CONFIDENTIAL
XCC(71)73
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The Financial Secretary deliberately avoided any refutation of the Minister's apologia. Instead, he said that each of the parties con- cerned found themselves in a peculiar situation, namely:
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(a)
(b)
(c)
HMG, inasmuch as it had found it necessary to modify its policy in a way which could not have been foreseen from a study of declared intentions up to literally a few days ago;
the Hong Kong Government, inasmuch as it had always believed (and had said so) that a tariff was not a viable form of protection for Lancashire and would disturb unnecessarily the traditional pattern of trade. The Financial Secretary added that the Hong Kong Government was also on record as saying that a change of policy in 1972 was untimely, given the likelihood of British entry into the EEC and the need to harmonise textile policies;
the Hong Kong industry, inasmuch as it had always believed that the end result would be eventually the tariff and the reimposition of quotas, which would involve both reduced profitability and limited access.
The Financial Secretary went on to say that all this was against the general background of:
(a)
(b)
(c)
(d)
(e)
the fact HMG's oft-repeated determination to abandon quotas and switch over to a tariff policy had influenced traders' expectations and they had made their dis- positions accordingly;
the recent US retreat into trade policy measures to solve monetary problems, together with protectionist moves by the US and other countries;
President Nixon's decision to pay off his December 1968 commitments to the US textile lobby. He felt that a parallel would be drawn in Hong Kong between the President's recent tactics via Ambassador Kennedy and the take it or leave it approach of HMG's announcement;
HMG's oft-expressed concern about current threats to the integrity of the world's trading system; and
recent statements in Parliament to the effect that the tariff could not be reckoned to be inadequate before it was applied. Furthermore, Mr Grant himself was on record as having expressed satis- faction that the forecasts in the Textile Council's study had been by and large borne out. Certainly, unemployment in Lancashire was not primarily a textiles problem.
CONFIDENTIAL