Mr Laird
HONG KONG EXPORTS OF COTTON TEXTILES TO THE UK
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1. Your minute of 24 January.
Judging from his comment on Hong Kong telegram No. 72 "I assume
paragraph] 3 is not on? is paragraph 2
Mr Royle seems to accept this assessment.
I agree that it would be appropriate for an FCO Minister to write now to a DTI Minister on where we go next with Hong Kong. Having said this, it is much less easy to consider what the contents of such a letter might be. Without wishing to be contentious, I am dispirited by the Governor's comment that the offer made at the end of our last round of talks was inadequate. Certainly it is true that it did not give all Hong Kong were asking for but, with respect, what they were after then and what they still seem to be after (if one takes the contents of Hong Kong telegram No. 72) not only seems to be "grasping for the moon" but, if we were to concede it, would make difficulties not only with the other developing countries but also, I suspect, with the EEC. As you know, at the last round of talks we worked on the basis of the Hong Kong proposal to bring their agreement more into line with the EEC arrangements, not only as this seemed one way of bringing round the DTI but also so that we could defend our action with other overseas suppliers and, provided we were not too far out of line, with the EEC if this were necessary. We have already breached this principle by accepting (which the EEC does not provide for) upswing (in the case of Group III to IV) and now in this context the figure of 24 million square yards is quoted - the only time such a figure was used was at the December talks when Mr Haddon Cave was talking, very tentatively, about hardship to cover orders booked by non-quota holders and orders booked by quota holders in excess of quota rights. He hinted at a figure of 25 to 30 million square yards but, as you will remember, his approach on upswing, although described as hardship, was really in the context that with tariffs and quotas Groups II and III would not be as profitable as before for Hong Kong and that to meet this difficulty we should provide upswing.
2.
This is not to say that we should not approach the DTI but rather that in commenting on the propositions in Hong Kong telegram No. 72 we should attempt to maintain credibility. Admittedly this would be better achieved by the suggestion of the Governor (Hong Kong telegram No. 73) by suggesting the "half-way approach" and you might think this would be the kind of general approach for the draft you suggest doing. Even on this though there are certain difficulties which are more I think for you than for me. Supposing that the DTI accept a compromise along the lines of Hong Kong telegram No. 73 which would perhaps be more based on the need to get agreement rather than the justification for such an agreement, Where does this leave Mr Haddon-Cave;
CONFIDENTIAL
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