CONFIDENTIAL
the EEC in the 1977 negotiations.
Textile exports by Hong Kong were held back by quota restrictions. EEC policy was to stabilize imports from low cost suppliers, including Hong Kong at their 1976 level, while making room for new supply from the poorest developing countries. In effect this meant that imports from comparatively developed countries, such as Hong Kong, Korea and Taiwan, were cut. As a matter of general principle the Hong Kong Government considered that stabilization of imports was impossible and that the policy of making room for imports from the poorest developing countries was improper. Events had shown that the EEC shortfall was made up, not by the poorest developing countries but by advanced countries such as the US and the Mediterranean Associates (Greece, Spain, Portugal and Turkey) of the EEC. Britain's own textile production had not responded to these protectionist measures and remained stable. Hong Kong's loss of market share had not gone to the countries which the EEC's policy was ostensibly designed to benefit. The Government of Hong Kong, and indeed the business community, felt that they could not do a great deal about the other members of the EEC but they expected better things from the UK. Hong Kong would not seek a re-negotiation of the 1977 Agreement but would seek an increase in Hong Kong's quota under that Agreement this year. Hong Kong's initial requests had been summarily rejected by the British authorities, but it should not be impossible to achieve some improvement. The Irish Government had already agreed to a small improvement in Hong Kong's quota.
4.
Mr Blaker said that one of the central purposes of the EEC was to increase trade between member countries. There could be no question of restraining that trade to make room for imports from outside. Mr Jordan said that Hong Kong had no quarrel with the EEC's external tariff. But quota restrictions on countries which were not members of the EEC to increase trade between member states was inconsistent with GATT. Mr Blaker said that as far as the Mediterranean Associates were concerned, the British Government had pressed for restraint on their textile exports. But developing trade and cooperation with the Mediterranean countries was one of the EEC's important policies. Mr Blaker said that he had noted Mr Jordan's points but he was not briefed to discuss the UK's policy on textile imports in detail. This was a matter for the Department of Trade. The British Government's overall strategy was to revitalize the British economy, get industry to accept change and abandon defensive measures such as quota restrictions. Mr Jordan reiterated that Hong Kong did not want to re-negotiate the Agreement with the EEC but did want an increased quota. EEC member states were free to do this, and surely Britain could not be less forthcoming than the Republic of Ireland? In response to a question from Mr Blaker, Mr Jordan said that the scope for Hong Kong to go up market and increase the value of its textile exports within the existing quota was limited. In response to a question from Mr Murray, Mr Jordan said that the fact that Hong Kong's existing quotas in the UK were used up so quickly
/demonstrated
.2.
CONFIDENTIAL