T/cnb
UNITED KINGDOM TEXTILE POLICY
II
DISCUSSIONS WITH HONG KONG: RESUMED SESSION HELD TUESDAY, A.K., 7 DECEMBER AT HILLBANK TOWER
(Mr Mowforth, FCO was not present, but Messrs Pryke and Saunders of CT Division joined the meeting)
1 Mr Haddon-Cave said that the situation in Hong Kong had deteriorated since the previous day. Newspapers in both Hong Kong and London carried reports of mounting criticism of HMG's rumoured action by major textile exporters in the Colony. Mr Ridley was able to inform the meeting of the Secretary of State's decision to bring forward the announcement to Wednesday 8, December. This timing was felt to be fairly advantageous: the news would reach the Hong Kong press by Thursday p.m. and ought to coincide with Mr Haddon-Cave's return. The meeting then went on to clarify points made at the earlier session.
2 Mr Ridley said there were two main constraints on any action by HMG. There could be no decalage of the tariff for reasons already explained, and any agree- ment to modify liong Kong's quota arrangement would have to be extended to other restricted suppliers who asked for sinilar concessions. The consequentials of such across-the-board modifications were difficult to quantify in the immediate future, but the broad outline was not encouraging at a time when Ministers were trying to hold the level of imports to approximately 1971 levels.
3 Against this background Mr Ridley wanted to make the following points. The "hardship" bonus suggested by Mr Haddon-Cave at around 25-30M sq yds would be greater than the total of Pakistan's 1971 country quota; if it were granted to other suppliers, Hong Kong's share of UK imports could decrease. Secondly, while the introduction of carry-over for Hong Kong alone might not raise the total level of imports into the UK to a great extent, if it were applied across the board (as it would have to be) the aggregate increase would be much larger. Thirdly, there was in Mr Ridley's view a danger that if HMG agreed to talks, hopes of "amelioration" raised in Hong Kong might have to be disappointed with awkward consequences for both sides.
4 Mr Haddon-Cave said the Governor would face more difficulties if talks were not agreed; comparisons were already being drawn between the Hong Kong Government's tough treatment of the US with the more conciliatory approach used with HMG. On carry-over he accepted that there were difficulties in re-intro- ducing it into the arrangement, but maintained that this was the fault of HMG. Its exclusion over past years had certainly worked against the interests of Hong Kong's exporters for simple commercial reasons.
5 There were strong arguments for the allocation of "hardship" yardage. Orders had been placed in the expectation of a free market both by traditional quota holders in excess of their allocation, and by non-quota holders. Many of the original quota holdors had decided to abandon the trade in the sense that orders placed for 1972 were less than their quota rights; it would now be too late for them to arrange new orders. Admittedly they would be able to sell their unused allocation to non-quota holders but this would be at a high premium There were bound to be losses because a great deal of the trade was marginally priced. There was no question of TEXTAB recovering quota rights for re-allo- cation to non-quota holders, because every quota holder would claim his right to sell or use as he wished; there was a well-established market in licences through brokers.