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(c) above. The examination is being carried out by sectors and proposals are being forwarded to the Council on each sector as they are ready. So far the only proposal which has been forwarded in this way, as far as the Department is aware, concerns the ceramics sector. Among the proposals in this sector is one which suggests surveillance on imports from Hong Kong on one item at present restricted by France (crockery and other household articles of porcelain). It is understood that proposals are also being prepared on cutlery, rubber footwear and umbrellas, but no information on these has been received so far.
23.
The Department's Brussels Office is maintaining contact with the Commission on these and other matters concerning the Community and is keeping the Department informed of developments. In addition, earlier this summer, a high official of the E.4.C. Commission,
who was passing through Hong Kong, visited the Department for informal discussions. He indicated that the policy of the Commission in drawing up a common import policy was to make this as liberal as possible i.e. to try to get as many items as they could included in the liberalised list. In pursuing this policy, however, it was necessary to pay regard to the views of Member States. As far as Hong Kong was concerned the major problem was what to do with the items at present subject to import restrictions in France. The Commission would do its best to get as many of these items as it could liberalised throughout the Community. But he hinted that there might be some which would have to be placed under surveillance, and even a few where Community quantitative restrictions would need to be established against imports from Hong Kong. The official also hinted at the possibility of a procedure being established for negotiating export restraints by Hong Kong on some of these items, and perhaps others later. He thought that this might be done under an interpretation of GATT Article XIX (which provides for temporary restrictive action when there is serious injury to domestic producers caused by imports) which would be less strict than Hong Kong has hitherto used in negotiating restraints on certain non-cotton textiles with e.g. Canada, Norway, Sweden and Germany.
24.
In the informal discussions with this official in Hong Kong and in other contacts in Brussels the Department has given no encouragement to these ideas. It has been pointed out that the discriminatory quantitative restrictions at present imposed by France on Hong Kong exports are contrary to the provisions of the GATT; and that any extension of such restrictions to cover the whole Community would a fortiori be even more contrary to the GATT. It has also been explained that, although Hong Kong is always willing to discuss with any of its trading partners any particular difficulties they experience from trade wath Hong Kong, an agreement on the part of Hong Kong to restrain exports is a most serious matter. It could only be contemplated in very exceptional circumstances where domestic production of the item in question in the importing country concerned was suffering severe damage as a result of imports from Hong Kong,
25.
It now remains to be seen what proposals the Commission produce on itens of interest to Hong Kong and how these are received by the Member States. There are already signs that certain Member Statos are not happy with the Commission's sector by sector approach and that it may not be accepted in discussion in the Council of Ministers. In that case some other more pragmatic approach may be required, perhaps involving bilateral discussions with the exporting countries particularly concerned or it may be that no acceptable solution will be found and that present arrangements will need to be continued for some time longer for want of any better alternative. In the meantime the Department's view is that Hong Kong's interests
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