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Hong Kong: Textiles
Your minute of 21st August points to a number of issues raised by Hong Kong telegrams 659, 660, 661 and 662 which we may have to prepare to discuss at fairly short notice with a Hong Kong representative.
2. It seems to me that the most urgent question which we will be faced with, is what action we will take if the Canadians adopt any of the first thrce courses of action indicated in paragraph 4 of Hong Kong telegram 660.
3. I am not sure that I find cogent the reasons suggested in your paragraph 10 why the Canadians"might do nothing". For example they might think that it would impress the Japanese if they were tough on Hong Kong at this stage.
1. It is at first sight extremely difficult to distinguish between the three Canadian alternatives. From the G.A.T.T. point of view there is no difference between imposing the surcharge (alternative 1) and raising the tariff (alternative 3) unless the Canadians were able to sustain that their surcharge legislation antedated their accession to the G.A.T.T.
5. As for "withdrawing m.f.n. treatment from Hong Kong" this looks like a suggestion that Article XXXV might be invoked by Canada against Hong Kong. I am looking into this further but it seems fairly clear that this would be quite unconstitutional.
6. The third alternative is described as "raise the tariff against Hong Kong and invoke Article XIX (he claimed they could get round the requirement on non-discrimination by claiming that prices were relevant)". If this means simply "invoke Article XIX and impose a tariff on shirts costing less than a certain amount", I do not think that this measures up to the meaning of the words "tariff against Hong Kong". Something more subtle is suggested e.g. a raising of the tariff against "disruptively priced imports of shirts", or some similar phrase which allowed the Administration some discretion. I think that, pending further clarification, the only comments we could really offer on this alternative would be
A non-
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(a) The Canadians are fully entitled to invoke Article
XlX, and we could not expect any success in challenging any claim which they might make that their industry was suffering injury within the meaning of this Article.
(b) Hong Kong has frequently (e.g. in the case of
Sweden) suspected that various countries might be able to devise means of applying Article XlX in an ostensibly/discriminatory way, which would neverthe- less in practice discriminate against Hong Kong. It boils down to a question of the meaning of the phrase "the like product" in Article 1 para.l. of the G.A.T.T. While not underestimating possible Canadian ingenuity, we can only say that so far we do not see how the Canadians could effectively discriminate against Hong Kong without falling foul of this Article.
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7. Pending further discussion with you and others, and the anticipated comments from C.R.E.2. on the Canadian surcharge, would only add that we should not of course give the Hong Kong Vendeen kuldred aur valußäilivál AppliBaşéo phát mẻ wi11 "öhallenge Canada in G.A,T.T.". We may of course say that we do not see that any of the Canadian alternative courses of action, as deg- cribed, could be reconciled with the G.A.T.T. except the
/straightforward