CONFIDENTIAL
A. THE TEXT OF THE HONG KONG DRAFT AGREEMENT.
THE ABSENCE OF A SYSTEM FOR GROUPING PRODUCTS ACCORDING TO SENSITIV- ITY, WHICH WAS FUNDAMENTAL TO THE COMMUNITY'S APPROACH TO SETTING UP A BETTER SYSTEM FOR CONTROL. THE INTRODUCTION OF THE NOTION OF A SURVEILLANCE SYSTEM WHICH WAS TOTALLY DIVORCED FROM A CONTROL SYS- TEM. THE FIGURES FOR FLEXIBILITY, SWING AND TRANSFER WHICH WERE
PITCHED TOO HIGH.
R. FIGURES.
WE ACKNOWLEDGED THAT THE NEW HONG KONG PROPOSALS RECOGNISED FOR THE
FIRST TIME THE PRINCIPLE OF STABILISATION OF 1976 IMPORT LEVELS FOR
SUPER-SENSITIVE PRODUCTS AND THAT THE GROWTH RATES OFFERED WERE IN
LINE WITH THE COMMUNITY'S OWN PROPOSALS. BUT THEIR PROPOSALS TOOK
NO ACCOUNT OF THE NEED FOR SACRIFICES BY THE DOMINANT SUPPLIER COUN-
TRIES ON WHICH THE COMMUNITY WAS INSISTING FOR REASONS WHICH HAD
AMPLY BEEN EXPLAINED. THIS, AND THE TOTAL ABSENSE OF PROPOSALS FOR THE RESTRAINT OF COTTON YARN IN THE HONG KONG PACKAGE, WAS SUCH
AS TO COMPEL THE COMMUNITY TO REJECT IT.
C. CATEGORIES.
THE HONG KONG SYSTEM WAS AT VARIANCE WITH THE COMMUNITY'S NEW CATEG-
ORIZATION SYSTEM.
4. BECK URGED HONG KONG TO THINK ACTIVELY IN TERMS OF A BARGAIN
THE COMMUNITY'S QUANTITATIVE LIMITS AND CATEGORIZATION IN RETURN
FOR HONG KONG'S EXPORT CONTROL SYSTEM. HE WARNED HONG KONG THAT THEIR PROPOSALS, IF NOT MODIFIED, WOULD LEAD INEXORABLY TO THE COMMUNITY FALLING BACK ON AUTONOMOUS CONTROL MEASURES. THIS WOULD BE
WORSE FOR HONG KONG: THERE WOULD BE A SMALLER SHARE OF THE CAKE FOR THEM, AND THEY WOULD HAVE LOST THEIR EXPORT CONTROL. HE REPEATED THE WARNING MADE BY TRAN IN HIS PRESS CONFERENCE LAST FRIDAY, THAT IF NO
AGREEMENT WAS REACHED BY 10 NOVEMBER HONG KONG WOULD GO TO THE BACK
OF THE QUEUE: HE ESTIMATED THAT THE COMMUNITY'S OFFER WOULD THERE-
AFTER INEVITABLY BE ERODED BY SOME 10% PER WEEK. THE ADVANTAGE OF THE COMMUNITY'S OFFER, FROM HONG KONG'S POINT OF VIEW, WAS THAT IT
LOCKED HONG KONG INTO THE POSITION OF PRINCIPAL TEXTILES SUPPLER
TO THE COMMUNITY FOR YEARS TO COME: THE HONG KONG DELEGATION SHOULD
SEE THINGS IN THIS PERSPECTIVE, AND PRESENT THE SITUATION IN THIS
FASHION TO THEIR TEXTILES ADVISORY BOARD.
2 CONFIDENTIAL
15. MILLS