E.E.C. appears to be that, while a few bilateral restraint arrangements covering a minor sector or two of trade might be safely ignored, the GATT could not ignore bilateral restraint arrangements covering a large part of the textile trade of the United States. It seems therefore unlikely that
the E.E.C. would acquiesce in this solution. We would also no doubt consider dangerous the encouragement which such a solution would give to the proliferation of bilateral restraint arrange- ments, and we would no doubt face pressures from the U.K. industry for similar restraints on the trade of the same coun- tries with the United Kingdom. We might also have to reconsider the question of the full liberalisation in both directions of our trade with Japan for which we are now working.
(iii) A remaining possibility is that no action should be taken internationally, and that the United States should, if their political pressures cannot be contained, take the unilateral action which they have mentioned as a threat. Much would depend on the form which legislation by Congress proved to take. At first sight in commercial terms the damage to the United Kingdom might not be serious if the legislation was confined under some form of words to dealing with "low- cost" imports, and the Americans have all along emphasised that it is imports from Asia that they are mainly concerned with. Again, if a reasonable growth rate was provided for, the interests of Hong Kong might not be seriously impaired. It is possible that if the Trade Bill now before Congress goes through, the Administration would be in some position to offer compensation, and to this extent the prospects would be improved of the Administration being able to make a showing of operating within the terms of Article X1X of the GATT. However, action of this kind by Congress would be a considerable blow to the fabric of international commercial relations, since it would be a demonstration of failure to agree on a major issue, and would give encouragement to protectionist forces in other industries in the United States and in other countries to
press for unilateral action in their particular interests. It is evidently the view of the E.E.C. that in the interests of our overall relations with the United States things should not be allowed to come to this pass.
/14. Conclusion