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the Community. To the extent that the latter can be brought to accept moves towards liberalisation we must expect EC/US friction. If their protection remains at a higher level than that of the EC there would be greater pressure on the EC from diverted exports a point of which our EC partners are also well aware. We will therefore need to work with those like Smith (USTR) who seem favour a gradual opening.
7. The alternative - continued protectionism - would be conflict with the LDCs and NICS at an inopportune moment in the preparations for the new GATT Round, as it is here that any reaction to a hard line by the UK or by the Community on MFA renewal is likely to make itself felt. Our tactics and strategy on the MFA and in the preparation for a new GATT Round will therefore need to be carefully coordinated, not least because the LDCS and NICS themselves will recognise that liberalising the MFA is one of the few cards we can play to get them to agree to what we want in the GATT.
Detailed Points
8.
Our economists raised two specific points on your paper. The more important relates to paragraph 11. The figures quoted there seem not to be fully comparable with each other. The £500m figure is an estimate of the cost to consumers measured at 1982 retail prices but using expected 1992 volumes. The equivalent 1982 figure is £455m, and this is the figure to compare with the £165m and £330m gains to producers and suppliers. This means the figures do not add up neatly as implied in paragraph 11. The reasons are twofold - first the gains and losses are measured at different prices (retail, producer and cif respectively); second, no account is taken of volume effects on the producer side. last omission is crucial suppliers will think twice about abandoning the MFA if they gain £30m per annum from it.
9. To reflect these points, we suggest a new paragraph 11 as follows:
This
'Although higher prices caused by the MFA go in part to British textile and clothing producers, much of the benefit accrues to foreign suppliers in the form of higher prices for their exports. Professor Silberston suggests that of the £455m paid out by British consumers in consequences of the MFA, possibly one half is lost abroad in this way.
10.
1
We also suggest that the last sentence of paragraph 8 be omitted. The costs-per-job limits in Regional Policy relate to public expenditure costs and not to any costs borne by consumers. They are therefore not really comparable with Silberston's estimates of consumer cost. Earlier in paragraph 8 consumer costs should be quoted not as £500m but as £455m, which is the figure consistent with the £9000 - £45000 estimate of the cost-per-job.
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/Conclusion