XN000022-1985-03-15 — Page 2

FRIDAY, MARCH 15, 13.

TALKS ON U.S. ORIGIN RULES END

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CONSULTATIONS BETWEEN THE UNITED STATES AND HONG KONG OVER THE RULES OF ORIGIN CONTROVERSY ENDED ON THURSDAY, (MARCH 14, U.S. TIME), AFTER THREE DAYS OF TALKS.

THE TALKS WERE A RESUMPTION OF EARLIER CONSULTATIONS IN FEBRUARY, HELD TO FOLLOW UP A RULING BY THE TEXTILES SURVEILLANCE BODY (TSS) IN GENEVA. THE TSB HAS RULED THAT HONG KONG'S COMPLAINTS AGAINST THE UNITED STATES' UNILATERAL CHANGE IN THE RULES OF ORIGIN OF KNITWEAR ARE JUSTIFIED.

+THE CONSULTATIONS CONFIRMED OUR FEARS THAT THE UNITED STATES HAS NO INTENTION OF SOFTENING THE EFFECT OF THE FINAL REGULATIONS ON HONG KONG'S KNITWEAR INDUSTRY, DESPITE THE CLEAR FINDING BY THE TEXTILES SURVEILLANCE BODY IN GENEVA THAT THE U.S. ACTION HAS UPSET THE BALANCE OF RIGHTS AND OBLIGATIONS UNDER THE BILATERAL TEXTILES AGREEMENT+, SAID THE LEADER OF HONG KONG'S DELEGATION, DIRECTOR OF TRADE, MR HAMISH MACLEOD, ON THURSDAY (U.S. TIME) IN WASHINGTON, D.C.

+WHILE THE PUBLICATION OF THE FINAL REGULATIONS ON MARCH 5, INVOLVING NO SIGNIFICANT CHANGE OVER THE INTERIM REGULATIONS, HAD SIGNALLED NO COMPROMISE WAS LIKELY, WE ARE NEVERTHELESS MOST UPSET THAT REASON HAS NOT PREVAILED, MR MACLEOD SAID.

+EVEN OUR PROPOSAL THAT TRANSITIONAL ARRANGEMENTS BE AGREED TO GIVE INDUSTRY TIME TO ADJUST, UNDER PROTEST, BROUGHT NO POSITIVE RESPONSE.+

THE U.S. HAD NO PROPOSALS WHICH WOULD ADDRESS THE TEXTILE SURVEILLANCE BODY'S RECOMMENDATIONS, NOR WAS IT ABLE TO ACCEPT H, K.'S PROPOSALS FOR IMPLEMENTING THOSE RECOMMENDATIONS.

+HONG KONG INDICATED ITS STRONG DISSATISFACTION WITH THE FINAL REGULATIONS. IN PARTICULAR HONG KONG EXPRESS SERIOUS DISAPPOINTMENT AND CONCERN AT THE ABSENCE OF ANY U.S. PROPOSALS TO IMPLEMENT THE TSB RECOMMENDATIONS.

+HONG KONG MADE IT CLEAR THAT IT DID NOT ACCEPT THAT THE U.S. HAD THE RIGHT TO MAKE UNILATERAL CHANGES TO RULES OF ORIGIN WHICH AFFECT THE IMPLEMENTATION OF THE H.K./U.S. BILATERAL TEXTILES AGREEMENT AND THE BALANCE OF RIGHTS AND OBLIGATIONS THEREUNDER.+

MR MACLEOD STRESSED THAT H.K. COULD NOT ACCEPT THE FINAL REGULATIONS, AND RESERVED ITS RIGHTS UNDER THE BILATERAL AGREEMENT, THE MULTIFIBRE ARRANGEMENT AND THE GENERAL AGREEMENT ON TARIFFS AND TRADE.

/+CLEARLY

LR