GVA/3/5
CONFIDENTIAL
19 November 9
35
120
Many thanks for your letter of 15 October in response to mine of 8 September.
2. There are a number of things I could say in reply to your remarks. But I think the most important concerns the general philosophy of our two approaches. I am sure you will accept it as a fact that hitherto cotton and non-cotton goods have been dealt with in two different and clearly distinct ways. In the case of cottons we have had the LTA and, as far as the .K. and Hong Kong are concerned, a bilateral agreement dating from 1966, which I can recall you claiming last year was equivalent to an Article ↳ arrangement under the LTA (this, incidentally, Hong Kong did not deny). You will recall also that voluntary restraint on Hong Kong cotton textile exports to the U.K. dates back as far as 1959.
3. In the case of non-cottons, on the other hand, there has been no LTA and Hong Kong has only conceded voluntary restraint on specific items of specific fibres to specific markets in cases where it is clear that serious injury is being caused to the domestic industry of the country concerned by imports of these particular products from Hong Kong (or from a number of countries, including Hong Kong, all of which are exercising similar restraint) - in other words, in an Article XIX-type situation. To be frank, I would concede that Hong Kong has also acted in this way in order to avoid the imposition of import restrictions, perhaps on a discriminatory basis, which she would consider to be more damaging to her trade as well as involving more dangerous precedents for similar action by other countries. But I think it is fair to say that Hong Kong has only conceded restraint in cases where the country concerned would be likely in practice to get away with import restrictions if it imposed them on grounds of "serious injury".
4. It should be emphasised, however, that, in none of the cases where she has conceded voluntary restraints on non-cottons so far, has Hong Kong linked the action with cottons or in any way accepted the one market concept in legal terms, even when it would have been to her short-term commercial advantage to obtain roll in between cotton and non-cotton items (e.g. in the case of shirts). In each case serious injury has had to be demonstrated in the relevant non-cotton item alone and not in combination with a similar cotton item.
5. All this is well known and you are, of course, yourself well aware of it, seeing how closely you have followed Hong Kong's discussions
8. Stewart, Esq., M.C.,
Ministry of Technology
1, Victoria St., 8.W.1.
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