Reference
7.
3
Industries 1 advised against a settlement throughout on the grounds that this would (i) encourage the United States and possibly others to follow suit; (ii) encourage the Swedes to take action against Portugal and (iii) increase the pressure on the U.K, market. We have proved right on all these points. We argued that the non-discriminatory application of quotas und r Article XIX was to be preferred to voluntary restraint. Hong Kong, the F.C.C. and C.R.E.I. argued that the Swedes could be bought off more easily, to the advantage of Hong Kong, by agreement to voluntary restraint.
8.
I shall be circulating copies of a note which Miss Welch The conclusion appears has prepared on recent developments. to be (i) Baron de Geer cannot be trusted to keep his word and (ii) that Hong Kong is deliberately trying to embarrass H.M.G.
Points for decision
9. It is assumed that H.M.G. will want to take no action in the Swedish case which would (i) weaken our resistance to the United States demand for an extension of the L.F.A. to all textiles and clothing; (ii) make it more difficult to agree to the liberalisation of imports from Japan in the forthcoming negotiations and (iii) increase the pressure for action against, in particular, Tortugal, when we already face an embarrassing situation. Shirts and sweaters raise a problem in all three cases.
10. Miss Elliott has made out as good a case as possible to
justify the Swedish position, but in my opinion it does not begin to stand up to what is required under Article XIX of the G.A.3.T. It is meaningless, for example, to look at the share of imports in cases where Sweden has traditionally relied on imports for a large part of her requirements. What mat erg is whether the domestic industry has been or is likely to be injured by imports from Hong Kong. I have done a good deal of work on the non- cotton figures over the weekend and I cannot find any case in which a restraint could in my view be justified under Article XIX, quite apart from UNCTAD and all that, which C.R.E.I. presumably regard as important.
11. You will recall that in the case of Cotton sheets U.K.
production fell by more than a quarter: imports went up by more than a quarter: most of the imports and almost all of the increase was in imports from India and Hong Kong: and the imported product
Our was identical with U.K. production (60 x 60, 20's/20's). case was nevertheless described as "flimsy" by Mr. Goldsmith and that, in retrospect, it was "a mistake" for us to have insisted on restraints in this case. The L.T.A. was intended to be a soft option compared with Article XIX so it must be presumed that the tests which C.R.B.I. would wish to apply in the Swedish case
On that basis are stricter than we applied in the case of sheets. all the Swedish requests should be turned down, including anoraks and sweators. The Swedish export record on anoraks suggests that most of Swedish production is not like or directly competitive with imports; production of the unrestricted item was growing faster than the restricted item; and in 1968 production as a whole
In the case of sweaters was still well ahead of the 1966 level. there is quite clearly no direct relationship between imports and domestic production. I shall be circulating later today the note I
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