would be an entirely different matter and one which would certainly
cause resentment and political difficulties in our relations with
Hong Kong. We therefore conclude that we face a threat of diversion
on a substantial scale only from Taiwan and Korea.
20.
So far, other countries have not yet taken tangible measures to forestail this threat of diversion other than by issuing public and
private warnings. Some, including Canada, Sweden, France and Germany
already operate some forms of import restrictions against non-cotton textiles. But if we were now openly to seek either restraint agreements or imposed quotas on non-cotton textiles we would in effect be the
first country to follow the American example. By striking out ahead of
the pack in this way, we would be putting at risk our influence to
achieve an internationally agreed solution for problems in the
textiles trade which is still our preferred course and our reason for
supporting the idea of a study within the GATT. We would also be out
of step with the official line taken by the EEC. Plainly we cannot
wait for ever for an agreed solution to this problem, but we are of the
view that we can still wait a little longer in the full knowledge that if the threat of diversion should become a reality we could move quickly to impose restrictions. In that event others would probably be facing
the same reality and we would be unlikely to be taking action alone.
We therefore conclude that we should not impose restrictions now but should seek informal consultations with the EEC on the possibility of a joint response to the present situation.
21. On the second argument that any quotas on cotton should apply as well to directly competing man made fibre products, we would concede
that ideally in any comprehensive quota system there should be single quota limits for directly competing products (eg for shirts of all
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