RESTRICTED
4. THE MAIN CUTSTANDING PROBLEM IS THE ITALIAN REFUSAL TO ACCEPT THE COMMISSION'S KEY FOR ALLOCATING QUOTAS BETWEEN MEMBER STATES (WHICH HAS DEEN REVISED TO GIVE DENMARK A TOTAL OF 5 PERCENT) - UNDER WHICH THE ITALIAN SHARE IS 16 PERCENT. THE ITALIAN RESERVATION APPLIES TO THE KEY AS A WHOLE AND NOT ONLY TO THE TEXTILE SECTOR. THEY ARGUED FIRST THAT THE PERCENTAGE REDUCTION IN THEIR SHAPE AS A RESULT OF THE ENLARGEMENT OF THE COMMUNITY WAS LESS THAN THE
REDUCTION WHICH OTHER MEMBERS OF THE SIX HAD RECEIVED AND SECONDLY, THAT IN ABSOLUTE TERMS THEIR QUOTAS WOULD INCREASE UNDER THE NEW
KEY BY CONSIDERABLY MORE THAN THE 5 PERCENT WHICH THE COMMISSION HAD CRIGINALLY PROPOSED, THE COMMISSION POINTED OUT THAT THE KEY WAS BASED ON ODJECTIVE FACTORS (POPULATION, CNP, AND TOTAL IMPORTS) AND THAT THE LESSER REDUCTION IN THE ITALIAN SHARE MUST THEREFORE
BE DUE TO A CHANGE IN THEIR RELATIVE POSITION WITH RESPECT TO THESE FACTORS. THE ITALIANS PROPOSED THAT THE DANES SHOULD TAKE A
FURTHER 2 PERCENT LEAVING THEM WITH 14 PERCENT, THE DANES AT FIRST ACCEPTED THIS PROPOSAL FÜR THE TEXTILE FIELD ALONE AND ON A PROVIS- IONAL BASIS, BUT AFTER CHECKING WITH COPENHAGEN SAID THAT THEY COULD NOT AFTER ALL GO BEYOND 5 PERCENT. THE PROBLEM REMAINS UNRE-
SOLVED.
5. THE OTHER OUTSTANDING PROBLEM IS THE DANISH REQUEST TO HAVE ADDITIONAL DUTY-FREE QUOTAS FOR SOME NINE PRODUCTS OVER AND ABOVE THEIR QUOTAS UNDER THE 5 PERCENT KEY. DESPITE WORRIES ABOUT THE
PRECEDENTS WHICH SUCH AP ENLARGEMENT OF THE COMMUNITY'S DUTY-FREE QUOTAS WOULD CREATE, THERE WAS SOME SYMPATHY FOR THE DANISH PROPOSAL AND IT WAS SUGGESTED THAT THE REGULATIONS IMPLEMENTING THE COP COULD
CONTAIN SPECIAL FOOTNOTES PROVIDING FOR THE ADDITIONAL DANISH QUOTAS. HUWEVER THERE WAS DISAGREEMENT OVER THE DANISH REQUEST THAT THESE ADDITIONAL QUOTAS SHOULD NOT BE SUBJECT TO THE PUTOIRS AND
THAT THEY SHOULD BE FREE TO PROCURE THEIR SUPPLIES AS THEY WISHED
TE ON THE BASIS OF EXISTING TRADE PATTERNS. THIS REOPENED THE WHOLE
QUESTION OF THE DANISH QUOTAS WHICH IS THEREFORE REMITTED TO THE
CONSIDERATION OF THE WORKING GROUP ON GSP ON 8 OCTOBER.
FCO PLEASE PASS ADVANCE COPIES TO:-
FCO
HART (EID)
CABINET OFFICE HOLMWOOD.
DTI - MISS LOWNE, RIDLEY (CT), INGRAM, BRADSHAW (CRE).
PALLISER.
[ADVANCED AS REQUESTED]
EUROPEAN ECONOMIC DISTRIBUTION
EID
ADDITIONAL DISTRIBUTION
FRAME
2
RESTRICTED