CONFIDENTIAL
3. WE CONSIDER IT ESSENTIAL THAT THE 1971 QUOTA SHOULD NOT BE EXCEEDED: OTHERWISE THERE WOULD BE A HEAVY BUNCHING OF IMPORTS IN THE YEAR ENDING MID-1972. FIRST THERE IS LIKELY TO BE A RUSH TO TAKE UP FULLY THE QUOTA ENTITLEMENT FOR C P A COUNTRIES (WHICH HAVE BEEN UNDER USED FOR THE LAST COUPLE OF YEARS) BEFORE DUTY FREE ENTRY FINALLY COMES TO AN END. BY ALLOWING CONTINUED DUTY FREE ENTRY FOR CPA GOODS SHIPPED UNDER QUOTA IN 1971 BUT ARRIVING IN BRITAIN IN 1972 (ASSUMING THAT THE FINANCE BILL CLAUSE IS PASSED) WE ARE ENSURING THAT THIS UNUSUALLY HEAVY INTAKE FROM THE CPA IS SPREAD OVER AS LONG A PERIOD AS POSSIBLE. SECONDLY ONCE THE QUOTA CONTROLS FOR THE DEVELOPING COUNTRIES END, HEAVY IMPORTS ARE LIKELY AS ALL THEIR EXPORTERS ENDEAVOUR TO SECURE FOR THEMSELVES THE LARGEST POSSIBLE SHARE OF A MARKET WHICH, SO FAR AS THEY ARE CONCERNED, IS NO LONGER SUBJECT TO QUANTITATIVE IMPORT RESTRICTIONS. AS REGARDS 1971 EXPORTS WE BELIEVE THAT THE COMBINATION OF QUOTA ENFORCEMENT AND DUTY RELIEF FOR CPA SHIPMENTS UNDER QUOTA ARRIVING IN 1972 WILL MAKE FOR AS SMOOTH A TRANSITION AS POSSIBLE FROM QUOTAS TO TARIFF PROTECTION ALONE AND AVOID DISRUPTIVELY HIGH IMPORTS OVER A NUMBER OF MONTHS, DURING WHICH PRESSURE WOULD BUILD UP FOR A RE-INTRODUCTION OF QUOTA CONTROL. IT IS IN THE INTEREST OF THE EXPORTING COUNTRIES AS WELL AS LANCASHIRE THAT WE SHOULD AVOID THE LATTER SITUATION. (THIS ARGUMENT WILL NOT, OF COURSE, CARRY MUCH WEIGHT IN NEW DELHI. ON THE OTHER HAND ENFORCEMENT OF THE 1971 QUOTAS FOR THE FULL YEAR WILL ENSURE THAT INDIA IS PROTECTED FOR AS LONG AS IS POSSIBLE FROM UNRESTRICTED COMPETITION WITH OTHER LOW-COST SUPPLIERS.) 4. PLEASE INFORM THE GOVERNMENT TO WHICH YOU ARE ACCREDITED OF THE FOLLOWING ARRANGEMENTS AND SUGGEST THAT IT IS IN THEIR INTEREST AS WELL AS IN OURS THAT THEY SHOULD BE OBSERVED. (TO HONG KONG SUBSTITUTE QUOTE THE FOLLOWING ARE THE PROCEDURES WHICH WILL BE NEEDED TO IMPLEMENT THE ARRANGEMENTS DESCRIBED IN PARAGRAPH 1 UNQUOTE)
A.TO ENSURE THAT THE QUOTA LIMITS ARE OBSERVED, ALL RESTRICTED COTTON TEXTILES EXPORTED FROM THE COUNTRIES SUBJECT TO QUOTA WILL CONTINUE TO BE CONTROLLED BY INDIVIDUAL IMPORT LICENSING UP TO AND INCLUDING 31 MARCH 1972. IMPORT LICENCES WILL BE GRANTED FOR GOODS EXPORTED IN 1971 ONLY IF THE DTI IS SATISFIED THAT THEY WERE SHIPPED WITHIN THE QUOTAS. GOODS EXPORTED IN 1971 IN EXCESS OF THE QUOTAS ARE LIABLE TO SEIZURE.
-2- CONFIDENTIAL
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