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DEPARTMENT OF TRADE AND INDUSTRY
Millbank Tower Millbank London SW1P 4QU
Telex 918829 Telegrams Advantage London SW1
Telephone 01-634 4422 ext
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2178/23
Mr W Domard
Department of Commerce and Industry Hong Kong
Our reference
Date
2/ August 1973
Thank you for sending us your Department's undertaking dated 9 August 1973 concerning the period immediately following the present termination date of the Long-Tema Arrangement on cotton textiles. We are in full agreement that the present uncertainty of the position in the early part of 1974 is threatening to disrupt trade in cotton textiles, and that some announcement should be made to remove this uncertainty.
The
The idea contained in your undertaking of extending the quotas from a twelve-month to an eighteen-month period seems to be an admirable solution, and we welcome it. But we see some minor problems in the fact that the period chosen is already one of quotas foverlapping duration, since the polyester/cotton element has been running since 1 October 1972. In principle we prefer twelve-month quota periods, so we think that it would be wiser to terminate the quota, as agreed in our understanding on 31st December 1973, and to announce at the earliest possible date a six-month interim quota to cover the period from 1 January 1974 to 30 June 1974. quota levels and restraint percentages are shown in the Annex to this letter.
They would be liable to a 10 percent carry-over of unused quota from the 1973 period where this existed. It is also accepted that the 21 and 4 annual increases referred to in paragraph 4 of the undertaking are not sacrificed or prejudiced in any way by the temporary arrangement. Furthermore, we can agree as far as the UK is concerned to the principle of retroactivity to 1 January 1974 of whatever restraints are agreed between Eong Kong and the FEC in the light of the new multifibre,multilateral textile agreement when it eventually emerges. The six-month quota would, as we see it, be cancelled when a new agreement is achieved, and Hong Kong's exports to date in 1974 logged against the new levels.
It is clear to us that the working out of the new erreement vill be a formidable task, since in addition to Hong Kong's vital interest in getting a rood deal there will be the provisions of a new and untested enabling agreement, plus the Community's internal differences of opinion and our own desire to get right away from the present sort of Community agreement consisting of the sun of member states' national quotas, with . no free circulation. We think that informal Fong Hong/GF discussions of what we each want to see in a new agreement would be useful within the next couple of months. We would not be able to do much more than
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