CONFIDENTIAL
FCO TELEGRAM NO.841 TO NEW DELHI · ·
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BEEN TREATED INTERNATIONALLY AS A SPECIAL CASE, AND THIS DECISION
WILL NOT CREATE A PRECEDENT FOR FURTHER DEPARTURES FROM OUR
TRADITIONAL POLICY ON COMMONWEALTH TRADE IN ADVANCE OF ANY GENERAL
CHANGE OF SYSTEM WHICH MAY BE REQUIRED BY OUR ENTRY INTO THE E.E.C.
8. THE EFFECT OF THE NEW ARRANGEMENT SHOULD BE TO REDUCE IMPORTS
FROM THE DEVELOPED COUNTRIES WHICH HAVE BENEFITED MARKEDLY FROM
THE EXISTENCE OF QUOTA RESTRICTIONS ON IMPORTS FROM THE DEVELOPING
COUNTRIES. THERE IS NO REASON TO THINK THAT, WITH THE POSSIBLE EXCEPTION OF INDIA, THE DEVELOPING COUNTRIES OF THE COMMONWEALTH
GENERALLY WILL BE ABLE TO EXPORT LESS TO BRITAIN OVER A TARIFF
OF THIS AMOUNT THAN THEY WOULD UNDER A CONTINUATION OF THE QUOTA
SYSTEM. SO FAR AS INDIA IS CONCERNED, THE GOVERNMENT WILL, WHEN
THE TIME COMES TO DETERMINE THE LEVEL OF AID TO INDIA AFTER 1972, TAKE INTO ACCOUNT, AGAINST THE BACKGROUND OF INDIA'S GENERAL AID
REQUIREMENTS AT THAT TIME, ANY ADVERSE EFFECTS ON HER EXPORTS
ARISING FROM THE TARIFF.
9. I TURN TO THE QUESTION OF FINANCIAL ASSISTANCE TO THE INDUSTRY.
THE TEXTILE COUNCIL PROPOSED THAT FIRMS IN THE TRADITIONAL TEXTILE
AREAS SHOULD BE OFFERED THE 40 PER CENT RATE OF INVESTMENT GRANT
WHICH IS PAYABLE IN THE DEVELOPMENT AREAS. THE GOVERNMENT HAVE
DECIDED AGAINST THIS BOTH ON GENERAL GROUNDS OF REGIONAL POLICY
AND BECAUSE IN PRESENT CIRCUMSTANCES, INCLUDING IN PARTICULAR THE
POSITION ON PUBLIC EXPENDITURE, WE WOULD NOT BE JUSTIFIED IN
SINGLING OUT THIS INDUSTRY FOR FINANCIAL ASSISTANCE ON SUCH A
SCALE.
10. THE COUNCIL ALSO PROPOSED THAT PLANT WORKED ON A MULTI-SHIFT
BASIS SHOULD QUALIFY FOR A HIGHER THAN NORMAL ANNUAL ALLOWANCE
FOR DEPRECIATION. THE GOVERNMENT ATTACH IMPORTANCE TO ANY PROPOSAL
WHICH MIGHT INCREASE THE UTILISATION OF NEW MACHINERY, AND THEY
ARE PREPARED TO CONSIDER AN APPLICATION BY THE TEXTILE COUNCIL
/FOR AN
CONFIDENTIAL