TNAG-0142-FCO40-178-Long-term-policy-on-International-trade-in-textiles-1969 — Page 176

C. & 1. 200

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TELEGRAPHIC

"CA

ADDRESS***

NONG" HONG KONG

O REF.:

YOUR REF.:

CR/EIC.111/2/4

IV

COMMERCE & INDUSTRY DEPARTMENT.

FIRE BRIGADE BUILDING,

HONG KONG,

20 August

9

196

Dear Hughes,

IM

3

Thank you for your letter of 31 July and for the paper on textile problems and possible solutions which you enclosed with it.

2.

You will not be surprised that we, too, have been doing some thinking on this subject and also that we have yet to reach firm con- clusions. Where we feel we have made some progress is in our strategic thinking in other words we can list all the possibilities in ascending order of objectionableness as far as Hong Kong is concerned. But our thinking is not so advanced when it comes to tactics. Until we know what American intentions really are and how ideas have developed else- where, especially in Japan and the E.E.C., we do not know what cards we have to play, let alone how to play them.

3.

In order to give you some idea of the direction of our thinking Encl.1 we have prepared some comments on your paper which you will find enclosed.

You will see that we have drawn attention to one or two other possibilit- ies which you may wish to take into consideration.

4.

Although we are glad to note that Mr. Stans has recently been rather less minatory than before and to note the rallying of State Depart- ment and Gilbert Office opinion behind the "item-by-item" approach, this does not mean that we would be happy to put all our eggs in the item-by- item basket because we can see some danger of this approach producing pressures on us to concede export restraints across a wider field than we would wish. This is not only because the Americans will undoubtedly start putting on the heat once they get other countries round the nego- tiating table. Another just as cogent reason is that, once there are four or five, or perhaps more, exporting countries involved, if one or two of them give way before a not very convincing case, the pressure will be on the others to concede on equity grounds. So far in our dealings with other countries, Hong Kong has been the first to be approached, or perhaps in some cases the second after Japan, so we have managed to have a big say in making the rules and laying down the benchmarks. But in the U.S. cotton-type non-cotton textile import market Hong Kong's perform- ance is already behind that of Taiwan and South Korea and we may, therefore, find it more difficult to avoid being pressurised into conceding more than we would want.

5.

For this reason we have certainly by no means written off the possibility of amending the C.T.A. so as effectively to bring cotton-type man-made fibres within its ambit, perhaps in return for improvements in other parts of the Agreement.

[07

6./