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5. Hong Kong's fear has always been that unless she accepted voluntary restraints, the countries demanding it would act unilaterally and even if we brought the case to the G.A.T.T, on behalf of Hong Kong nothing would in the event be done, Borcever, as she has no protective tariff, Hong Kong has no obvious means of reprisal and as she depondo entirely on international trade for her welfare she would · regard a policy of retaliation in any form aa contrary to her general intercsto.
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Line to be taken by Hong Kong
A
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6. The line which, left to their own devices, Hong Kong is likely to take is that they remain opposed to any extension of restraints to nen-pade fibres and wool, whether voluntary or under a multilateral arrangement; the foregoing being. subject to two qualifications:
(1) That in situations comparable to those which arose with Sweden and Norway in 1968, and Germany and Canada earlier, Hong Kong would be prepared to consider, on an item by item, fibre by fibre basis, any case made by the United States to the effect that serious and demonstrable damage was being caused to the domestic producers by imports from Hong Kong.
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(11) In the last resort, if the United States are deter- mined to have restrictions of some sort, Hong Kong would prefer extension of the L.T.A. either to voluntary restraint or to unilateral restrictions imposed by the United States Government.
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7. Tho main interest of the United Kingdom in the handling of these issues at the present time is clearly to maintain to the fullest extent possible the solid front of opposition to the United States' proposal for an extension of the L.T.A. to non-cotton textiles. So long as there is a reasonable chance that by maintaining this front we may succeed in heading the United States Administration off taking any action of the kind they have been talking about, we, should clearly maintain the maximum pressure in this direction. This position is basically in full accord with Hong Kong's interests. There is, however, a risk that if in the course of discussion with Hr. Stans Hong Kong's full position and
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