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SWEDEN/HONG KONG TEXTILE NEGOTIATIONS
Officials from llong Kong will arrive in Stockholm on June 16 to resume negotiations on restraint of certain non-cotton textile items for the twelve months starting 1 July. These negotiations started in April but were broken off without agreement. The items concerned include two on which restraint was agreed last year for the period ended 30 June 1969 and on which the levels of restraint wore aub- stantially increased following negotiations last February; and a number of other items of man made fibres or wool which have not been restrained hitherto and which the Swedes now wish to have restrained. The table attached lists these items and summarizes the existing arrangements and the Swedish requests.
(2) Hong Kong has said that on all the items they wish to be able to concede restraint at the level of trade reached before the Swedes notified their request to enter into negotiations. They propose to negotiate within a range of restraint levels betweon the existing, or 1968 levels of trade and substantially lower figures. They are prepared to accept Sweden's request that the trade should be limited by the use of the "roll-back" formula to an appropriate recent level, on the grounds that this would be higher then in any other case in which they have conceded a non-cotton restraint and that to refuse restraint in these circumstances would strengthen the hands of the Americang in urging extension of the G.A.T.7. cotton textile agreement to non-cotton items.
(3) There is a fundamental difference of view on these requests between on the one hand Industries 1 Division and on the other hand CRE 1 Division and the Foreign and Commonwealth Office. Industries 1's arguments turn essentially on two issues, our textile policy and the injury criteria which should determine the levels of restraint and in consequence there is also disagreement es to the strength of the case on each of the items concerned.
TEXTILE POLICY
(4) Industries 1 argue that we must be consistent with our existing policy by refusing demands for quota protection for our textile industries, except in the special cases of cotton and jute, on the following grounds;
(a) the right solution to Sweden's problem and to the non-cotton textile problems of the United States and Canada is to invoke Article XIX of the G.A.T.T, case by case on a non-discriminatory basis so that imports from the developing countries can be regulated in a controlled manner.
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/(b)