Mr. Goldsmith said that presumably the Hong Kong officials hoped that Her Majesty's Government, when Kr. Ernst comes over to have discussions, would express forcibly to him how unwelcome this development in the common commercial Folioy would be to Her Majesty's Government, and that all Hong Kong's GATT rights would be reserved.
S. He invited Mr. Ingram of CRS 3, the Division which has prime responsibility for Board of Trade policy on going into the Community to com ent on this proposal. Mr. Ingram said that it was difficult to comment in advance of the visit on what could be said. It was clear that the Community realised that questions of Hong Kong's rights were of their own kind; this had been specially mentioned in the revision opinion. The Community would therefore not be surprised if we made a special demarche. Vr. Stewart of the F.C.. had no particular comments on how this issue should be raised with "r. Ernst.
ú. The position on umbrella imports was examined as an example. France was the only Community country with quantitative restrictions although Germany and Benelux were worried about umbrella imports, possibly because the ribs of the unbrellas were of Japanese origin and thus tended in some small way to circu vent the arrangements they had for trade with Japan, but this had not been argued. Exports to Germany and Benelux were in quite good quantities but exports of umbrellas to Italy were small. If nothing could be done about the extension of the restrictions, an overall limit divided between each four groups would be established, each group to administer its share of the overall quota au it saw fit. In efect the quotas would be country quotas not Community quotas.
7. kr. Goldsmith said this situation was not logical. Goods should be able to enter the Community at any port; to maintain an overflow stop was a negation of the common commercial policy. The Commission proposals could undermine the whole idea of the common commercial polioy. Nor did he think it was logic that because France had restrictions these restrictions should he extended to other countries, particularly since these restrictions were illegal. Neither the F.0.0. or C.R.E. 3 had any objection to us putting these points forcibly. Mr. Jordan said that Mr. Ernst might invoke Article XXIV para. 5A of GATT which allows the general incidence of duties and regulations of commerce "to be the same as prior to the formation of the Customs Union." The answer would be that this did not justify restrictions which were illegal in the first place.
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Mr. Durnett raised a question on the timing of these proposals. questioned whether the Community were taking seriously the end-of-year date for completion of their common commercial policy. We might ask Ernst when they would be negotiating with Japan on these matters. Mr. Goldsmith referred to the talks taking place under the Anglo-Japanese treaty and that we were hoping to negotiate to get rid of the remaining voluntary export restraints from Japan, with Japan removing restrictions on imports into her country. 1972/3 was the date by which we hoped mutual liberalisation would take effect. He was under the impression that the Community were hoping to negotiate a similar sort of deal with the Japanese. But from what Ernst had said, he had gained the impression that the Community were not moving as fast as us and therefore the Community's present proposal could be consistent with eventual liberalisa- tion and the first move in this direction. It would also be extremely useful to the E.E.. if they could settle the Japanese question first. They would then be able to come to Hong Kong saying that they must do something similar, but with Hong Kong there was a different situation in that they had no restric- tions with which to negotiate.
/9. Mr.Goldsmith