Sweden
CONFIDENTIAL
13. In 1968 arrangements were agreed between Hong Kong and Sweden, not only limiting Hong Kong exports of certain cotton garments in terms of the LTA, but also restraining exports of certain categories of garments in wool and synthetic fibres.
14. These arrangements were demanded by the Swedes ostensibly to satisfy the pre-election demands of their own industry and were for a year only. But the Swedes have since demanded that Hong Kong extend the arrangements not in time only but in scope. There have already been two rounds of consultations, one in Geneva as a result of which further items of man-made fibre were restrained and another in Hong Kong which was inconclusive and is to be resumed
next month.
15. We are considering with the Board of Trade Hong Kong's proposed negotiating instructions for next month's talks. There may be difficulty in getting an agreed line. The Board of Trade are understandably anxious that Hong Kong should resist any demands which do not rest on convincing proof of serious injury to the sector concerned in the Swedish industry. They have in mind the encouragement further voluntary restraint arrangements may afford to current American initiatives and they are concerned that the spread of Hong Kong's restraint arrangements with other countries may lead to strong pressure from the British textile industry for similar restraints on Hong Kong's trade in non- cottons with the UK. There is a suspicion that Hong Kong is concerned more to concede restraint at levels where established market gains can be consolidated than to stand firm on requiring proof of serious injury. To some extent there is a clash of UK/Hong Kong interests in this situation. It is certainly not in Hong Kong's interests to resist voluntary restraint to the point where Sweden (or any other importing country) resorted to unilateial restrictive action. The latter would undoubtedly be more damaging to the Colony's trade; the Colony would receive scant sympathy if such unilateral action were challenged in GATT; we ourselves could do little to help Hong Kong in this context. There is some understanding of Hong Kong's point of view in the Board of Trade. But they do not rate the risk of unilateral action as high as does Hong Kong. On this point Hong Kong considers that it is the best judge.
16.
CONFIDENTIAL
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