JJP/T
CONFIDENTIAL
ANNEX TO NOTE
DISCUSSION ON THE RESULTS OF THE WORKING PARTY'S EXAMINATION OF HONG KONG'S CLAIM FOR HARDSHIP YARDAGE (WEDNESDAY 12 JANUARY)
1 The Working Party (Messrs Kiang and Poon for the Hong Kong side and Messrs Divers & Bentliff, Miss Welch and Miss Walters for the UK) had held a meeting during the morning of 12 January 1972, at Millbank Tower. Both sides agreed that it had provided a valuable opportunity to examine the material produced by the Hong Kong officials and to cross-check to a certain extent the claims and complaints which UK importers had presented to the DTI.
2 There was however no real correlation between the schedule of claims produced by Hong Kong (see Appendix A) and the list of orders placed before 8 December held by Import Licensing Branch (Appendix B). The UK list showed orders for Hong Kong greycloth of 4.7m sq yds, and for 11,600 dozen garments and 2,000 dozen towels, but it was agreed that because of the special nature of the trading relationship between Hong Kong exporters and UK importers contracts were rarely covered by ILC's; a strict comparison of the two lists was therefore abandoned.
3 The purpose of Hong Kong's schedule was to compare claims made by their exporters for extra yardage to accommodate their orders where these were in excess of quota rights. In the event it emerged that only in the case of corduroy were orders actually higher than the level of 1972 quota.
4
Mr Ridley explained to the Hong Kong side at the beginning of the Wednesday afternoon session that despite the lateness of the announcement of HMG's change in policy, the corduroy case was the only one which could be considered to be within the scope of any future arrangements we might have to make in the field of excess orders. The Secretary of State's request to Governments had made our position clear: pre-existing orders must in the first instance be regarded as a first charge on 1972 quotas. Overlicensing could only be considered when quotas or categories were exhausted.
5 HMG recognised that Hong Kong exporters might not have the requisite quota allocation to accommodate their orders, but we were suggesting that they might use their normal quota-buying facilities to get them out of this difficulty. However it was possible that when Ministers took their final decision about the total excess yardage problem, some provision might be made to cover the position of Hong Kong exporters whose orders could not be accommodated within category ceilings.
6
Mr Haddon-Cave said that the concept of making pre-existing orders a first charge on quotas was not acceptable to Hong Kong because (a) it meant shifting hardship from those without quota to those with quota whose orders were less than their entitlement or (b) the quotas themselves having been given to their holders for many years past, no longer existed as "free" quota to be used in the way HIG seemed to suggest.
This was simply a function of the way in which Hong Kong's quota allocation worked. Secondly, although the HongKong figures did not match those of Import Licensing Branch, exporters would see no reason to accommodate UK importers at the expense of their right to use their own quota as they wished. The quota was after all administered from the Hong Kong end, not from the UK.
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