and we would be blamed.
It would be a serious matter to
leave the Governor with the political consequences in Hong
Kong when we had compelled him to accept our judgment rather
than his own.
(6)
Climate in such matters in Hong Kong is particularly
critical at present on account of the decision, without com
eultation, to impose a tariff on Commonwealth textiles.
(7) The Board of Trade has not decided its policy towards
voluntary restrictions. While they are doing so we are asking Hong Kong to accept the consequences of our own divided views on the subject. The question whether such
voluntary restraints affect the "anti-Stans front" is as
much in issue now as it was before the last round of Swedish
negotiations when again we gave Hong Kong an exhibition of cliff-hanging.
(8) The Canadian case that polyester/polynosic and polyester/ cotton are virtually interchangeable substitutes is very hard to resist. As there has been an agreement about polyester/ cotton for two years no new principle would therefore be involved if P/P were included.
(9) The issue is still therefore whether there is a good case and Hong Kong can be trusted to judge this. They have to justify their decisions to a critical Textile Advisory Board
and are no more anxious than we are to restrict trade at
unnecessarily low levels. They have had a good deal of practice in negotiating and are experts.
(10) Canadian determination for political reasons to protect their industry is illustrated by the pattern of agreements they are building up with Korea, Malaysia, Taiwan, Singapore, Japan. They will not allow imports to go on flowing from Hong Kong when the latest information shows outstanding contracts for shipments of over 81,000 dozen P/P shirts. The restraint limit for P/C is only 75,000 dozen.
Hong Kong Department
14 August, 1969.