0003230
G.F. 323
CONFIDENTIAL
9
27.
The Canadian Government has now made an offer for the remainder of this textile year to create a sub-limit of 75,000 square yards for cabinet towelling in the Article 4 agreement provided Hong Kong agrees to the proposed limit of 178,998 pounds for cabinet towels in the Article 3 agreement.
Assessment
28.
The Department believes that it is unlikely that the Canadians can be persuaded to increase their offers on the "triggered" sub-categories. With regard to the classification difference on cabinet towels and towelling, the Department believes that the creation of a sub-limit on towelling within an already agreed sub-limit on fabrics in the Article 4 bilateral agreement would create an undesirable precedent. The Department successfully resisted a U.S. attempt to secure a sub-limit within a specific limit on towels within the towels categories in the Hong Kong/U.S. Bilateral and to give way to the Canadians now could weaken Hong Kong's position vis-a-vis the Americans if they raise this matter again. In addition there is practical advantage in a roll-in for towels and towelling as it is probable that the whole combined limit could then be shipped as towels and have a higher value. Furthermore, it is significant that, as at 21st July, 1969, total exports of cabinet towelling amounted to 229,360 square yards (compared with the Canadian offer of 75,000 square yards), of which 70% was shipped after the trade in cabinet towels was suspended at the consultation... level and the Department ruled that it had no legal authority to restrict exports made under the fabrics bilateral below the limit set out in that Agreement. (On the basis of yardage/ poundage declared on export authorisations covering cabinet towels, the Department has arrived at a conversion factor of 2.715 square yards per pound to convert cabinet towelling in square yards to cabinet towels in pounds. Using this ratio, the equivalent weight for 229,360 square yards is 84,479 pounds.)
29.
The Department therefore feels that, for both presentational and practical reasons, it would be preferable to agree to restrain cabinet towelling within the cabinet towel limit provided the latter is increased to accommodate some of the trade which Hong Kong has built up during the year: it is unlikely, however, that the Canadians will agree to the total quantity of cabinet towelling shipped this year being transferred to the cabinet towels sub-category. Furthermore it is unlikely that the Canadians will allow the trade in cabinet towelling to continue unchecked until 30th September. The Department therefore believes that the Hong Kong team should be empowered to agree to suspend export licensing for this item as soon as this matter is raised at the consultations.
30.
Since it is unlikely that the Canadians will agree to increase significantly the consultation levels in this textile year, or in the next, if they are reached again, the Department believes that Hong Kong would do better if it abandoned the concept of consultation levels for towels in any renewed agreement. Instead, these levels should be replaced with specific limits which would become an integral part of a combined Article 3 agreement for garments and towels. Under the terms of the C.T.A. this would then make towels eligible for swing increases, not only as between the towels categories but also between towels and garments. If this can be achieved it would thus then provide a considerable element of flexibility.
/31.
CONFIDENTIAL