0003230
G.F. 323
CONFIDENTIAL
6
With Hong Kong this was obviously not the case and he thought that in view of the relatively trivial figures for Hong Kong trade in Group 1 fabrics that swing might be conceded between the two groups. Dorward said that since Ernst had conceded that performance in Group 1 was trivial there seemed no good reason why he should continue to suggest that the coverage of any eventual restraint agreement should include this sector. Ernst made a half-hearted argument based on the dangers of price disruption regardless of the quantities involved but his heart did not seem to be in it. Jones suggested to him that there would be presentational value in suggesting limits for Group 2 alone in the case of Hong Kong, in that the published restraint figure would be obviously lower; and furthermore greater growth might therefore be conceded. Ernst took note of this point but doubted if it would, for his purposes, have much presentational value. He said he might nevertheless be able to see his way to some presentational arrangement whereby Hong Kong's wishes in regard to growth could be met by lowering the base; or, alternatively its wishes in regard to the base could be met by lowering the growth.
16.
Returning to the question of swing, Ernst said that following the explanation given to him by the Hong Kong representatives at the previous round of talks, it had been possible to review Community policy in this regard. Despite the limitation to down swing only in the Model Agreement, therefore, he could accept in principle 5% swing between specific categories. The Hong Kong side noted this offer.
17.
Still referring to Article 4 of the Model Agreement, Ernst made a fim offer of 10% carryover and, as this accorded with the Hong Kong desiderata set out in COT/W/122., this offer was noted and agreed in principle.
18.
As regards anticipation, Ernst said the best he could offer was 5% and not the 10% requested by Hong Kong. This offer was noted.
19.
Ernst then went on to elaborate a suggested form of swing beyond anything which was referred to in the Model Agreement. This be described as swing between Member States. Recounting what was apparently a Commission invention designed to emphasize the
communautaire' nature of the proposed arrangements, he said that it was envisaged that following the split up between Member States of the total Community restraint limit, provision would be made intemally (i.e. within the E.E.C.) for unused quota in one country to be utilised in another. It appeared that the mechanics of such an arrangement were not yet fully developed but the theory was that after a reasonable part of a quota year had elapsed, and following an initiative either by Member State(s) or the exporting country concerned, agreement might be reached on a portion of Member State 'X''s sub-limit to be transferred to Member State 'Y'; . appropriate adjustments being made in the export control system in the export- ing country. The Hong Kong side took note of this proposition.
20.
Still on this theme, Ernst volunteered that there might also be facility to increase annual sub-limits for individual Member States on a once-and-for-all basis at the request of the Member State, or the exporting country in agreement with the Member State, if market conditions appeared to warrant. This would be additional to any anticipation provisions. As regards the normal anticipation procedures, Community practice was that the provisions could not be invoked automatically by the exporting country but only upon specific application. In practice, however, if such application was made no problen was expected to arise. Dorward said Hong Kong exercised
/anticipation ...
CONFIDENTIAL