CONFIDENTIAL
those countries which already operate export restraints.
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6. While Thai polyester/cottons have not yet arrived here in substantial quantities, experience last year in dealing with South Korea and Taiwan has shown the consequences of delaying action. Up to last July, when we informed South Korea that we wanted consultations, imports from this source amounted to about 3m sq yas per year. By the time a restraint agreement had been negotiated, contracts been established for delivery of 33m sq yds by the end of 1973. Similarly, Taiwan with a past performance of less than In sq yds had booked orders for 12.8 sq yds (of which we finally licensed 7.211) »
The quantities so far ordered from Colombia, Spain, Macao and Brazil are much smaller. But there is reason to believe that theme
countries could quickly take advantage of restrictions placed on their competitors. We should therefore act immediately when licence applications from any single source reach a certain level. To presorve reasonable equity between producers, the level should be set at 24 sq yds in any period of six months. In addition to Thailand, Colombia has already reached this point, and action should Le taken in respect of both countries now. The 2 sq yd rule will enable us to establish generous restraint levels in relation to actual trade while it is still small, which is preferable to being forced to seek restrictions later against the background of a greatly increased performance. We would not take action against Spain if the 2n sq yd level were reached, because of Spanish status as an EEC associate, and the questionable justification for describing her as a low-cost producer, But if Macao, Brazil or othe potentially disruptive sources from which cotton textiles are now restrained were to reach the 2n sq yds level of licence applications In any 6 month period, action similar to that now proposed for Thailand and Colombia would follow automatically.
Effects of further restraints on the UK market
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8. The present world-wide boom in demand for textiles
including polyester/cottons may appear to be an unsuitable economic situation in which to introduce further restraint. But it is
unlikely that further orders now placed on developing countries
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