НКК 6/331/1
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Speaking Notes for Meeting with Board of Trade on 14 August to discuss Hong Kong/Canada
Textile Negotiations
We have tried on Hong Kong the Board of Trade line that they should not reach agreement with the Canadians on 18/19
August on MMF items but await a Board of Trade policy decision
on the issues involved. This has not satisfied the Governor who has in his telegram 638 asked us to reconsider urgently. He reinforces the arguments in that telegram in a personal telegram for Sir Leslie Monson in which he expresses the view that it is of the greatest importance that these talks proceed. We think that Hong Kong should be allowed to negotiate the extension for another year of her MMF Agreement with Canada including the new item polyester/polynosic if the Canadian case justifies it. These are the arguments,
(1) Although we are inclined to agree that Jordan went too far at the preliminary talks in Ottawa we were not present and the Governor emphasises in his personal telegram "only the man on the spot can judge the situation he faces". Jordan judged that it was necessary to avoid precipitate action by the Canadians to give some indication of willingness to meet their point of view. Hong Kong are therefore committed.
(2) As a result the Canadians are expecting an agreement and if they do not get it will probably put on a surcharge and will certainly receive a bad impression of Hong Kong as a responsible trading partner whatever we may say to Ottawa. The Canadian negotiating team flies to Hong Kong this afternoon.
(3) It is no use our saying that Canadians will be acting against the GATT when they have already imposed a surcharge on Korea and Malaysia.
(4) If the Canadians were to put on a surcharge we are unable to give Hong Kong a firm credible undertaking to protect their trade from the consequences. (We understand there may be an FCO legal opinion that we would in any case be out of order to put a case on Hong Kong's behalf in the GATT.)
(5) If a surcharge were imposed it is Hong Kong's trade which would suffer as a result of our intervention in our own interest
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