TNAG-0156-FCO40-192-Export-of-textiles-to-Australia-1989 — Page 50

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(iv) Australian production of drills, denims, dungarees

and jeans accounts for nearly 40% (22 million sq. yds.) of total production of woven cotton fabrics (57.4 million sq. yds.) and that the threat of serious dis- ruption in this sector would adversely affect the whole cotton textile industry.

Department's Views

(a) Basis of negotiation

4.

The Australian suggestion that their first Memorandum was deliberately worded imprecisely to leave open the possibility of an arrangement outside the terms of the C.T.A. is difficult to reconcile with the first paragraph of that Memorandum. The terms in which the second one is couched, however, make it clear that a Japanese type solution holds appeal for the Australians, pro- bably because they envisage such an arrangement as being the first of several in which they would then not be bound to justify and support claims to market disruption as prescribed by the C.T.A. (In this regard it has now been established that the Australia/ Japan Trade Agreement does not provide for any specific restraints so any that exist must be on an informal "industry to industry" basis).

5.

In the Department's view, there can be no question of Hong Kong negotiating on this request outside the provisions of the C.T.A. An industry-to-industry agreement would be both impractical and unjustifiable; and there is no apparent case for negotiating in regard to this limited area of trade a bilateral agreement "not inconsistent with the terms of" the C.T.A. as provided for in Article 4 of that Arrangement.

6.

The Department proposes, therefore, to reply stating that it now regards the Australian request for consultations to be made under the terms of Article 3 of the C.T.A. and, on that understanding, is prepared to enter into consultations in Hong Kong at a mutually acceptable date.

7.

As regards the provision in Article 3 for reporting to the G.A.T.T. Secretariat for the information of the Cotton Textiles Committee, the Department proposes that the Australians be given the option either of submitting the full exchange of Memoranda, or alternatively of redrafting their request from the two they have thus far submitted, the resultant formal notification being dated the same as the second Memorandum. This legalistic attitude is proposed because the Department considers that, given the basic Australian protectionist attitude, it is essential to safeguard Hong Kong's rights under both the C.T.A. and the G.A.T.T. itself.

(b) Statistical reconciliation

8.

As stated in CAB/451, the absence of export licence requirements for textile exports to Australia and the narrow range of fabrics on which restraint is requested preclude reconciliation. A review of Hong Kong trade declarations for all cotton denims, drills and jeans show exports in 1967 as having been of the order of 3.36 million sq. yds. valued at approximately $5 million (c.f. Enclosure 4 to CAB/451 where July/June exports in 1965/66 and 1966/67 were respectively 2.2 million sq. yds. worth $3.3 million and 3.06 million sq, yds. worth $4.6 million),

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