CONFIDENTIAL
10. Meanwhile, the Commission seemed intent on slamming the door. We learned early on Friday afternoon, 18 November, that they intended to summon the Hong Kong representative to tell him (a) that unilateral measures would be imposed on 1 January, and (b) that redistribution of the offer originally made to
Hong Kong would begin immediately. The Council were to be informed of this on 21 November. Following an intervention from Mr Gray, DOT, who protested in the strongest possible terms at this course of action, the Commission agreed to put off the
redistribution.
11. Mr Judd immediately advised Hong Kong that there would be no particular problems over transitional arrangements or export administration of the quotas but that any assurance about quota levels was out of the question. In the circumstances, Hong Kong's only hope of avoiding unilateral measures was to return to the negotiations without any preconditions. Hong Kong finally accepted this advice and the negotiating team returned to Brussels on
21 November.
12. Since the resumption of negotiations, matters have moved fairly fast. The Community and Hong Kong are reported to be near an agreement on the all-important Group I products, the 8 most sensitive. Discussion has turned to the other products and the Department of Industry negotiators have been flexible in attempting to identify only those which are of the greatest concern to the UK while trying to meet Hong Kong on the others. We have just (a.m., 29 November) heard that there may be a serious problem in the negotiations over cotton fabric. We are investigating this and will do our best to ensure that a compromise is reached.
13. Hong Kong's role in Geneva is less certain. The GATT Textiles Committee will meet on 5 December (ie. after the end of bilateral negotiations but before EEC Ministers review the results and decide about renewal of the MFA). The EEC is therefore likely to face a stormy session, and if Hong Kong has been forced to sign an unpalatable agreement, her representatives are likely to be among the most extreme critics of the EEC.
European Integration Department (External)
29 November 1977
CONFIDENTIAL