New Provisions
COMPTON.TIAL
(7) Unlimited downswing ex Group IV to basket
(8) 10% upswing ex Group IV basket to specific categories (9) Each Group IV category can only receive one 10% uplift
under the above provisions.
4 Comparison of present arrangement with the proposed arrangement
in vardage terms
GROUP IV
Present
m sq yds
Proposed
Group IV limit
plus 1%
90.229
92.738
Group V limit
plus 1%
2.509
Group IV
1972 maximum
New Group IV 1972 MEL
export level
90.229
with 10%
95.869
(Group limit)
swing ex
without swing
Group II1
Sun of specific categories
97.782
96.917
This comparison demonstrated that the new proposal did not exceed specific limits (in line with Ministers' statement). Although the new Maximum Export Level was 5.6% greater because of the upswing provision from Group III and the transfer of yardage from Group V, the actual group limit was untouched.
5 There followed a discussion on how the swing facilities would affect the new specific limits for the revised categories. Mr Ridley warned that HMG was not prepared to give away wholesale opportunity to Hong Kong to increase her performance in all categories. We had two alternatives in arriving at our modified format: to re-shape the categories without the new EEC-type swing provisions or to base all categories on 1971 performance (plus 1%) with the swing provisions.
6 Hong Kong agreed that they had hoped for improvements on both of these counts, but denied that they had accepted the performance-based criterion for categorisation. The meeting then went on to examine the calculations rrepared by Hong Kong in their Tables 1 & 2 (see Annex 1, Appendix B and C), where restraint levels had been calculated by Transposing 1971 quota levels (or estimated quota levels where an old category was split) adding 1% (or 5%) where appropriate, and using performance only where no specific restraint existed. Deadlock appeared to be inevitable for a time while Hong Kong maintained that they would not sacrifice pro-rated quota levels for the. advantages of greater flexibility between categories and bigger n.e.s. categories. In HMG's view this appeared to be a request for no decrease in category ceilings with better swing arrangements, and because of the significant aggregation of imports that would ensue, we could not entertain the idea.
7 Hong Kong replied that their unofficials had indicated that HMG's revised proposal could only be accepted if it could be described as being "of benefit" to each sector of Hong Kong's industry. The whole discussion to date had concentrated on the present rigid division between fabrics and garments in the agreement; the only way out of the straitjacket was to apply upswing froa
CONFIDENTIAL
t