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present very large imports into the UK will grow by a much smaller figure, perhaps less than 2%. They should be able to accept this. Even as far as the UK is concerned, the permitted growth rate will be about the same as that allowed under the previous arrangement. For the rest it will be very much larger.
17. The remaining question is the coverage of items to be included in the arrangement. The Department of Industry have told Hong Kong that there is pressure to include knitwear in the Community's restraints. If this happens, we shall be in for a row with Hong Kong. We cannot justify restraints on knitwear imports into the UK on grounds of disruption. Since we take more than half of the Community's total Hong Kong imports, restraints by the others would be even less justifiable. But the internal Community consultations are not yet complete and it would be premature to discuss the details with Mr Jordan.
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The mandate for negotiation with Hong Kong is not yet complete. As Mr Jordan knows, the UK is sticking to the agreed principles of the MFA and we hope that the outcome will be reasonable. The FCC are well seized of the potential problem on knitwear.
A Suggested Link between quantitative Textile Restraints and the GSP 19. Hong Kong suggested (telegram no. 1017 of 11 October) that in order to get progress on the GSP they should threaten to insist on an MFA negotiation under Article 3 rather than 4. A
Flag D1>/» brief by CT Division is attached. Subsequently Mr Jordan has
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.watered this down into a proposed memorandum to other members of the EEC. This is being discussed on 23 October between the Hong Kong team and the Department of Trade. The present view in Whitehall is that the memorandum should not issue. Although it is less threatening than Hong Kong's original proposal of a link, it still pre-supposes that Hong Kong has some leverage in the MFA negotiations to force improvements in the GSP. This is almost certainly untrue.
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