CRE 17516/L/G GATT.
Hong Kong's Rights and Obligations.
I warned you this morning of our complete inability to reach agreement with Industries I Division on the extent to which we should authorise Hong Kong to enter into voluntary restraint arrangements with Sweden in respect of a number of textile items in the non-cotton sector. There is nothing new in this situation. It has arisen on every occasion on which proposals have been made for Hong Kong restraint outside the field of cotton textiles. My minute to you of March 10 (minute 3 on this file) sets out at some length the general issues. The change in the situation since that time is that Hong Kong wishes to have authority to accept restraints not only of anoraks and knitwear but also of women's underwear, blouses and certain ahirts. Mr. Kennis's draft at doc.101 (dated June 6) with its annexes sets out in detail the differences which have arisen between C.R.E.1 and the Foreign and Commonwealth office on the one hand and Industries I on the other, The immediate issue is whether we can agree to the despatch of the draft telogram at doe.100. It is urgent because officials from Hong Kong are due to arrive in Stockholm on June 16 and they ought to know what is their negotiating limit before they leave Hong Kong.
2.
The issue should not be seen simply in terms of intransigence on the part of Industries I and complaisance on the part of C.R.E.1 and the F.C.O. We have to balance conflicting considerations. We must bear in mind on the one hand that the Department of Commerce and Industry in Hong Kong (with the support of their textile interests) are strongly of the view that it is better for Hong Kong to accept restraint under duress, provided there is a reasonable statistical case for it, than to envisage the alternative. The alternative, as they see it, is that unilateral restraint might well be imposed on some of their exports at much lower levels than they could secure in negotiation; but if we laid a complaint in the G.A.T.T. on Hong Kong's behalɗ there would not be a clear-cut ruling in Hong Kong's favour; and this would open the door for almost any importing country to treat Hong Kong as a special case without regard to general G.A.T.T. rights and obligations.
3.
On the other hand, Industries I fear that creeping bilateralism, as it is called, might well eventually lead to general restrictions on non-cotton textiles and strong presure on them for action to restrain imports into the United Kingdom from Hong Kong and other competitive sources.
4.
I will not lengthen this minute further since the docu- mentation, as Mr. Kommis says, is formidable and in my opinion out of an proportion to the importance of the subject. The issue to be doalded is whether document 100 should be sent at once to Hong Kong. I think it should; Industries I think it should not; and that instead the Hong Kong negotiators should be authorised to concede nothing more than a three-month extension of restraints at existing levels on anoraks and knitwear only. A subsidiary issue to be decided is whether we or the F.C.0. should send someone to attend the Stockholm talks. We in C.R.E.1 have no one available. The F.C.0. could, if necessary, send someone. Provided the limits of the negotiating authority for the Hong Kong officials were made sufficiently clear there is no overwhelming case for direet British participation.
5.
The other mcipients of this minute (apart from Mr. Peck) have had copies of Mr. Kemis's documentation (1.e. does. 100 and 101). I am sending Mr. Peck copies of these along with his copy of this minute.
Mr. Hughes (SEC)
(R. Goldsmith), 9th June, 1969.
0.0.
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