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concern expressed by the High Commissioner in his telegram is sufficient to require us at the very least to make a firm approach to the BOT along these lines. However I recognise that the chances of the BOT agreeing to such a suggestion do not seem to be good particularly since they did not consider it necessary or correct to consult us - or even inform us - about the Indian High Commissioner's call on their President in advance.
5. I would suggest that the background material we send to our High Commissioner to draw on in his approach might in any case embrace some of the following points. He should point out that the President's statement in the House on 22 July contained a promise that we would initiate discussions with the GOI, and the President told the High Commissioner on 1 August that we would like to examine, in particular, the possible extent of the losses which her textile industry believed they might suffer as a result of the tariff. It would be foolish to lose a sense of proportion over this issue the BOT estimate that the order of magnitude of the Indian loss of sales might be up to £llm.7. It is declared Indian policy to lessen her dependence on exports to any one country (as well as on imports from any one country) and to encourage the modernisation and diversification of her textile industry. There was some doubt in the minds of the experts about how far the Indians might be able to make a successful effort at "trading-up" and we had noted that attempts were to be made to shift the pattern of production towards more sophistic- ated goods over the 4th Plan period. We would hope that to some extent the change would present the Indian industry with a new opportunity as well as a new obstacle. Insofar as this did not occur it would obviously be some time before the statistics which would show the extent of the harm that was done would become available, and before the Indians would have had time to make a thorough study of the probable effect on her exports. Fortunately, there was plenty of time before the decision would be implemented in any case. When the study was complete we would certainly be prepared to hold realistic discussions with the Indians and, depending on the statistics and what the Indians have to say, to consider ways in which the decision might need to be modified or its effect offset and how far compensatory aid should be made available.
6. In addition, if it has not been done already, may I suggest it might be useful to copy to Delhi your brief of 15 July for the Secretary of State for the Cabinet meeting, to reassure the High Commissioner about the careful consideration that was given within this Office to this issue (and not least that we urged that Commonwealth Governments should be consulted before the announcement)?
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(T. D. O'Leary)
South Asian Department
8 August, 1969.
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