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administration of the controls in their own hands.
7.
In discussions at official level the Hong Kong authorities have
suggested that the problem could best be solved by extending the
definition of textiles under the CTA to include those made of man-made
fibres (mmf). The Americans would then be able to control imports of
non-cottons with the blessing of the GATT (by bilateral arrangements,
as is the case with cotton). It is, however, doubtful whether such a
change (even if agreement could be reach in the GATT) could be made
in time to induce the US Administration to drop the Mills Bill. Ideally
the Government of Hong Kong would like to have a free hand to negotiate
a restraint arrangement with the USA in which cotton and non-cotton
textiles were combined in a single quota. This would mean that any
fall in their cotton exports to the USA could be taken up by non-
coutons within the total quota ceiling. (The Americans have, however,
indicated privately to us that they would not accept this proposition
a fact of which the Governor of Hong Kong is also aware).
8.
Hong Kong's interests in this matter are different from those of
the UK and they conflict. The UK (and the EEC) views with concern
the possibility that action will be taken (either by the imposition of
quantitative restrictions on non-cotton textile imports into the US,
following the passage of the Mills Bill; or the negotiation of a series
of bilateral voluntary restraint arrangements between the US and the
Asian suppliers) which will undermine the principles of the GATT and
leads to a diversion of Asian textile imports to Europe. At talks in
Geneva at the end of July, under GATT auspices, delegates from the UK,
EBC and US agreed that the problem of international trade in textiles
should be the subject of a GATT study; the Japanese are still consid-
ering whether they will also support this idea. It is by no means
certain that the Japanese will agree to this suggestion and it should
not therefore be referred to in talks with Hong Kong industry and press.
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