5.
Paragraph 12
19.
The paper really only touches on the question of voluntary restraints, which it seems, from the accounts of Stans' second visit to Tokyo, is the line that he is pursuing now. We do not quite under- stand what is meant by "official agreement" in the second sentence. Our impression from Stans' latest moves is that official bilateral agreements would satisfy him even if there were no general international agreement, though the Commerce Department would certainly prefer to be able to nego- tiate the bilateral agreements under the umbrella of an international agreement with something like Article 3 of the Cotton Textiles Arrangement to make sure that the whip hand is help by the importing country. The crucial difference is between voluntary restraint arrangements covering broad bands of products, and perhaps even all non-cotton textile exports to the United States by the exporting countries concerned; and narrow restraints on an item by item, fibre by fibre basis, justified in each case by agreement between the two countries that an Article XIX-type situation exists. What Stans has been pressing for is the former type. But next to import restrictions it would just about the worst solution for Hong Kong, worse even than a separate C.T.A.-type arrangement because there would be no agreed set of international rules to appeal to.
20.
The latter method is, of course, the way Hong Kong has been proceeding so far with the Scandinavian countries and Canada. It might be tolerable to us provided the Americans played the game by the rules we have managed to follow so far of what an "Article XIX-type situation" amounts to. But we are beginning to have grave doubts as to whether a reasonable line could be held with the U.S. in practice because when a number of countries are involved, if one or two break ranks and concede on a poor case, the others would then be whipped into line by arguments of equity and the threat of sanctions. We are still considering the question of whether so-called "creeping bilateralism" of this sort is a feasible course with a country such as the United States.
Commerce and Industry Department,
Fire Brigade Building,
Hong Kong.
20 August 1969
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