0003230
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38.
CONFIDENTIAL
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Mr. Jordan said he would welcome such information. A fairly precise indication of capacity and its utilisation was not only important in the context of possible market disruption, but also to examine the possibility that a limitation on imports from some sources would benefit British industry and not other suppliers. Mr. Stewart thought it unlikely that other countries would be able to compete sufficiently to be able to replace Portugal and Hong Kong. Mr. Jeaffreson contended this view and said that, while Hong Kong's share of the market had dropped in 1967, total imports had increased and production declined; there was, therefore, every indication that other suppliers were competitive. Hong Kong's share of the market had remained fairly constant since 1965 and, in the circumstances, Hong Kong could hardly be blamed for any problem that had arisen in late 1966.
39.
Mr. Stewart remarked that the only reason why Hong Kong had achieved such high exports of wide sheeting in 1965 was that the then existing categorisation arrangements had been ignored. Mr. Jordan pointed out that this situation had resulted from the de-categorisation agreed by H.M.G. in return for the denial of carryover.
40.
Referring to Mr. Stewart's opinion that other suppliers were unlikely to benefit if Hong Kong were restricted, Mr. Jordan enquired whether H.M.G. were prepared to guarantee that third countries would not be allowed to supersede Hong Kong. Mr. Stewart replied that no such guarantee had been given to Portugal, and he was certainly not prepared to seek authority to make any promises to Hong Kong. He stressed that it was H.M.G.'s conviction that a situation of market disruption presently existed, and that Ilong Kong had played a large part in causing it.
41.
Mr. Jordan reiterated that the British request had to be dealt with under the existing Agreement. While Section E2 of the latter provided for the establishment of additional categories with specific limits, there was no clause in the Agreement permitting reductions to be made from specific limits already established. In fact, Section E6 was clear evidence that the possibility of such reductions had been ruled out from the start. Mr. Stewart replied that his own reading of Section E6 was totally different. He held firmly to his view that the Heads of Agreement in no way limited H.M.G.'s prerogative to deal with a situation of market disruption which had arisen since the Agreement was concluded. Mr. Jordan replied that while there might be scope for debate over the full meaning of Section E6 there could be no argument about Section H5 which stated quite plainly that the Agreement could not be changed except with the consent of both parties. He had never suggested that Hong Kong was not even prepared to consider the British case on the grounds that the Heads of Agreement made no specific provision for such requests to be entertained. However, he was concerned lest the C.A.B. should feel that H.M.G. was adopting an arbitrary line, and he had to be able to assure members that the consultations were being conducted with due attention to the Heads of Agreement. This was particularly important as the B.O.T.'s request was unprecedented. He repeated that Hong Kong's latest bilateral agreement, with the Benelux, specifically ruled out such approaches as H.M.G. were now making. Mr. Stewart replied that had Britain not been so generous in the past, H.M.G. might have been able to adopt an equally magnanimous attitude. It was not meaningful to compare the
situation of Britain and the Benelux countries as the latter had never permitted imports to take up such a large share of domestic consumption. Britain's record in regard to tolerance of imports was unequalled.
/Second Working Session:
CONFIDENTIAL