15
Thank you for showing me these papers.
It is our view that this would not be a good time for passing on to the Indians an unhelpful reply to their Aide Memoire about Hong Kong's treatment of tobacco imports from India. You will no doubt have seen the telegrams from our High Commissioner about the mounting official and political resentment there at the manner and content of Mr. Crosland's parliamentary statement of 22 July about cotton textiles. These telegrams suggest that there has been some erosion of the goodwill and trust on which we rely to help maintain various continuing favourable aspects of the British position in India.
2. We had indeed been considering the possibility of urging the Board of Trade to consider the feasibility of making concessions to the Indians in some sector of their export trade to us to help retrieve some of the harm which we think has been done. I attach a copy of Mr. O'Leary's minute of 8 August to Mr. Whitehead (Commodities Department), now somewhat outdated by events, to show you how our thinking had been developing.
3. I note that both the question of preference on Indian tobacco for Hong Kong and our decision to impose a tariff on Indian exports of cotton textiles to us turn to some extent on legal interpretations of the 1939 U.K.-Indian Trade Agreement. However, as I said when we spoke, I do not think that the legal advice you have obtained about the extent to which the Kennedy Round Agreements supersede the relevant provisions of the 1939 Agreement is applicable to the question of whether our decision on cotton textiles contravenes that Agreement. The relevant Article in the latter case seems to me to be Article 15 (requiring consultations) and it may be necessary to take legal advice on that Article.
4. Should it be decided that we cannot make any concessions to the Indians we would still recommend that at the least we should delay our response on the Indian tobacco preference with Hong Kong until Indian feeling about cotton textiles has had time to simmer down.
P. Vereker
(P. W. M. Vereker) South Asian Department
W 136
12 August, 1969