4. The fact is that the categorisation provisions of the Agreement are not, we believe, unduly onerous; it is not altogether surprising that the scope which they allow for concentration on exports of particular types of textiles (given the generous share of the market reserved for Hong Kong within the limitations applicable to "restrained" countries as a whole) should have resulted in a request for modification in respect of one of them.
5. The Heads of Agreement and the arrangements which have been made with the other "restrained" suppliers are intended collectively to avoid further disruption of the British market. The course of these negotiations has demonstrated that the term "disruption" has a strong subjective element. But it is hardly surprising, given the extent, unique in the world, to which our consumption of cotton textiles is met by imports with the consequent run-down in our domestic production, that our industry should have been able to demonstrate that it had suffered an unparallelled degree of market disruption. The previous degree of categorisation proved insufficient to avoid severe injury to particular sectors of our market and because the situation was so serious, we asked you to co-operate in affording us some measure of relief in return for compensation in other sectors. We are grateful to you for meeting our request.
6. I realise, of course, even on the assumption that the case for relief is conceded, that there may be considerable scope for argument about the degree. Some of the comments in your despatch show, clearly enough, that you consider the new restraint levels on sheets and sheeting to be more severe than the facts warrant. This is a matter of judgement. I believe that, to give some significant relief to the domestic industry, we were obliged to press you (and the Indian Government) to accept substantial outs in exports of sheets and sheetings to us. We did not reach this conclusion lightly or in haste.
The 7. I have one point of detail to make on your paragraph 21. Aide Memoire did not allow for any growth in the new sheeting and sheet categories and no concession was offered in the course of the negotiations. However, it was subsequently decided to offer 3 per cent growth for 1970 in return for an immediate standstill on the issue of export authorisations. This offer was communicated to the leader of your Delegation, who, I understand, accepted it as part of the package to be put before the Cotton Advisory Board. We had not previously allowed any growth for Portugal, nor did we subsequently allow any growth for India, so that in the circumstances I regret that there can be no question of our allowing any growth above 3 per cent for Hong Kong.
Copies to:Mr.C. H. Kemmis, the Board of Trade.
Mr. S. Stewart, the Board of Trade.
Mr. D. Sellers, Hong Kong Government Office.