3 Mr Haddon-Cave accepted this, but pointed out that in view of Hong Kong's non-GATT relationship with the UK, retentica of her country quota wes not strictly
peaking obligatory. He asked what were HG'a short and long-term objectives valor he revised policy. Mr Ridley detailed the mechanics of the request to Goverments to continue administering the country quotas, the possible dates when the announcement could be made in the House, the issue of the Press Notice and the TI and the formel notification to the GATT CTC. Hong Kong should not read too much into the apparent emphasis on 1972 in the statements made so far about the policy. We were expecting that entry into EEC in 1973 would carry with it an automatio obligation to assimilate to the Community's Article 4 agreements, suitably re-negotiated to reflect the existing pattern of imports into the UK, but in-depth discussions with the Commission about a common policy for 1973 onwards had not yet taken place. Emphasis on 1972 had therefore arisen from our assessment of the need to contain the present situation in the U market in terms of both volume and traditional product and supply pattern, because there would be too much uncertainty if a now pattern began to emerge in 1972 with the prospect of EEC entry and the expiry of the LTA in September 1973 locning large on the horizon.
4
Beyond 1973 the field was still fairly open apart from limitations produced by the new US agreements. We expected that the Community would want a holding operation for 1973 ponding intensive discussions at international level about multi-fibre versus single-fibre restraints.
5
Mr Haddon-Cave stressed that Hong Kong had not yet signed her cotton agreement with the US; they still hoped to get the agreement based on two years (co-terminous with the LTA in 1973) followed by a review to consider extension for a further three years, rather than a full five-year term ab initio. The US had tried to buy then off by offering a 5% bonus on cotton (about 2m og yds) in return for an extension of the cotton arrangement but the Hong Kongers had hold out for a settlement which left the cotton agreement co-temminous with the current LTA. They believed that "orderly" trade in textiles could only be achieved by updating the LTA to include all fibres. and they were "path.ologically oppos cd" to a continuing system of multi-lateral agreements on a single-fibre basis; the aim therefore was to get confidential side- letters agreed with the US by the end of 1973 which would contain à review clause giving flexibility between fibres and constructions, and a re-negotiation of the cotton agreement when it expired in September 1973.
6 The discussion then turned to the possibility of ameliorating the impact of HIG's decision to retain q.r. on cotton textiles on Hong Kong's economy". Mr Haddon-Cave accepted that our decision had arisen cut of changed circumstances, but it was nevertheless going to be a difficult task for the new Governor to present it, particularly to the large textile concerns in Hong Kong whose interests were directly threatened. The news had already leaked to the press; it was therefore imperative for Mr Heddon-Cave to be able to announce on his return that he had reached on unoquivocal understanding that talks would be held. It was probably better from both points of view that the agenda for theso talks should remain confidential, but he had the following main objectives:-
i
ii
iii
decalage of the tariff if it could not be abandoned completely;
once-for-all transfer of yardage from Groups II, III and V to Group TV to compensate for the reduced.competitiveness of fabrics following introduction of the tariff;
modernisation of the category arrangements to bring them more into line with commercial reality (perhaps on the EEC model);
2