CONFIDENTIAL
uncertainty and disruption would be minimised by a postponement of the imposition of the tariff until the outcome of our application to join the EEC is known. The introduction of the tariff on imports of cotton textiles from the Commonwealth Preference Area is not being undertaken as part of a process of alignment with EEC's Common External Tariff and we do not therefore admit the suggestion of discrimination. In our view it represents the substitution of tariff protection for quantitative restrictions in which the tariff has been fixed at the lowest practicable rate. There is therefore no scope for a phased introduction of the duty which, since in the carly stages it would offer virtually no protection, would necessarily have to be accompanied by a continuation of the quota system. Nor can we accept that a postponement of the change until the outcome of our EEC application is known would remove uncertainty or reduce disruption. In our view such a last minute change of course would cast doubt on the credibility of our overall policy on textiles and seriously interfere with the operations of those amongst our domestic industry and our overseas suppliers who have planned ahead to meet the changed conditions. We would be left without any firm policy for the short term and without any compensating medium or long term advantage since the task of aligning our policy to that of the Six, if this becomes necessary, would not thereby have been made any simpler. I cannot therefore believe that anyone would derive more than an extremely short-lived advantage from such a situation.
The
7. In (e) and (f) you consider the possibility that the UK may be forced to reimpose quota restrictions after 1 January 1972 by a sudden disruptive surge of imports of cotton textiles. The UK has reserved its right to take action in the case of disruption in accordance with the provisions of the Long Term Arrangement. President's statement of 22 July, 1969, however, laid down that the United Kingdom would only consider reimposing quotas after 1 January 1972 on particular products if there was a significant rise in total imports of cotton textiles as well as disruption of the market in these particular products. These represent stricter conditions than are laid down in Article III of the Long Term Arrangement and mean that the United Kingdom will be prepared to tolerate increased import penetration in one sector of the market in cotton textiles detrimental to the interests of the UK industry if this is offset by relief for the UK industry in other sectors. The implications of this policy were set out in greater detail in my Saving Despatch No. 223 of 22 June 1970 to you. During the meeting on 1 February the Hong Kong representatives sought further assurances about the basis on which quota restrictions might be reimposed in the face of disruption caused by determined atempts by our suppliers to improve their market performance. It is not possible (nor would it necessarily be in the interest of overseas suppliers) for us to lay down in advance our reaction to every hypothetical situation that might arise, but since it is our intention only to impose quotas on sectors in which there is disruption, it follows that the pattern of any reimposed quotas
4
CONFIDENTIAL