CONFIDENTIAL
UK COULD CERTAINLY NOT ACCEPT ANY INCREASE ON THE FIGURES IN ANNEX IV REV. 2 FOR BRAZIL ON GROUP 1 PRODUCTS, PARTICULARLY COTTON YARN AND COTTON CLOTH. WE DO NOT ACCEPT THE ARGUMENT THAT BRAZIL MUST HAVE SPECIAL TREATMENT BECAUSE OF THE IMPORTANT COMMUNITY TRADING INTEREST THERE WHICH WOULD BE OPEN TO RETALIATION. THE SAME CERTAINLY APPLIES TO THE COMMUNITY'S FAR EASTERN SUPPLIERS WHO
ARE GETTING A MUCH WORSE DEAL THAN BRAZIL.
5. THE UK WISHES TO UNDERLINE ONCE AGAIN THE IMPORTANCE OF THE MOST DOMINANT SUPPLIERS, PARTICULARLY HONG KONG, INDIA AND SOUTH KOREA. THE CURRENT COMMUNITY APPROACH CAN ONLY SUCCEED IF WE ARE ABLE TO CONCLUDE AGREEMENTS WITH THESE COUNTRIES. THE COMMUNITY MUST THEREFORE BE VIGILANT IN LOOKING FOR TACTICAL OPENINGS WITH THESE COUNTRIES WHICH WILL ENABLE US TO SECURE OUR MAJOR OBJECTIVES ON THE FIGURES. WE HAVE NOW STUDIED THE COUNTER- DRAFT OF A MODEL AGREEMENT PRODUCED BY HONG KONG. WE HAVE A NUMBER OF POINTS ON IT WHICH WE ARE READY TO DISCUSS IF HONG KONG IS READY AT THE SAME TIME TO TALK ON THE BASIS OF THE COMMUNITY'S
FIGURES.
BACKGROUND
6. WE ARE GLAD TO NOTE THAT NO IMPROVED OFFERS HAVE IN FACT BEEN MADE TO BRAZIL IN SPITE OF THE SOMEWHAT DEFENSIVE RESPONSE WHICH DAVIGNON GAVE TO YOUR REPRESENTATIONS ON THIS SUBJECT (YOUR TELNO 6478). WE COULD NOT AGREE TO PARCELLING WITHIN THE AGREED LIMITS IN FAVOUR OF BRAZIL. FOR YOUR INFORMATION, ANNEX 4 REV 2
FOR COTTON CLOTH GIVES BRAZIL A 1978 FIGURE OF 12,205 AS AGAINST 1976 EXPORTS OF 7,550. THE EQUIVALENT FIGURES FOR HONG KONG ARE 1976, 19,100: AND 1978, 13,000.
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MEMBER STATES HAVE BEEN ASKED TO ACCEPT THE USE OF THE HONG KONG COUNTER-DRAFT MODEL AGREEMENT AS A BASIS FOR DISCUSSION. THE UK WAS RELUCTANT (YOUR TELNO 6472, PARA 15) TO AGREE TO THIS WITHOUT FURTHER STUDY OF THE HONG KONG DRAFT. WE HAVE NOW COMPLETED SUCH STUDY AND HAVE THE FOLLOWING MAJOR POINTS ON THE
HONG KONG DRAFT:
(1) CONTROL OF THE AGREEMENT.
WE ARE HAPPY WITH THE HONG KONG PROPOSALS ON EXPORT AUTHORISATION AS FAR ONLY AS HONG KONG IS CONCERNED. WE WOULD NOT WANT AGREEMENT ON THIS TO BE USED AS A PRECEDENT BY OTHER SUPPLIERS LESS EFFICIENT
THAN HONG KONG IN THIS FIELD.
-2- CONFIDENTIAL