Reference..... HKK 6/24.
Mr. Britten
I am afraid that there are items on these papers dealing with EEC common commercial policy and its application to Hong Kong which you have not seen namely the Hong Kong memorandum at (15) and Mr. Christofas letter of 10 September at (16).
2.
An examination of the June discussions with Herr Ernst in Hong Kong (record at (9)) and the five Commission proposals on ceramics (2/E), umbrellas, footwear, cutlery and ball-bearings (14/E) indicates a strong possibility that quantitative restrictions are going to emerge as a built-in feature of EEC common commercial policy and that such restrictions will in appropriate cases be imposed against Hong Kong. This has implications not only for Hong Kong's trade with EEC but also, if the UK joins the community, for its trade with the UK.
3. In August Hong Kong was taking the view that the Commission's sector by sector proposals might
I
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not be favoured by the Council of Ministers and that
some other more pragmatic approach" may emerge (paragraph 25 of the Hong Kong memorandum) They were therefore inclined to the view that it was too
early to take any initiative or show undue concern about "hypothetical possibilities that may not materialise"; this matched our own view in July (13) that we should await a more authoritative indication of the Community's intentions. But Mr. Christofas at (16) is not so sanguine and appears to envisage that the build-up of pressure to make more rapid progress might well lead to the adoption of
sectorial import regime proposals". He therefore raises the question of making a stand on Hong Kong's behalf and of its timing. Mr. Dodge, the Hong Kong representative in Brussels, takes a somewhat similar view in his memorandum at (16/E) except that he has represented firmly that HMG should now be asked to make a formal protest on Hong Kong's behalf about the discriminatory nature of the proposals.
4. One thing, I feel sure, we cannot do and that is (in Mr. Christofas' words) "leave the whole matter to be swept up into the consideration of Hong Kong's trade relations with the enlarged community", if and when we embark on negotiations for our own entry. We must, I think, consider this on the basis that EEC will reach some, if not all, decisions on a common commercial policy before negotiations for our entry can begin.
5. I suggest therefore that in view of the promptings emanating from Brussels, both to ourselves and to Hong Kong, we should now give some detailed consideration to this matter and should ask Hong Kong for further views in the light of recent developments. The points which appear to require more detailed study
are:
(i) The grounds on which we would base
representations. Foremost here will be the strength of the case for arguing that the proposed EEC action is contrary to GATT: this would seem to bring us once more on to the very difficult ground of Article XIX which Ernst argued could provide the necessary cover for restrictive action.
/ (ii)