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he could not agree that because performance was low in shirts, the category should be deleted. This was a classic case where demand had moved out of woven cotton and into knitted mixture fabrics or man- mades, amply demonstrated by Hong Kong's own penetration figure (particularly in the cotton/polyester mixtures). For a realistic appraisal both of the sensitivity of the UK shirt market and of the need for restraint we needed to look at restraints on a multi-fibre basis.
9. Furthermore, when we examined the overall way in which Group IV of the arrangement worked, we had to recognise that individual category ceilings were now so high that there was bound to be considerable underusage to keep within the Group IV ceiling. In this way, yardage in under-used categories such as shirts or bedlinen was not lost; was in effect a high degree of concealed flexibility.
there
10. Mr Haddon-Cave agreed that there was a form of "upswing" within the Group. But what Hong Kong wanted was "cross-swing" between categories (tied to the receiving category) and some measure of "'downswing" between groups (tied to the donor group). This was simplification as opposed to re-organisation of the flexibility arrangements in order to increase the size of the basket (n.e.s. category). Hong Kong's case was that the trade should be allowed to swing with the market; the modernisation could be phased over a period of years if HMG could not agree to its immediate introduction because of prevailing difficulties.
11.
Mr Ridley said that it was important to remember that we were talking about a one-year extension of an existing arrangement pending the substantial re-negotiation which we should face in 1973 when the UK had to align the the EEC's Article 4 agreements. It was probable that the ten would regard the period January-September 1973 as a "rump period"; the real time for a fundamental re-shaping of the UK/Hong Kong agreement would thus be after the expiry of the Long Term Arrangement in September 1973. The UK hoped, privately, that there would be a move towards greater "burden-sharing" between the different markets in the enlarged Community at that time, which would allow us greater room for manoeuvre, For these reasons we preferred to introduce only a few minor adjustments, rather than a radical re-structuring of the present arrangement.
12.
Summing up for Hong Kong, Mr Haddon-Cave said he could not fully accept these arguments. A twelve-month or two-year moratorium was a long time in trading terms, and Hong Kong was concerned to get some kind of loosening-up in their arrangement with the UK. He was willing to put aside for the moment his requests for once-for-all yardage transfer and for development of the categorisation format, but as a substitute, Hong Kong urged consideration of her proposals for flexibility. Particular importance was attached to the concept of group swing, and in this context he reminded the UK side that we were unique in our continued restriction of grey and finished piecegoods. Admittedly we were fairly liberal and "stuck to the rules" whereas certain European countries did not (a reference to Hong Kong's diffi- culties in exporting "unrestricted" greycloth to France); nevertheless, when the UK began to align to the EEC system, we should find that their arrangements allowed for (a) 10% swing from Group II to Group I (b)
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