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Hong Kong/Sweden Textile Negotiations
I am sorry that I must trouble you with another issue where this Division is in dispute with C.R.E. It concerna the negotiations which are about to begin between Hong Kong and Sweden for continued and extended restraints on the export of certain Hong Kong textile items to Sweden. You have already had a copy of C.R.E.1's submission to Mr. Hughes on this subject.
2.
We have no wish to raise unnecessary difficulties on what may appear to be a trivial subject but important issues of principle arise going wider than the immediate problem. Our views are set out more fully in the note attached to Kr. Stewart's minute to me of to-day. What we are seeking is a consistent policy towards our textile industry, with protection based on the tariff (which is internationally agreed to be the proper form) rather than on quotas, and with reliance on the safeguards in the G.A.T.T. The dangers we see of allowing Hong Kong to negotiate restraints with Sweden on the lines recommended by C.R.E. 1. are briefly the following:-
3.
(1)
(11)
(111)
There will be an increasing reliance on quotas as the means of protection outside the cotton textile field. A few months ago the Swedes themselves were saying that they intended to confine their requests to an extension of restrain on existing items. Now they are asking for three more; to-morrow no doubt there will be more still. talks in Oslo follow those in Stockholm.
And
If the Swedes get restraints on knitwear and shirts there will be no case for resisting an American request for similar treatment: we have done detailed work on the American position and their case is in our view at least as strong as Sweden's on these two itcnw. And if r.Stans gets quotas on these items he will not leave it at that: we shall be well down the road to the extension of the L.T.A. he is seeking. In this connection we should bear in mind what our Embassy in ashington have told us, that one of Mr.Stans's chief arguments in favour of restrictions by the U.S. is that other countries have restraints on non-cotton textiles. Sweden will bear this out by her action.
Our
The pressure from our own industry for restraints on knitwear and shirts (including imports from E.F.T.A. sources) would become irresistible. case is at least as strong as Sweden's on shirts and possibly as strong on knitwear.
(iv) We should thus find ourselves in the middle of a
rapidly accelerating bilateralism in protection in non-cotton textiles, in which we would have to share if we were not to be even further damaged by deflections of trade.
The attached report which we requested from cur Commercial Counsellor in Stockholm bears out our view that the Swedish textile industry is at present reasonably healthy and
/prospercus.
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