CO.IDENTIAL
3. Hong Kong then complained that the 4m sq yds upswing facility from Group III to Group IV was inadequate when compared with an aggregate figure of 200 sq yds. They suggested that the swing facility should not be tied to the donor group, but to the receiving group ie 10% of Group IV limit to be drawn from either Group II or Group III, (up to 9.2m sq yds). Again the UK side refused to accede to this pressure, warning Hong Kong that they risked prejudicing the final outcome of the negotiations if they continued to pursue it. Hong Kong then suggested a compromise of 5% upswing from Group III but based on the Group IV ceiling (ie not tied to the donor group). In yardage terms, this would amount to 4.64m sq yds. This was accepted by the UK side.
4. A draft letter was then prepared which Mr Ridley could send to Mr Haddon-Cave, setting out the understanding reached between the two sides subject to further consideration by both Governments and to discussions with the Lancashire industry:
LETTER TO MR HADDON-CAVE
"This letter records the understanding reached between us in discussions between 10 and 14 January 1972 about the implications for Hong Kong's trade in cotton yarn and woven cotton textiles with the UK of the UK Government's decision to retain the existing system of quantitative restrictions on such textiles in 1972.
2. I undertook that the amendments and modifications set out below to the Heads of Agreement on Hong Kong's exports of cotton textiles to the UK 1966-1970 (as already modified and extended) would, subject to further consideration on our side as regards possible implications for the UK's restraint arrangements for cotton textile imports from other restricted countries and subject to discussions with the UK textile industry and the European Commission, be submitted for approval to UK Ministers:
will
a)
b)
c)
a)
e)
Group V (Miscellaneous Cotton manufactures) disappear as a separate group and its total yardage of 2,509,919 square yards will be added to that of Group IV (made up goods)
In 1972 up to 5% of the Group limit of the new Group IV may be transferred from the Group limit of Group III into the new Group IV.
Category 9 will be increased in 1972 to 1 million square yards, the total of Group III being unchanged.
The new Group IV limit will be sub-divided into new categories with new category limits as set out in the Annex to this letter.
In the new Group IV, yardage may be transferred from one specific category to another or from the n.e.s. category, except to categories 13, 14a and 23 up to 10% of the limit of the recipient category This arrangement supersedes the "swing" arrangement that was applicable between categories within the old Group IV under the Heads of Agreement.
CONDENTIAL