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INDUSTRY AND TRADE
of negotiations, covering both tariff and non-tariff barriers, was disappointing. This was largely due to the need for participating countries to engage in a rather protracted examination of the various lists of items excepted from the negotiations on the grounds of national economic interest. This was further complicated by the inability of the European Economic Commission to play an active part in the negotiations since their mandate was a limited one due to the internal political difficulties facing the Community. The negotiations with the United States Government for com- pensation under the terms of Article XXVIII of the General Agree- ment on Tariffs and Trade for the administrative adjustments to the US tariff schedule, which began in November 1964, were brought to a successful conclusion just before the end of the year. The compensation finally agreed upon included reductions in two tariff rates applicable to items in respect of which Hong Kong is a prin- cipal supplier in the American import market.
The importance of textile exports both as a factor in interna- tional trade and in Hong Kong's economy gives special significance to frequent international negotiations on the subject. Exports of cotton textiles to five countries-the United States, Canada, Italy, Norway and the Federal Republic of Germany-were under re- straint, to greater or lesser degree, during the year as a result of the invocation by Hong Kong's trading partners of the provisions of the GATT Long-Term Cotton Textile Arrangement. United States restrictions covered 37 categories comprising 94 per cent of the Colony's exports for the third year of the Arrangement (i.e. from 1st October 1964 to 30th September 1965). One more category was brought under restraint in the course of the year. At the request of the United States Government, negotiations for the 4th Long Term Year were postponed until after the Kennedy Round textile sector discussions and the major review of the Long Term Arrangement, so that in their negotiations with Hong Kong they might take account of any measures for liberalization that might be agreed at these two meetings. In the meantime the 5 per cent annual growth mandatory under the Arrangement was granted in all categories under restraint. In October, the American authorities expressed concern about the level of export authorizations in six additional categories and the issue of export authorizations was temporarily suspended pending the outcome of negotiations.