S. Stewart Eag..M.C.
5th September, 1969.
basis you argue that cotton and m.n.f. should be added together so that a "disruption" case can be examined on the combined figure. You then suggest that in the particular case of ilong Kong exports to the U.K., these should not be allowed to get very far off the ground in n.u.f. bassuse it would be "the last straw". Furthermore, your argument then departs from the "one market" concept, by suggesting that no roll in to combined levels ought to be allowed between cotton quotas and any new m.n.f. quotas that might be established. Finally you hint that, when cotton quotas are removed on 1st January, 1972, the case could be dealt with item by item through Article XIX action involving global import restrictions. And that Hong Kong will only have herself to blame for this situation because she has conceded voluntary restraint too easily to other countries and has "diverted" exports to the U.K. market.
12. It may be that I have misunderstood your argument, in which case I should be happy to receive your clarification of it. But if not, thereis a great deal I could say about this thesis. The least is that there is absolutely no evidence from the figures that the last point is happening. I would only say that, if this line of thought is pursued it could in the end prove to be more restrictionist than anything claimed so far by other countries through voluntary restraints. Next, by claiming that there is now no real difference between cotton and m.n.f. it can only give comfort to the Stans thesis and bring forward the day when the L.T.A. is extended to all textiles, or even a separate ET.A. is established for non-cottons. Finally, if this is your interpretation of how the "Article XIX approach" could work out in practice, then it only confirms the argument I have put forward that, far from leading to a more liberal situation in world trade in textiles than exists at present, such an approach could increase the degree of restrictionism. In this situation I would point out that Hong Kong would have no redress against the U.K. in the GATT due to her status as a dependent territory.
13.
My conclusion is that Hong Kong would, of course, be ready to consult with H.M.G. at any time about her exports of non-cotton textiles to the U.K. But as at the moment there is no cuse for restraint action on any item end no evidence that anything Hong Kong is doing in the few other markets to which she does restrain her exports of certain items is creating any difficulty in the U.K. market.
14. I am sending copies of this letter to Bob Goldsmith and Denzil Dunnett (Board of Trade), Ken Gallagher and Bunny Carter (F.C.0.), and David Jordan in Hong Kong. I an also passing a copy to Richard Wells in Sir Anthony Part's office.
(D.J.C. Jones)
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