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9.
In reply to his statement, I said I did not intend to comment on it but I sought clarification on a number of points concerning the Aide Memoire. In the first place, there was no mention in it of H.M.G.'s approach being made under the terms of Heads of Agreement which governed the cotton textile trade between Hong Kong and Britain. I had, nonetheless, assumed that the Aide Memoire was delivered under the consultation clause (H.5), having regard to the clause covering additional categorisation (4.2), but I must point out that H.M.G.'s proposals were in places inconsistent with the terms of the Heads of Agreement (e.g. the cut backs in group II, category 7 and group IV, category 14 were inconsistent with E.6.). Hong Kong would also be anxious to know what action was proposed in respect of other suppliers (.2.).
10.
In reply, Stewart said that the Aide Memoire could be considered as being "in the spirit" of the Heads of Agreement, but that its consistency or otherwise with the wording of that document should be viewed against the background that Hong Kong "had not shown itself in other negotiations to be over concerned with keeping to the strict letter of agreements" which, on my challenging hin, he made clear referred to the recent Swedish negotiations. In his opinion, H.M.G. could have acted under Article 4 of the C.T.A., but, whatever the wording of various agreements might be held to prove, the facts of the situation were that ministers would find it most difficult to accept any Hong Kong clain for better treatment than set out in the Aide Memoire. Imports of wide-width sheets and sheeting from India and Hong Kong had to be held down to around 30 million square yards a year. I said I would report these remarks to my Government which I felt sure would regard any abrogation of the Heads of Agreement as a most serious matter.
11.
I then asked Stewart to what period he proposed to relate the suggested new limits, as these had been exceeded already for the current year. Stewart replied that this point was to some extent negotiable. The Textile Council would like the new limits enforced immediately, but they could not be imposed for the quota year 1968 and a separate quota year for a few products from 1st October presented difficulties to both sides. He thought the new levels should be enforced from 1st January 1969, but H.M. G. would not expect the present rate of shipments from Hong Kong to continue for the rest of 1968.
12.
On the substance of the British case, I first sought clarification of the products covered by the restraint in view of the change in definition for categories 3 and 10 and the new category for finished sheeting over 60" in width. Stewart said that the restrictions on yarn dyed fabrics were necessary because candy striped sheeting was one of the items causing problems for the U.K. industry and Hong Kong was an important supplier of this item. The finished wide-width cloth category would not include terry fabrics, canvas or duck but would include winceyette, flannelette and other raised and brushed fabrics. The exact ambit of the restraints was negotiable.
CONFIDENT.
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