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G.F. 323
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17.
Sir John remarked that surely, as of now, there had been no encroachment by textile imports on the American lomestic industry. Mr. Stans, in conceding the point, said that it did not make political sense for the Administration to accept a transfer of employment. Sir John pointed out that Hong Kong had achieved a good rate of growth and full employment through pursuing a policy of unfettered free trade. Mr. Stans replied that this concept was not applicable to the United States, and that it was in any case difficult to accept that the concept of free trade had no exceptions, for instance to allow time for domestic industry to adjust, because otherwise it would mean the willing acceptance of abnormal damage.
18.
Mr. Stans then claimed that Sir John was in fact implying that he had come too soon, that he should have waited until the American textile industry had suffered serious
The trend line of damage: he hoped that this was not so. imports was a clear indication that the domestic textile industry was on a decline as a result of the impact made by imports. For example, textile stocks in Wall Street were on the way down. He pointed to the fact that imports of m.m.f. items from Taiwan had jumped from $15.5 million to $36 million
it in 1968; if Hong Kong were to move into the m.m.f. field, would precipitate the situation. Sir John agreed that there was potential for Hong Kong exports in this field.
Sir John
19.
Mr. Stans asked whether Hong Kong would now be willing to undertake bilateral discussions on wool. replied that Hong Kong would not, but there would be no objections to entering without commitment into consultations, if called, having regard to Article XXII of the G.A.T.T.
20.
Mr. Nehmer said he would be interested to have Hong Kong's reaction to the statistical position on woollen knitted outerwear: Hong Kong's share of domestic consumption of women's woollen sweaters in 1968 was 46%, domestic production was declining (7.5 million dozens in 1957, 6.5 m. dozens in 1967 and 6.3 m. dozens in 1968), and according to Dun & Bradstreet, profits of domestic manufacturers after tax were falling (3.6% in 1950, 0.9% in 1967). 89 plants producing these items had either been voluntarily liquidated or had gone bankrupt. Imports of woollen sweaters had increased from 13.9 million lb. in 1964 to 21.5 million lb. in 1968, and Hong Kong's share had jumped from 2.7 million lb. in 1964 to 10 million lb. in 1968. In answer to a query from Mr. Jordan, Mr. Nehmer said that the percentage figures for domestic production to consumption in acrylic knitwear was 47%.
21.
Sir John reiterated that Hong Kong was always prepared to consider any case, but at leisure, and not on this occasion
He which Mr. Stans himself had said was not a negotiation. agreed that free trade could not be an absolute principle, and that time might be required for making adjustments, but what he objected to was a permanent adjustment of imports to domestic production. Sir John stated that Mr. Stans was in fact advocating that the level of American production must never go down and that a substantial part of the domestic market must be permanently reserved to American industry. Mr. Nehmer said that the cotton textiles sector in the United States was stagnating and that alternative employment was not readily available. Sir John pointed out that this process of stagnation, which arose also from technological advance, produced a transfer of employment into more valuable economic activity. Mr. Nehmer reiterated that there were very few alternative opportunities for the cotton textile labour force
Mr. Stans which in the main were over-age and undertrained.
CONFIDENTIAL