(b)
As a result of the exchange of views on textile trading policy, I now understand the Hong Kong position much better than I did. This is dealt with in more detail below.
The Hong Kong position on textile trade policy
4. There is still some ambivalence in Hong Kong thinking on textile trade policy, which derives from their exposed position as a trading nation. So far as the analysis of the textile trade problem goes, their position is remarkably close to that of CT Division: they would like unrestricted trade in textiles, but recognise that there is a problem in the labour-intensive cut-and-sew clothing. Past arguments are to some extent a question of semantics. Hong
· Kong is now talking much less of a lateral extension of the LTA, because they appreciate that this can too easily be interpreted as simply extending quantitative restraints from cottons into non-cottons. They see no justification for any quantitative restraints on knitted fabric, still less yarns, and regard any problem in waven fabric as residual and declining. Essentially what Hong Kong has in mind is that any new restrictions on clothing should not involve artificial categorisation as between clothing of different fibres (some, e.g. cotton, declining) and as between clothing of woven and knitted fabrics (the former declining, the latter expanding): such artificial categorisation could clearly be used by e.g. the Americans, in effect to cut back the level of their clothing imports as the switch out of cotton and woven cloth continued its momentum.
5. Hong Kong has hitherto described this lack of artificial categorisation as "flexibility". Lack of artificial categorisation is a perfectly respectable position on the single market concept,
sure that this is one of the things that would come out of a good GATT study. I suggested to Hong Kong, however, that the term "flexibility" was an unfortunate one, as it suggested opportunism on the part of the exporting country and the giving of a concession on the part of the importing country: it was for the importing country to justify apparently artificial categorisation, not for the exporting country to justify "flexibility". I think they were impressed by this point.
6.
If there is still any lingering hankering in Hong Kong for a lateral extension of the LTA, and then only in clothing, (and this is why I say there is still some ambivalence in Hong Kong thinking), it is for two reasons:-
(a) this would automatically secure a lack of artificial
categorisation because of the rolling-in of cotton clothing quotas with e.g. mmf clothing quotas;
(b)
it would help to maintain the fiction of the uniqueness of textiles. There is some fear that
combined quotas on clothing (other than in the context of a lateral extension of the LTA) might lack
"uniqueness" and therefore be a precedent for quotas on non-textile exports.