G.F. 323
CONFIDENTIAL
3-
10.
Referring to Mr. Stewart's remarks concerning certain press re- action in Hong Kong to the outcome of the Swedish talks, Mr. Jordan said that, while sensationalism was to be deplored, it had constantly to be borne in mine that as exports of textiles were so important to Hong Kong's economy, the concern of the general public about Hong Kong's agreements with other countries was understandable; press reports and comments simply reflected this natural interest.
11.
Turning to Mr. Stewart's remarks regarding the present capacity and profitability of the British industry, Mr. Jordan was at some loss to understand H.M.G.'s concern over imports of wide sheeting. As the industry had been extensively rationalised and order books were full, the only probable effect of any further limitation on Hong Kong would be increased opportunities for other supplying countries. In the circumstances, he could see considerable difficulties for Hong Kong to meet the B.O.T.'s request.
12. While Hong kong recognised that Britain had adopted a comparatively liberal attitude towards textile imports, the fact that Hong Kong had been the first supplier voluntarily to limit exports to the British market had enabled other exporting countries to gain an increased share in the British market, and it was likely that this had contributed to the decline of the British industry. As the latter had contracted and demand had remained buoyant, it was not surprising that imports were taking up an increasing proportion of domestic consumption. Imports from Hong Kong were strictly regulated by the leads of Agreement which covered a five-year period.
13. Mr. Jordan was surprised that the B.O.T. had made no reference to the Heads of Agreement in their request. Any modifications to the existing arrangements had to be made in accordance with the provisions of the Heads of Agreement. While the latter allowed for the establishment of new categories with specific limits for former n.e.s. items, they certainly did not provide for cutbacks on existing limits.
This was clearly indicated in the terms of Section E6 which stated that there would be no reductions from ceilings in categories where export performance fell short of the ceilings. While he recognised that Britain and Hong Kong were not in G.A.T.T. relationship with cach other and could not, therefore, make an agreement formally under the C.T.A., both parties had been guided by the provisions of the G..T.T. and the C.T.A., and the present restraints, in fact, constituted a quasi Article 4 agreement.
14. Mr. Stewart replied that the present request could not be dissociated from Britain's unsatisfactory balance of payments position. He stressed that there were strong pressure on H.M.G. to institute import controls on a wide scale; the press had particularly singled out the way clothing contributed to the imports bill. It should be brought home to the Hong Kong industry that, if import control were to be established, H.M.G. would not leave the present textile quotas as they were. What the B.O.T. now seeking was some assistance from Hong Kong to relieve these pressures, and in so doing, to protect Hong Kong's interests.
15.
He agreed with Mr. Jordan that Lancashire was unable to supply sufficient wide sheeting to meet domestic demands, but this was simply because so many mills had closed since 1966 when the industry had first` complained about the level of imports. If action had been taken earlier, there would have been fewer closures. In the event, however, H.M.G. had felt obliged to honour its obligations under the G.A.T.T.; but imports had now increased to such an extent that positive measures could no longer be delayed.
/16.
CONFIDENTIAL