4.
Hong Kong therefore argue thas, since "growth" was not raised or discussed at the September talks, the arrangements set out in Beads C and E5 of the leads of Agreement are applicable. They accept that, by a message passed through Carter after the conclusion of the talks and after his departure, Shaun Stewart offered 3 per cent growth. But their case is that the proposed package which it was agreed on the previous day to present to higher authority for approval represented a considerable out back on Hong Kong's existing level of trade and was accepted on the basis that no modification of the growth provisions in the Heads of Agreement had been proposed. They take issue with the statement in paragraph 7 of our saving espatol: no. 712 that "the lide Memoire did not provide for growth" - pointing out that it said in fact that "IMG would find it very difficult to ontemplute any incrense”,
5.
I think it would be the greateat pity if we were to jeopardise, for the sake of this point, an agreement which (it would seem) gave us substantially more than we were prepared to settle for. I refer here to a draft letter to the Director General of the Textile Council, covered by Shaun Stewart's minute to you of 20 September 1968, in which you were able to say that you "gave away only 40 per cent of the margins set by the negotiating limits". (Since this department was not shown the negotiating instructions we have no other source of information on which to base a judgment of the "success" of the negotiations from your departmental viewpoint.) If we did so well, then I consider that we can afford to meet Rong Kong on this point and that it would be in our interests to do so in order to bring to a satisfactory conolusion an episode that has engendered much ill-will. Only one growth increment remainım to be drawn unter the existing Heads of Agreement which expires at the end of 1970 and, if not superseted by other arrangements, will than fall to be renegotiated.
6.
I would emphasise that failure to meet Hong Kong on a point so central to their e nception of the nature of the
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