CONFIDENTIAL
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Senhor Cavaco Silva referred to the problems which Portugal was experiencing in its trade with Spain, as a result of Spanish interpretation of the rules of origin. Portuguese industry was not vertically integrated and a number of semi-finished products were imported from elsewhere in the Community. Spain was putting technical and administrative barriers in the way of Portuguese exports. If no solution could be found by the end of the month,
Lord Cockfield had Portugal would be forced to retaliate. recently visited Lisbon and appeared to accept the validity of Portugal's case. He hoped that the United Kingdom would equally be sympathetic. Portugal already had an enormous trade deficit with Spain.
The Prime Minister observed that Spain had always been a closed market. It was essential that Portugal should obtain the full support of the Commission in order to compel Spain to change its practice.
Bilateral problems
The Prime Minister said that she hoped very much that the outstanding claims for compensation for agricultural properties seized after the Revolution could be settled rapidly. Senhor Cavaco Silva said that this issue had been solved the previous week. Only the technical problem of fixing the precise amounts now remained to be dealt with. The Prime Minister said that she very much hoped this really was the end of the story. The issue had been allowed to drag on for far too long.
The Prime Minister also referred to her hope that British companies would be given a full opportunity to win public sector contracts in Portugal. She mentioned in particular the cases of ICL and Plessey. Senhor Cavaco Silva did not respond directly.
Southern Africa.
The Prime Minister invited Senhor Cavaco Silva to give his assessment of developments in Mozambique and Angola.
Senhor Cavaco Silva said that the situation in Mozambique was chaotic. But there was no real challenge to President Machel's position. This meant that he could afford to talk to Renamo because he would in any event remain as leader. It might take some time to bring him to the point of opening talks. There were others around Machel who were reluctant to see him take the step. But in the end
The Prime Minister said that there was no other solution. the United Kingdom had done what it could to encourage President Machel to move closer to the West.
Senhor Cavaco Silva said that the situation in Angola was rather different. The present Portuguese Government
But the result would would like to have talks with Savimbi.
be to leave relations with the Angolan Government exclusively in the hands of the Portuguese Communist Party. He believed that President Dos Santos would also like to move towards the West. Indeed, there had been a number of
CONFIDENTIAL