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He said that the Administration were aware of the penalties attached to the third alternative, but that he could ensure the Hong Kong Government that something would happen and soon. So far as Hong Kong was concerned, however, the restraint agreement on cotton reached with the United States under the C.T.A. had worked well, and any international agreement that might be reached on m.m.f. would not at present affect Hong Kong (presumably he meant because he .. was not proposing a cutback or standstill but only a
'moderation of the growth rate). Mr. Stans concluded by saying that he had outlined the American case, and invited the Hong Kong representatives to put their case.
8.
Sir John Cowperthwaite said that one problem with having discussions with the U.3. Government was to establish who the American Government was in such situations because of the separation of powers.
9.
Mr. Stans replied that their Government was a democratic Government, and went on to say that Hong Kong should evaluate the problems and pressures involved. He Encl.1 produced a copy of a letter which Representative Mills had
written to him on the occasion of his visit to Europe and the Far East in which the latter stated that a mutual resolution of problems was to be preferred to unilateral action but that before the American textile industry was allowed to be destroyed, the American Government would consider the imposition of whatever limitations were required to preserve it. Mr. Stans then handed over a copy of a bill Encl.2 that Mr. Mills had introduced into Congress on 7 May proposing
the limitation of textile imports into the United States on a Encl.3 value basis. He went on to read an extract from a letter sent
by President Nixon to the National Association of Wool Manufacturers on the occasion of their 104th Annual Meeting, stating that the Administration was aware of "the erosion of the strength of this industry caused by disruptive imports" and that it was committed to finding an international solution Encls. to that problem. Mr. Stans also read out telegrams he had 4A-B received from labour organizations and textile manufacturers'
associations urging him to find a satisfactory solution to the textile problem.
10.
Sir John said that it was difficult for him to know where to start. The American textile problem had been presented as a domestic problem in an international light, but nonetheless it was a domestic problem. Furthermore, Mr. Stans had said nothing about the effect of a multi-lateral arrangement on Hong Kong. A multilateral arrangement could in any case not be acceptable to Hong Kong. Sir John, in taking up a point made by Mr. Stans earlier on, said that the statement that the United States was a free open market for textiles was not true because, for instance, imports from China were not admitted. Mr. Katz interposed to say that this was not the same thing. Sir John agreed but pointed out that it gave the lie to the claim that the U.S. market was unrestricted for textiles; other countries' restrictions on textiles could also be unrelated to pressure from imports. Sir John further stated that it was not true to say that the United States was the only free open market in textiles as. Hong Kong itself allowed completely unrestricted entry of textiles. Mr. Stans replied that he meant that the United States was the only major country in this category. Sir John responded by saying that Hong Kong was a major exporter of textiles and the world's largest exporter of cotton apparel. He went on to say that none of Hong Kong's m.m.f. and woollen products went to the United States because of restraints on these products elsewhere; Mr. Stans had implied that because of its free market, the United States had to take the trade diverted from other protectionist-minded countries, but this was not true of Hong Kong. Mr.Stans replied that it was. Sir John again denied
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