0003230 G.F. 323
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whole being able to establish a good enough case on any item at anything like present levels of exports for Hong Kong to be willing even to consider action of this sort. Mr. Ernst replied that there might be some cases where Hong Kong could have a very high share of Community imports but Mr. Jones said that the share of internal production and consumption and
Mr. Ernst retorted the trend of imports would also need to be considered. that, as the Community was a large producing unit, this criterion was not wholly appropriate. The Community would still require attention to be paid to difficulties experienced by individual member states or by particular areas. In other words, something which might not be a problem looked at in terms of the Community as a whole could cause considerable trouble for individual member states, or for particular areas, and this would have to be taken care of. Mr. Jones indicated that he could do no more than take note of this view without showing the slightest degree of enthusiasm for it.
Cotton Textiles
in
Mr. Jones
9.
With regard to cotton textiles, Mr. Ernst said Hong Kong should take the initiative in concluding an Article 4 agreement with the Community sometime in the summer of 1970, when the future of the C.T.A. would be known. He said that, in view of the Common Commercial Policy, member states could not extend individual agreements beyond the end of 1969, although the Commission might approve some temporary extensions on condition that, the meantime, consultations on an agreement with the Community as a whole would take place. He implied that unless exporting countries 'co-operated' the E.E.C. might be forced to impose Article 2-type restrictions. replied that, as far as Hong Kong was concerned, only France maintained Article 2-type restrictions on Hong Kong and these were residual. Hong Kong's other agreements with Germany and the Benelux countries were under Article 4. Hong Kong would not necessarily reject the idea of concluding an Article 4 agreement with the Community as a whole. It would need to be negotiated and
But whether agreement could be reached would depend on the terms offered. he had to point out that, if no agreement were concluded, the proper course for the Community under the terms of the C.T.A. was to have recourse to Article 3. It would be quite illegal for the Community in such circumstances
Mr. Ernst to try and impose new restrictions under Article 2 of the C.T.A. replied that this was again a 'legalistic' view and that in this sort of situation he felt that the Community would consider imposing import restrictions.
10.
With regard to Ernst's view about a Community 'reserve' quota, Mr. Jones pointed out that this seemed to detract from the concept of export
He reiterated control which was implicit in any Article 4 agreement.
that whether Hong Kong would go in for a comprehensive bilateral would depend on the contents of the package not only levels and categorisation, but also flexibility provisions, including swing.
Preferences
11.
Mr. Ernst confirmed that the E.E.C. was still working on 'hypotheses'. The final details of a comprehensive E.E.C. preference scheme would depend upon what the U.S. would offer. He believed that Hong Kong would not be included in the final E.E.C. scheme as otherwise the whole scheme would
Mr. Ernst thought collapse because of Hong Kong's over-competitiveness.
that Hong Kong would not really lose to other 1.d.c.'s by such exclusion, and expressed interest in hearing Hong Kong's side of the situation.
12.
Mr. Jones said that Hong Kong's objections to exclusion were both doctrinal and real. He recalled that the O.E.C.D. Special Group had recommended the 'self-election' principle. From information made available so far it appeared that countries whose per capita income was higher, or whose competitiveness (at least in some products) was greater,
than
/that of
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