We are naturally disappointed that the Derby Group feel unable to comment on possible watch list levels. This means that we shall have to make our own assessment of the level at which imports would reach an intol. Grable limit. We note that the Group regards 1975 as the car- liest date for liberalisation and that there should continue to be an understanding with the Japanese to safeguard against concentration of particular products within a broad quota item. We shall of course do what we can to persuade the Japanese to accept the continuation of controls until 1975, either by quota or watch list or a combination of both. But if they are prepared to make a really attractive counter offer on the lines indicated in the request list, we may have to concede an earlier date for liberalisation, though this will not be before 1st January 1973.
We note what you say about the level of imports from other sources but would find it difficult to justify dis crimination against imports from Japan: Janm like all other countries, has a right to most favoured nation treat- ment and is pressing us to end the temporary der ogation from this principle to which she agreed as a purely tempor- ary measure when the Anglo-Japanese Treaty was signed.
We appreciate what you say about U.S. import controls and it is clearly desirable that we should if possible keep our options open if action in the U.S., or indeed elsewhere, caused Japan to switch exports from other markets closed to them to the U.K. But again we must bear in mind Japan's right to most favoured na tion treatment and consider whether it would not be better in such circumstances to introduce non-discriminatory import controls to protect our market from distortions of trade brought about by restrictions imposed on other markets.
If you would like further discussion of anything in this letter I should be very happy to make the necessary arrangements.
(P. W. CAREY)