CYPHER CAT A
FM F C O 251400Z
RESTRICTED
TO PRIORITY GOVERNOR HONG KONG TELNO 97 OF 25 JAN
PA.
2
FOLLOWING TELEGRAM NOW REPEATED TO YOU AT REQUEST CF DEPARTMENT WAS RECEIVED FROM UKREP BRUSSELS.
RESTRICTED
FRAME
30/I
TO PRIORITY FCO TELNO 326 OF 23 JANUARY INFO ROUTINE BONN COPENHAGEN DUBLIN THE HAGUE LUXEMBOURG PARIS ROME UKMIS GENEVA INFO SAVING BRUSSELS (FOR DODGE) GOVERNOR HONG KONG.
FCO TELEGRAM NO. 54 TO BONN
RESTRAINTS ON NON-COTTON TEXTILES FROM HONG KONG
1. AT THE MEETING OF THE TEXTILES WORKING GROUP ON 22 JANUARY, THE UK WAS REPRESENTED BY GWINNELL AND COSTIN (DT!) AND DE FONBLANQUE (UKREP).
2. ERNST (COMMISSION) OPENED BY SAYING THAT IN VIEW OF THE UK'S POLYESTER COTTON AGREEMENT WITH HONG KONG THE LATTER HAD BECOME THE MOST DISRUPTIVE SUPPLIER OF NON-COTTON TEXTILES TO THE OTHER MEMBERS OF THE COMMUNITY. THERE WAS NO TIME TO DISCUSS AT THIS POINT OTHER S.E. ASIAN COUNTRIES, ANY VOLUNTARY RESTRAINT AGREEMENT MUST BE NEGOTIATED BY THE COMMUNITY AS A WHOLE ON THE BASIS OF AGREED
SENSITIVE ITEMS.
3. GWINNELL OUTLINED THE UK'S POSITION SAYING THAT, WHILST IT WAS POSSIBLE THAT THE GERMANS HAD A CASE, COMMUNITY-WIDE RESTRICTIONS SHOULD HAVE A SPECIFIC PURPOSE, E G MINIMISATION OF UNEMPLOYMENT. AND SHOULD BE SELECTIVE IN COVERAGE AND OF LIMITED DURATION AND THAT DAMAGE TO THE HOME INDUSTRY SHOULD BE PROVEN.
4. THE GERMAN DELEGATION CRITICISED THE UK'S RESTRAINT AGREEMENT WITH HONG KONG, THEY WERE PREPARED TO BE LIBERAL BUT WERE SUFFERING FROM THE DIVERSION OF GOODS FROM THE US AND LATTERLY UK MARKETS TO THE EXTENT THAT IMPORTS OF CERTAIN PRODUCTS HAD DOUBLED IN THE LAST 4 MONTHS. THIS WAS BECOMING A POLITICAL PROBLEM IN GERMANY AND PRESSURE FROM UNIONS WAS BUILDING UP. THEY AGREED WITH THE COMMIS- SION'S PROPOSALS INCLUDING THE LIST OF SENSITIVE PRODUCTS CIRCULATED IN SEPTEMBER, SUBJECT TO MINOR MODIFICATIONS.
5. THE FRENCH AND ITALIAN DELEGATIONS, SUPPORTED BY THE IRISH, FAVOURED AN OVERALL SOLUTION WHICH WOULD RESTRICT ALL NON-COTTON PRODUCTS WHETHER SENSITIVE OR NOT AND WHICH WOULD NOT BE CONFINED TO HONG KONG. THE FRENCH ARGUED HOWEVER THAT IT WOULD TAKE A CON- SIDERABLE TIME TO AGREE ON SUCH A SOLUTION AND THAT AS AN INTERIM MEASURE THE COMMUNITY SHOULD TAKE UNILATERLAL MEASURES.
6. AFTER FURTHER DISCUSSION THE COMMISSION ASKED FOR AGREEMENT TO THEIR PROPOSAL TO NEGOTIATE A VOLUNTARY RESTRAINT AGREEMENT BASED ON IMPORTS OF THE LAST THREE YEARS (DOCUMENT S/27/73). THERE WOULD BE A STANDSTILL FOR 1 YEAR PENDING THE OUTCOME OF THE GATT STUDY AND THE AGREEMENT WOULD TEMPORARILY COVER ALL PRODUCTS WHICH WERE CON- SIDERED SENSITIVE. THE UK DELEGATION REPEATED ITS OBJECTIONS TO AN OVERALL SOLUTION, IF HONG KONG WERE TO AGREE TO LIMITATIONS A SUBSTANTIVE CASE MUST BE MADE.
7. AS TIME WAS RUNNING SHORT, THE MEETING HAVING BEEN LIMITED TO TWO HOURS BY THE PROLONGATION OF THE MORNING'S JUTE MEETING, IT BECAME CLEAR THAT NO FIRM AGREEMENT COULD BE REACHED ON THE FORM OF A MANDATE TO NEGOTIATE WITH HONG KONG. IT WAS THEREFORE AGREED THAT A FURTHER MEETING OF THE GROUP WOULD BE HELD ON 2 FEBRUARY TO DISCUSS THIS PROBLEM. THIS WOULD FOLLOW MEETINGS WHICH HAD ALREADY BEEN ARRANGED FOR 32 JANUARY TO DISCUSS THE LIST OF ITEMS WHICH MEMBER COUNTRIES CONSIDERED TO BE SENSITIVE ON THE BASIS OF THE LIST PROPOSED BY THE COMMISSION IN THEIR SEPTEMBER PAPER AND ON 31 JANUARY TO DISCUSS REACTIONS TO M. LONG'S PROPOSALS ON THE FORM OF ANY MULTI-LATERAL AGREEMENT (MORNING) AND THE COMMUNITY'S PROPOSED AGREEMENT WITH YUGOSLAVIA (AFTERNOON),
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