CYPHER
CYPHON/CAT A
ROUTINE FURTIGN AND COTTONWEALTH OFFICE TELEGRAM MEMBER 67
CONFIDENTIAL
NEUTRAL
FOLLOWING TELEGRAM NOW REPEATED TO YO
TO BOW
A PEERUARY 1270
LQUIST OF DEPARTMENT
WAS RECEIVED FROM UNITES GENEVA Lopadkotó TO GOVERNOT HONG KONG TELEGRAM 10, 6 OF 22 JANUARY REF BATED FOR INFORMATION TO FC 0, HONG KONG GLY, LONDON OFFICE, JRUSSELS (FOR DCDOOR), UKDEL BRUSSELS, WASHINGTON (FOR HERKIM)
FROM JONES
HONG KONG/33: COTTON TEXTILES.
PROLINARY DISCUSSIONS INTH TEC COMATOSIC! MORE HELD 1: DRUGSELS
ON 26 JANUARY TO CONSI30A TOMESS LIKELY TO BE OFFERED TO HONE
KOBA 14 EVENT OF EXTENSION OF CT, ERNST WAS ACCOMO ANTE3
BY TWO COLLEAGUES, DODGE, DORWARD AND MYSELF, REFRESENTED HONG
KOMA.
2. FROM THE SEQTHING ERYST MADE IT CLEAR THT 40 YET HE HAD NO MAIDATE FROM MEMBER STATES AND COULD THEREFORE ONLY DISCUSS WITHOUT COMAITSENT. WE CAIR THAT WE HAD CONS, 17 RESPONSE TO CTC CONCLUSIONS, TO HEAR WHAT MIGHT BE ON OFFER AND TO ACK QUESTIONS
CAPER TO HELP CLARIFY HONG KONG'S FINAL ATTITUDE TOWARDS STA EXTENSION. BUT WT RECOGNISED THAT, IN ABSENCE OF HADDATE, COMMISSION WAS NOT YET IN A FOSITION TO BE BO 3PECIFIC. NEVERTHELESS TE AORCED IN THE CIRCUMSTANCIE TO CONTINUE ON 4 INFORMAL BASIS WITHOUT COMMITMENT AS A PRELIMINARY TO LATER
SUBSTANTIVE TALAS.
3. BARST CONFIRMED THAT COMMUNITY AS SUCH WOULD ADHERE TO ANY
EXTENDED CTA AND THAT FUTURE #Z9C7ISTIONS YOULD BE CONDUCTED DY COMP 1381ON ON BASIS OF COMMUNITY MANDATE. HONG KONG WAS HOST DIFFICULT CAS/ BECAUSE OF ITS LARGE AND VERY UNEVEN PENETRATION OF
BEC MEMBER STATES MARKETS. DUT CONTISSION MANTED TO BREAK VECIOUS CIRCULE, START TO GET FRENCH OFF THEIR EXTRIKE POSITION AND CASE THIS PRODLOK IN CONTEXT OF BRITISH ENTRY, I THOUGHT
HONG KONG WOULD EVENTUALLY BE OFFENED AN NATIOLE 4 CREEMENT
WITH WHOLE COMMUNITY. BASIS COULD EITHER BE AVERAGE OF IMPORTS IN THREE YEARS 190779 at CANTH,"
QUOTE EXCEPTIONAL UNQUOTE 1069 PERFORMANCE WITH ONLY TOKEN GROWTH AT BEST, TOTAL WOULD BE BROKEN DOWN BETWEEN MENDER STATES ON BASIS OF EXISTING TRIDE
BUT CATEGORISATION WOULD BE UNIFORM, WHEN ASKED WHETHER TRIS
IMPLIED THAT EXPORT CONTROL, WOULD BE CONCEDED BY PRAVICE HE HELGED
AND SAID THAT DETAILS OF AttidierNATION WOULD STILL NEED TO DE
REGOTIATED WITH INDIVIDUAL MEMBER STATES.
4. WE GIALLENGED THAT THIS BASIS WOULD NOT OFFER QUOTE LECREASED
EXPORT OPPORTUNITIES AND MORE FLEXIBLE CONDITIONS QUOTE 19 HONG KONG AS PROMISED IN CTC CONCLUSIONS BUT WOULD RATHER EXTEND AREA OF RESTRICTION BY INCLUDING PRESENT LIBENALISED TRADE WITHOUT
EVIDENCE OF HARKET DISRUPTION. ERNST REPLIED THAT EFC WAS ALREADY TAKING MORE FROM HONG KONG THAU FROM ANY OTHER EXPORTING
COUNTRY AND THAT THIS WAS A SOURCE OF DIFFICULTY FOR THEN WITH OTHER LOCS. FURTHER QUESTIONINE REVDALCO, HOWEVER, THAT HE WAS SERIOUSLY OVER-ESTIMATING 1969 TRADE BY WORKING FROM EXTRA- POLATED IMPORT FIGURES FOR FIRST ONE MONTHS WHICH SHOWED A 20 PERCENT INCREASE OVER 1966. WHEN WE SHOWED FROM HONG KONG EXPORT
FIGURES FOR WHOLE YEAR THAT GROWTH WAS MORE LIKE 5-6 PERCENT HE
COMICIDED THAT COMMISSIM WOULD NEED TO THINK AGAIN.
3. WE ALSO HAD LONG DISCUSSION ON SWING BETWEEN SPECIFIC
CATEGORIES. DESPITE SEVERAL PETVIOUG EXPLANATIONS, COMMISSION BAD APPARENTLY NOT YET TOKEN ON BOARD THAT LIKI WAS ON QUOTE SUING
IN UNQUOTE AND THEY MAY REVISE THEIR THINKING ON THIS 18 RELATION TO PROVISIONS OF MODEL AGREEMENT. TRIST'S OWN THINKIES SEEMED TO BE MOVING IN DIRECTION OF 5 PERCOUT CARRYOYER AND
ANTICIPATION AND PERHAPS, AS A RESULT OF OUR EXPLANATION, 5 PERCENT SUING.
6. DI REPLY WE SAID WE COULD GIVE NO INDICTATICE OF UNETHER HONG
KONG WOULD BE PREPARED TO CONSIDER NEGOTIATION ON ABOVE BASIS. IT WAS AGREED THAT FURTHER CONSULTATIONS WOULD BE HELD EN MARCH
BY WHICH TIME COMMISSION WOULD HAVE RECEIVED SOME MANDATE FROM
COUNCIL. WE MADE IT CLEAR THAT HONG KONG WOULD REGARD THESE AS
THE SUBSTANTIVE CONSULTATIONS ERVISAGED IN THE CTC CONCLUBICUS BUT
HOT AS THE PRELIMINARY TO A FORMAL ARTICL" 4 NEGOTIATIO.
7. AT END OF DISCUSSION ERNST RAISED QUESTION OF COR IN RELATION
TO HONG KONG. HE SAID THERE WERE THREE PROSTEMS, MAMELY *** (4) COTTONS,
(D) NON-CUTTONS, AND
(C) FRENCH RESTRICTIONS ON OTHER PRODUCTS. COTTONS WERE BEING COVERED AND NON-COTTOMS SHOULD BE HELD OVER UNTIL OUTCOME OF D S PRESSURES WERE KNOWN. 17 AMERICANS OBTAINED ANYTHING LIKE COMPREHENSIVE RESTRAINT ARRANGEMENTS WITH ASIAN SUPPLIERS COMMUNITY WOULD BE FORCED TO MOVE AS WELL. BUT THEY DID NOT WISH
TO DC 80 AND COMMISSION AIN WAS RATHER TO GET RID OF PRESENT RESIDUAL RESTRICTIONS.
8. ON (C) ERNST PEHEVED HIS PROPOSALS FOR DISCUSSIONS WITH HONG KONO WHICH HE ENVISAGED TAKING PLACE ONCE THEY HAD DEALT WITH JAPAN (EXPLORATORY NEGOTIATIONS MID-FEBRUARY IN TOKYO) AWD HAD SETTLED COTTON TEXTILES WITH HONG KONG. COMMISSION'S M WAS TO LIBERALISE ROOT OF FRENCH RESTRICTED ITEMS DUT
SOMETHING VOULD KEED TO BE DONE ON A VERY FEW TO SAVE FREDON FACC. UMBRELLAS IN PARTICULAR WERE SERIOUS PROBLEM IN WHOLF COMMUNITY, OVER 50 PEROPTIT OF CONSUMPTION CAME FROM JAPAN AND HONG
9. HE SAID HONG KONG WOULD NOT REFUSE ANY REASONABLE REQUEST FOR DISCUSSIONS HAVINE REGARD TO ARTICLE NK!! OF GATT BUT COULD HOLD OUT NO MORE OF TAREEING TO VOLUNTARY RESTRAINST OUTSIDE TEXTILES FIELD IN VICT OF PRECEDENTS INVOLVER, ERKOT REPLIED THAT CONSULTAT 19.15 WOULD NEVETTH LIST BA USTFUL AND HE AINTED THAT ISSECT MIGHT EVENTONLY CONSIDEN SOLUTIONS QUOTE VITRI! NORIAL GATT PROCEDURES UNAUOTE 1.0. BY USING ARTICLE XIX.
1.
FRUGT SKID C NEGOTINTING AND CONSULTATIVE CLV ITWEKTO LOKAVES THE FIRST SXFORTENS TO HOLD OVER INFORMAL
DISCUSSIONS) THAT HE SAW IT??L? INSCHOO-SE-15222LIKA MENDY FOR A FURTHER TUTANG OF OTO BEFORE MERILA
STEMA
CA$ 957