very small quotas indeed. Outstanding contracts might therefore have to be licensed over and above the quotas. We could keep this excess within bounds and would be better able to check the genuineness of the claimed contracts if we restricted the concessions to contracts covered by inevocable letters of credit. If we accepted this amount of additional imports we could then simply repeat the 1971 pattern of licensing and thereby avoid devising a new method of allocation with its inevitable tecthing troubles for the purpose of a one year holding operation.
39. It has been suggested that it might be possible to reconcile a number of countries to continue restraint by taking quota entitlement from India (since she now seems unable to use more than about 60% of her large quota) and redistributing this amount to Hong Kong, Pakistan etc., perhaps with some softening of the categorisation provisions and the liberalisation of cotton yar. Unsatisfactory though the present allocation of quotas between countries now is (based as it is on the pattern of trade in 1962-6 we do not consider that time permits us to reopen the whole package for inevitably protracted negotiations, as each country asserts its claim for better treatment than its competitors.
40.
It will also be necessary to consider whether the 1972 quotas should contain an element of duty-free entry, given that the ERC has opened duty-free quotas for a few countries' cotton textile under its generalised preferences offer. The Government has not taken powers to operate duty-free quotas during 1972. Loncashire would be strongly opposed to any concession of this kind, however limited in scope. If the duty-free arrangements for cotton
textiles covered the same list of beneficiaries as the rest of our UNCTAD offer, a considerable degree of "counter-marching" would be involved when, after accession to the BEC, we had to conform to the Community's short list of half a dozen or so beneficiaries (which excludes, amongst many others, Hong Kong). However, desirable though it is that the UK should not introduce duty- free quotas for textiles in advance of Common Market entry, we
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