2u
(C)
CONFIDENTIAL
ANY RECENT INCREASES IN GERMAN IMPORTS FROM HONG KONG ARE CAUSED BY MARKET DEMAND AND THE SUGGESTION IN PARA. 6 OF UKREP BRUSSELS TELEGRAM 326 THAT THERE SHOULD BE A CUT-BACK OF IMPORTS TO THAT FOR THE LAST 3 YEARS WILL NOT ONLY BE CONTRARY TO ALL ESTABLISHED LTA PRINCIPLES AND CAUSE US SERIOUS DAMAGE, BUT CAN ONLY RESULT IN THE DIVERSION OF PURCHASES TO OTHER SOURCES E.G. EAST EUROPE.
AS SEEN FROM THIS DISTANCE, IT IS BECOMING APPARENT THAT AN UNSTATED OBJECTIVE OF THE GERMANS IS TO CUT BACK THEIR TEXTILE
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IMPORTS FROM HONG KONG IN ORDER TO MAKE ROOM FOR FURTHER IMPORTS FROM EAST EUROPE IN FURTHERANCE OF THEIR OSTPOLITIK. I AM SURE YOU WILL AGREE THAT THERE CAN BE NO JUSTIFICATION FOR THIS ROBBING OF PETER
TO PAY PAUL.
3. IN PARA. 1(11) OF OUR TELEGRAM 84 WE HAVE MENTIONED CONCERN OVER POSSIBLE SUGGESTIONS FOR AN AMENDMENT OF GATT ARTICLE XIX TO SOLVE THE ''TEXTILE PROBLEM. IN ADDITION TO THOSE FEARS, JORDAN FORMED THE IMPRESSION IN HIS TALKS WITH LONG IN DECEMBER THAT THE LATTER DID NOT SERIOUSLY BELIEVE THAT THE ULTIMATE SOLUTION TO THIS PROBLEM LIES IN THAT DIRECTION. A SENIOR MEMBER OF THE CATT SECRETARIAT CURRENTLY PASSING THROUGH HONG KONG HAS GIVEN FURTHER CLEAR HINTS THAT THE MOST OBVIOUS SOLUTION LIES IN A WAIVER EITHER BY MODIFICATION OF THE CTA OR, MORE LIKELY, A NEW ARRANGEMENT
AND I WOULD SUGGEST THAT OUR COMBINED EFFORTS BE CONCENTRATED ON THIS LINE OF APPROACH.
4. WHILE THE FUTURE IS FRAUGHT WITH DANGERS FOR US, WE HAVE TAKEN DUE NOTE OF PARA. 4 OF STUART'S TELEGRAM 102 AND PROPOSE TO SEEK THE ADVICE OF THE TEXTILES ADVISORY BOARD ON TUURSDAY AFTERNOON, 1ST FEBRUARY, FOR THE IMMEDIATE INSTITUTION OF UNILATERAL RESTRAINTS TO GERMANY ON A RANGE OF WOVENPOLYESTER/COTTON GARMENTS, BRIEFLY, THE ITEMS TO BE INCLUDED IN THE RESTRAINT WILL BE THE COUNTERPARTS 10 THE SPECIFIC CATEGORIES IN THE HK/EEC COTTON TEXTILES AGREEMENT EXCLUDING HANDKERCHIEFS (1.E. CATEGORIES E4 AND E6 TO E9). THE RESTRAINT LIMITS WILL BE AT OUR 1972 EXPORT LEVELS, PROVIDED THAT THOSE LEVELS MAY BE AUGMENTED BY ANY SHORTFALLS IN SOTTON SHIPMENTS. WE FEEL THAT THIS MAY BE THE MORE EFFECTIVE WAY OF PROCEEDING
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CONFIDENTIAL
/BEARING