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Discussion then focussed on whether any progress had been achieved towards including Hong Kong's taxtiles in the GSP. Mr Ingram said a real attempt had been made by the Commission to this end, but to no avail. When it calculated the effect of including some Hong Kong items in the Scheme, it was found that all cases those items became "sensitive". Mr Preston stressed that the most that could be achieved would be a statement by the Council that it had every intention of bringing textiles within the Scheme sometime in the future. Mr Jordan expressed the fear that the concept of limiting GSP access for the "super-competitives" might be extended in 1975, and that Hong Kong, like Yugoslavia in this year's negotiations, might be the principal target next year. Mr Ingram sought to remove this fear by pointing out that a greater degree of flexibility in the 1975 Scheme should be shown by the operating countries.
12 EEC TEXTILE RESTRAINTS
Mr Jordan said he felt there was a link between the GSP discussions and EEC textile restraints. The GATT Multifibre Arrangement required the elimination by 31 March 1975 of restraints on imports of most textiles unless they were shown to be justified using the recognized criteria. Hong Kong's attitude to the whole question of restraints would be conditioned by the Community's final attitude on the GSP when this became known, but things would become very difficult if the EEC sought to extend restraints which were unsupported by justification as laid down in the MFA. Mr Jordan thought that if this did occur it would create very difficult problems for both Hong Kong and the UK. He considered that Hong Kong's recently concluded bilateral textile restraint agreement with the USA could justifiably be considered as liberal in its provisions since it was really concened with a few specific products (despite the comprehensive product coverage), with a generous allowance for growth. The total annual quota was something of the order of 835 m sq yds.
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13 Miss Lowne replied that every effort was being made and opportunity taken to remind the other EEC member states and the British textile industry of the provisions of the MFA relating to justification. Fierce opposition had been met in Britain's attempts to preserve the purity of the MFA so that the Community/Hong Kong textiles restraint agreement would, as far as coverage and growth rates were concerned, be similar to the terms of the MFA. She recommended that Hong Kong hold its fire until negotiations with the Community had been started, and then go all out to achieve agreement on terms most favourable to the territory. Another argument against Mr Jordan's proposal that Hong Kong should insist on megotiating under Article 3 of the MFA was that the territory would increase the risk of losing administration of the export restraint controls as the Community was already seriously considering the introduction of controls by importers under the new agreements. Miss Lowne warned that it was for Hong Kong to educate the Community about the terms of the textile restraint agreement with the USA. The EEC member states believed that the agreement was very restrictive for Hong Kong and unless Hong Kong disabused them of this understanding they would be further encouraged by it to try to conclude a similar accord with the territory with the same comprehensive coverage but with very small growth rates. She believed Hong Kong would be well advised to explain fully the provisions of the agreement to the Commission since member states would be more likely to be convinced of them by that body than directly by Hong Kong officials.
14 Mr Jordan accepted this view, adding that Mr Mills could undertake the task while he was in Europe to deliver a Memorandum, copies of which were circulated round the table.
15 It was agreed that Whitehall would consider the text of the memorandum quickly, and give its views to a meeting with Messrs Mills and Dodge the following afternoon.
Distribution:
UK officials present Mr Edwards CAE 3
Mr Kinnear Mr de Fonblanque
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BTC Hong Kong UKREP Brussele
CRE 2/3 28/10/74