XN000022-1977-11-07 — Page 8

MONDAY, NOVEMBER 7, 1977

+FINALLY, THE EEC PROPOSALS FOR A DRAFT AGREEMENT CONTAINED NUMEROUS PROVISIONS WHICH WOULD HAVE THE EFFECT OF DEPRIVING HONG KONG OF EXPORT CONTROL. THE HONG KONG DELEGATION HAS LEFT THE EEC IN NO DOUBT THAT, THE MAINTENANCE OF EXPORT CONTROL IS FUNDAMENTAL TO HONG KONG'S POSITION, SO THAT IT MAY AT LEAST MAXIMISE THE LIMITED EXPORT OPPORTUNITIES PROVIDED BY ANY RESTRAINT AGREEMENT. ALTHOUGH A FORMAL ASSURANCE ON EXPORT CONTROL WAS GIVEN TO HONG KONG DURING THE NEGOTIATIONS, THE EEC HAS FREQUENTLY REVERTED TO PROPOSALS THAT WOULD IN EFFECT AMOUNT TO

IMPORT CONTROL.

+HONG KONG HAS PRACTICALLY NO EXPORT TO THE COMMUNITY

OF THE FIRST PRODUCT IN THE COMMUNITY LIST OF +POLITICALLY AND ECONOMICALLY SENSITIVE+ PRODUCTS, NAMELY COTTON YARN. HONG KONG'S EXPORTS ACCOUNT FOR ONLY 0.3 PER CENT OF EEC IMPORTS, SO ANY DIFFICULTY BEING EXPERIENCED BY EEC END CANNOT POSSIBLY BE ATTRIBUTED TO HONG KONG.

TO THE

+FOR THE OTHER SEVEN PARTICULARLY SENSITIVE PRODUCTS, HONG KONG HAS OFFERED TO RESTRAIN EXPORTS IN 1978 LEVELS OF 1976 RATHER THAN THE HIGHER 1977 LEVELS AS PROVIDED FOR IN THE MULTI-FIBRE ARRANGEMENT. THIS IS A MAJOR CONCESSION AND THE HONG KONG AUTHORITIES BELIEVE THAT THIS PROPOSAL MEETS IN FULL THE EEC'S STATED OBJECTIVE OF STABLISING IMPORTS IN 1978 AT THE IR 1976 LEVEL TO PROTECT DOMESTIC INDUSTRY.

+HONG KONG IS PREPARED TO RESTRAIN 30 OF AN ADDITIONAL 39 PRODUCTS ON WHICH THE EEC HAS SOUGHT CONTROLS. EXPORTS TO THE EEC OF OTHER NINE ARE INSIGNIFICANT. THE 1978 LIMITS PROPOSED EY HONG KONG FOR THESE 30 PRODUCTS ARE BASED ON 1977 RESTRAINT LIMITS WHERE THEY EXIST.

+THESE PRODUCTS ARE GROUPED INTO 18 CATEGORIES IN ACCORDANCE WITH THE CLASSIFICATION SYSTEM IN THE CURRENT HONG KONG/EEC AGREEMENT WHICH IS WELL KNOWN TO THE TRADE AT BOTH ENDS AND WHICH WILL NOT CREATE THE DIFFICULTIES FORESEEN IN THE NEW SYSTEM PROPOSED BY THE EEC.

+ON THE BASIS OF THESE PROPOSALS, HONG KONG IS WILLING TO CONCLUDE A BILATERAL AGREEMENT UNDER THE MEA FOR FIVE YEARS FROM JANUARY 1, 1978.+

THE INITIAL EEC REACTION TO THESE PROPOSALS IS EXPECTED TO BE GIVEN IN BRUSSELS TODAY (MONDAY).

18