CONFIDENTIAL
APART FROM THIS LOSS OF TRADE, THE HONG KONG GOVERNMENT WAS CONCERNED ABOUT THE EFFECT OF THE COMMUNITY'S PROPOSED MEASURES ON THE US/HONG KONG AGREEMENT. THE AMERICANS MIGHT QUOTE COMMUNITY ACTION AS A PRECEDENT FOR REDUCING THEIR OWN IMPORTS FROM HONG KONG. THEY HAD ALREADY WARNED THE HONG KONG GOVERNMENT THAT THEY COULD FEEL BOUND TO TAKE THIS STEP. IF THEY DID, THE LOSS OF TRADE TO KONG KONG WOULD BE £260 MILLION.
SIR M MACLEHOSE WENT ON TO SAY THAT IT WAS A MISTAKE TO IMAGINE THAT THE RESILENCE OF THE HONG KONG ECONOMY WAS SUCH THAT IT COULD TAKE IN ITS STRIDE THE IMPOSITION OF MEASURES OF THIS KIND IN THE TEXTILE SPHERE. MOREOVER, HONG KONG OBJECTED TO THE FACT THAT IT WAS BEING ASKED TO CUT BACK ITS EXPORTS OF TEXTILES TO THE COMMUNITY TO MAKE ROOM FOR OTHER EXPORTERS, NOT TO PROTECT THE COMMUNITY TEXTILE INDUSTRIES, THE REAL EXPANSION IN EXPORTS IN RECENT YEARS HAD COME NOT FROM HONG KONG, BUT FROM INDIA AND THE COUNTRIES WITH WHICH THE EEC HAD PREFERENTIAL AGREEMENTS.
MR JUDD SAID THAT HE HAD LISTENED CAREFULLY TO WHAT THE GOVERNOR HAD SAID. THE FOREIGN AFFAIRS COUNCIL ON 20 SEPTEMBER HAD APPROVED THE BROAD OUTLINES OF THE COMMISSION'S LATEST PROPOSALS ON TEXTILES. COREPER WOULD NOW BE ASKED TO EXAMINE THE DETAILS, THE GOVERNOR WAS REIGHT IN SAYING THAT THESE HAD NOT YET BEEN SETTLED IN RESPECT OF INDIVIDUAL COUNTRIES. WE HAD JUST SEEN THE COMMISSIONS FIGURES FOR HONG KONG AND THEY WERE VERY CLOSE TO THOSE MENTIONED BY MR TRAN DURING HIS RECENT VISIT TO HONG KONG. THE COMMUNITY'S OBJECTIVE WAS TO COMPLETE THE VARIOUS BILATERAL NEGOTIATIONS BY THE END OF NOVEMBER. HE WANTED TO WARN THE GOVERNOR THAT THE COMMUNITY WAS DETERMINED TO ACT UNILATERALLY ON TEXTILES BY THE END OF THE YEAR IF THE BILATERAL AGREEMENTS HAD NOT BEEN SATISFACTORILY CONCLUDED.
MR JUDD ADDED THAT OUR CALCULATIONS SUGGESTED THAT THE EFFECT OF THE COMMISSION'S PROPOSALS ON HONG KONG'S PROJECTED GDP GROWTH RATE WOULD ONLY AMOUNT TO A REDUCTION OF 0.8%. THE VIABILITY OF HONG KONG' S ECONOMY WAS WELL KNOWN. EMPLOYMENT IN THE COMMUNITY'S OWN TEXTILE SECTOR HAD SUFFERED A 15% REDUCTION DURING THE LIFE OF THE PRESENT MULTIFIBRE AGREEMENT, WITH A LOSS OF
500,000 JOBS.
2 CONFIDENTIAL
/LORD