M. Stemet,
Hong Kong Dept.
1/5.
Reference
Mr. Stans' visit to Hong Kong
116)
I agree broadly with the line taken in the draft submission attached to your minute of today's date, provided that no reference is rade in the outgoing telogram to the existing bench-marks which are acutely embarrassing in the case of anoraks and provided it is made clear that it is for the United Kingdom to decide whether or not Hong Kong can enter into negotiations with the United States on particular items.
2.
I accept that there may be good reasons, as set out in para. 9(a) of the submission, for building up the position of Hong Kong in the G.A.7.7., but I suggest that the ambitions of Hong Kong officials in that regard are much less important than the detriment to the United Kingdom of any weakening in the united front which has been offered to hr. Stans in the present instance. The policy of the Hong Kong Government is very largely determined by the short term interests of her textile manufacturers and I do not think we need have any feeling of guilt if these interests are subordinated to a wider public interest, which mot only includes that of the United Kingdom, but of all developing countries.
3.
In
I am not, of course, suggesting that Hong Kong should refuse to consider the difficulties which the United States may have on particular items, but in doing so she ought to put the emphasis. on Article XIX of the G.A.T.T. rather than on the bench-marks which were unfortunately established in the Swedish case. other words, Hong Kong would, in association with the United Kingdom, look at the figures to see whether an Article XIX situation had been established. The Americans may in fact have something of a case on shirts and sweaters, but, if so, the United Kingdom is likely to have one too, with all that that would imply for our relations with Hong Kong, particularly if we were prevented by E.F.T.A. from taking action against Portugal. Our troubles on textiles are so great that we cannot afford to be left behind in the race to restrict trade in textiles and clothing.
4. I am also not excluding the possibility that Hong Kong would be allowed to conduct its own negotiations on non-cotton textiles if the C.î.A. were to be extended as the Americans wish. It would be quite another matter to give Hong Kong discretion in a field where the bench-marks would get successively lower and lower because the Americans, having obliged one country, e.g. Korea, to restrict its exports, would tell Hong Kong that she was not going to be allowed to take advantage of that fact by increasing her own trade with the United States. And it is of course relevant that Korea and Taiwan are already exporting more m.m.f. products to the United States than Hong Kong, which is perhaps one reason why the Hong Kong manufacturers are not at present putting pressure on their Government to reach agreement with the United States.
5. There is one point on which you may like advice. Mr. Nehmer has made much of the argument that the United States does not have power to impose restrictions on imports unless a multi- lateral or bilateral arrangerent already exists. I agree that the United States may not have this power, but to the best of my knowledge it has not prevented them from reaching satisfactory bilateral agreements with Japan in a number of cases. I am almost certain that in 1960/61, when I was in the United States, the Ancricans had an agreement with the Japanese under which the Japanese restricted exported of plywood to the United States, and
/indeed