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Canadian Surcharges
I have read with interest Interpretative Note 1 at Annex E to the Cotton Textiles Agreement. This implies that Canada recognised she had an obligation under paragraph 3 of Article 3 not to impose a surcharge which would reduce the level of trade specified under Annex B. Is there anything in the files or Minutes of the G.A.T.T. bearing on this? Can our Delegation to the G.A.T.T. find out whether the Canadians made a statement to this effect? You will have noticed from a recent telegram that Hong Kong infers that her trade in cotton/polyester shirts under the quota might be hit by a surcharge, but since these shirts fall within the quota, Annex E implies that the Canadians would be in contravention of the C.T.A. if they did not exclude major weight cotton shirts from the surcharge.
2.
Article XIX of the G.A.T.T. only authorises the imposition of restraints "to the extent and for such time" as may be necessary to prevent or remedy injury. The Canadian legislation also restricts the amount of the surcharge to what in the opinion of the Governor- in-Council is reasonably required to remedy the injury. This would seem to preclude action on polyester/cotton shirts, where thereis a quota. However, it might be worth asking the High Commission to sound out one of the consultants Hong Kong retained a lawyer in Toronto earlier this year on :-
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a) whether it would be ultra vires to impose a discriminatory
and clearly vindictive surcharge on goods already subject to quota, e.g. the polyester/cotton shirts;
b)
whether a discriminatory and prohibitive duty could be imposed on imports of polyester/polynosic shirts. Isn't there something called "mandamus" to stop the Governor-in-Council giving an opinion which is clearly unreasonable having regard to the wording of the Statute?
3. You will be aware that we have a good case for invoking the C.T.A. against Canada. Would you please have a table prepared comparing the 1962-1964 average imports from Canada with the Canadian and Hong Kong figures for 1967 and 1968, by Hong Kong categories, including, in particular, towelling and towels, sheets and Eighties Square. Could we then use the arguments which the Canadians have used with other countries on polyester/cottons to role back the 1962-64 average by the excess in 1967 and 1968? When the quota had been determined the logical step would then be to issue the licences to U.K. importers to spend in Canada or llong Kong. Alternatively, if we wished to conform in every respect to the present arrangements, we could give half the licences to the alf Canadian Government to allocatyand put the other/in the global quota.
I imagine that our colleagues would want to discuss any such scheme in detail before it was implemented, but I would see every advantage, if the Canadians are going to threaten us with the use of a discriminatory and penal surcharge against Hong Kong, of letting them know that we haye drawn up a scheme of this kind which could not be attacked in the C.T.A. as inequitable, having regard to Article 2(4), 3(7) and 6(c) of the Agreement.
4. I appreciate that imports from Canada have fallen off this year, as have imports generally, but our quotas wore of course all embracing. What is their share of the reduced total, compared with 19687 In any case, we have a case of market disruption on Canadian towelling and towels (where the Canadians are being beastly to Hong Kong)/ and printed cloth.
Sheels
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