CONFIDENTIAL
There are strong (and seemingly irreconcilable) policy conflicts within the B.O.T., between C.R.E. and Industries Divisions
largely,
I suspect, because of the personalities involved (or at any rate one
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of them) which vitiate the premise in paragraph 2 of the paper (albeit a sound one) that HMG and Hong Kong ought to be able to evolve an agreed line before negotiations commence.
5. Basically this is due to the fact that Hong Kong is increasingly being called upon by importing countries to exercise voluntary restraint of exports in non-cotton textiles. (Restraint arrange- ments in cotton textiles are permissible under specific provisions agreed in GATT, called the "Long Term Arrangement" or "Cotton Textiles Arrangements"). Industries Division view this trend with dismay;
they consider that the Hong Kong precedents will eventually lead to pressure for restraint arrangements in the non-cotton field similar to those in the cotton field, which might damage British exports; they say that Hong Kong's restraint arrangements with other countries will lead to pressure from British industry for similar restraints on Hong Kong's non-cotton exports to this country, which it will be difficult to resist. C.R.E. Division would rather see Hong Kong concede voluntary restraint by agreement than be unilaterally restrained by countries invoking Article XIX of the GATT under which importing countries that can establish serious injury or threat of serious injury to their industries are able to take emergency action to control imports; not only would Article XIX action provide an embarrassing precedent but action against Hong Kong would be difficult to counter in view of the prejudice against the Colony in many quarters; they are inclined to support Hong Kong's view that the Colony's interests lie in conceding a reasonable case for restraint under which it is likely to get a better deal than would be the case if it forced the importing country to take unilateral action under Article XIX. This is a very simplified statement of a difficult problem
6. This policy conflict could, I think, be sensibly resolved
(in Hong Kong's favour) were it not for the personality of one man
Shaun Stewart
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who is the head of the textiles department in Industries Division. He has a completely one-track mind and is quite unresponsive to any other point of view. He just will not
"lie down" and even when decisions were handed down from on high
CONFIDENTIAL
(as they
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