUCTIONS PLUS EXCEPTIONS
8.
From an administrative point of view, the simplest course would be to modify our offer on industrial goods by withdrawing the prospect of duty free entry and/or lengthening the list of exceptions. We might, for example, offer a 50 per cent tariff cut to non-Commonwealth developing countries with exceptions in addition to those already tabled. If, however, we embark on the course of selecting items for our exceptions list on the basis of what certain other countries seem prepared to do, we should almost certainly have difficulty in reconciling the claims of various industries their products to be included in the list.
SAFEGUARDS FOR BRITISH INDUSTRY AND OUR PREFERENTIAL SUPPLIERS
9. The duty quota system provides its own safeguard (the quota ceiling) against disruptive imports. The alternative technique of offering tariff reductions would require safeguards of a different kind. These could take two forms. First, concessions might be withheld from the outset on items which we considered particularly sensitive. Secondly, we would offer concessions on other items on the basis that we reserved the right to withdraw or modify them, at our discretion, in certain circumstances e.g. if imports from the developing countries were arriving in such quantities or at such prices as to cause or threaten significant injury to the domestic industry or to our present preferential suppliers who, of course, include the developing countries in the Commonwealth. We should
in all cases reserve the right to impose anti-dumping or counter- vailing duties in accordance with our present law and international obligations.
SUMMARY
10.
A judgement is therefore required whether we follow broadly the E.E.C. technique of duty quotas on the lines of paragraphs 6 and 7 above, or the tariff cut plus exception technique on the lines of paragraph 8 above. There is no need to take a final decision at this time on this question, and we should perhaps not even exclude the possibility of employing one method for some items and another method for other items.
11.
As Annex A shows, the administration of duty quotas would involve a range of problems including some of the kind which arise in administering ordinary import licensing quotas. It is true that trade could, in principle, take place outside a duty quota, but any quota system inevitably involves bureaucratic controls, rigidities and unfairness, and our general commercial policy over the years has been to get rid of quotas. This policy was recently endorsed
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VoriribENTIA!