0003230
G.F. 323
CONFIDENTIAL
10
summer of 1966, a decline which the industry had anticipated from the reduction in orders. Being liberal minded, the B.O.T. had delayed action as long as possible, but in early 1967 had been obliged to move against Portugal. The B.O.T. had hoped that the restrictions imposed by Portugal would remedy the situation, but unfortunately this had not happened. consequence, the assistance of both Hong Kong and India was now being sought. He pointed out that, as Portugal had conceded a 40% cut-back, it was not unreasonable for H.M.G. to request Hong Kong and India to exercise some restraint.
47.
-
In
He emphasised that the case of market disruption he had presented was far better founded than many pressed by other partics to the C.T.A. He concoded that there was no provision for such a situation in the Heads of Agreement. But if the C.T.A. was used as a yardstick and Hong Kong accepted it as such then the B.O.T.'s case was unshakeable. As far as export opportunities were concerned, Hong Kong would lose little or nothing if there was a cut-back on wide sheeting and sheets; ample opportunities existed in other categories, and, in fact, there might be positive advantages for Hong Kong in a deflection of capital in this way, into more labour intensive industries. Mr. Jeaffreson remarked that Hong Kong had invested in wide looms assuming a market given under the Heads of Agreement. Mr. Stewart replied that these wide looms could be used to produce, say,
three narrow cloths more economically than would three narrow looms.*
48.
Referring to the Heads of Agreement, Mr. Stewart said that 1% annual growth had been accorded to Hong Kong on the assumption that overall consumption of cotton textiles in Britain would increase at the rate of 1% per year.
Just as, therefore, Britain had been prepared to share this growth, so should exporting countries be ready to accept further limitations in the event that the market contracted. Mr. Jeaffreson commented that this line of argument was hardly in keeping with the spirit of the C.T.A. the preamble to which envisaged the provision of growing opportunities for the cotton textile exports of less developed countries.
49.
On the question of compensation, Mr. Stewart said that if Hong Kong was prepared to consider a cut-back on wide sheeting and sheets, he would be willing to investigate the possibilities of increasing some of the specific limits for finished fabrics He would not, at the expense of those relating to grey cloth. however, be able to apply concessions to Category 4 (drills, jeans, etc.) which was particularly sensitive. He then put his formal proposal as
grey wide sheeting
finished wide sheeting
sheets
million square yards
12.5
3.0
0.85
16.35
This was an appropriate adjustment on the "normal level" of trade 1964-65 which had been
*
/grey
They
Hong Kong weavers could not accept this argument. considered wide looms to be sufficiently slower than narrow looms as to render the production of narrow cloths on them completely uneconomical.
CONFIDENTIAL