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CONFIDENTIAL
OTTAWA TELNO. 632 TO FCO
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3. ALTHOUGH CANADIAN OFFICIALS HAVE ALREADY IMPLIED TO US THAT IMPOSITION OF A TARIFF ON COMMONWEALTH COTTON TEXTILES WOULD AFFECT THE TIMING AND TEMPO OF THEIR OWN REDUCTIONS OF OUR PREFER- ENCE, WE BELIEV E THAT THIS IS INTENDED MORE AS A DETERRENT TO ACTION WHICH, FOR REASONS ALREADY GIVEN, WORRIES THEM, RATHER THAN A THREAT OF DIRECT RETALIATION. THERE IS NO DOUBT HOWEVER THAT THOSE OFFIC- IALS WHO WOULD SPEAK UP AGAINST FURTHER SUBSTANTIAL REDUCTIONS IN OUR PREFERENCE FOR THE TIME BEING WOULD BE WEAKENED IN THEIR ARGUM ENTS AND, ALTHOUGH THE CANADIANS WOULD NO DOUBT WEIGH THE RISKS OF ESCALATION IN THE MUTUAL EROSION OF PREFERENCES, HOLDING OPERATIONS ON OUR PART (AS FOR EXAMPLE IN THE RECENT CASE OF MOTOR BIKES) MIGHT BECOME MORE DIFFICULT.
SIR C CROWE
FILES
COMMODITIES D.
S. ASIAN D.
AM. D.
W. AFR. D.
E. ABR. D.
S. E.D.
HONG KONG D.
G.S.A.D.
S.W, PAC. D. T.P.D.
SIR A, SNELLING MR. GALLAGHER
CONFIDENTIAL