TNAG-0168-FCO40-204-Exports-of-textiles-to-United-Kingdom-1969 — Page 112

CONFIDENTIAE

2.

In the consultations we reached agreement of a package to be referred to our superiors. The levels incorporated in this package represented a considerable cutback on Hong Kong's current level of trade and the package was accepted by Hong Kong on the basis that since no modification of the growth provisions had been proposed they would con- tinue to apply.

Stewart left Hong Kong early in the morning of the day after the consultations were concluded leaving behind with you a note "offering" Hong Kong 3 per cent growth in return for the suspension of issue of export authorisations.

It would appear from this that Stewart believed that there would be no growth and Hong Kong were not entitled to any unless he "offered" it. If this is so, it is a fundamental misapprehension deriving perhaps from Stewart's refusal to accept that the basis from which these discussions had to start was the Heads of Agreement, and that in the consultations these Heads were modified only to the extent that he proposed and Hong Kong accepted such modifications.

Since the Heads of Agreement make specific provisions for growth (see paragraphs 1 and 2 above), there could be no question of Stewart "offering 3 per cent growth". He should have sought Hong Kong's accept- ance of this limit on growth, which could otherwise under the Heads of Agreement reach 6 per cent.

To turn now to paragraph 7 of the S. of S. saving despatch FLAG'A',

No. 712, the following are our comments on it point by point :

(a)

"the Aide-Memoire did not allow for growth" in fact it only said "HMG would find it very difficult to contemplate any increase", so we naturally expected this to be raised in the actual consultations;

(b) "growth in the new sheeting and sheet categories" - the Aide-Memoire said "increase in imports of wide sheeting and sheets from India and Hong Kong" : there is actually only one completely new category No. 12A, finished wide sheeting;

(c)

ino concession was offered in the course of the negotiations" ; "concession" was not to be offered by the B.O.T. but sought from Hong Kong; Hong Kong was being asked to agree to a modification of the Heads of Agreement; any Head modification of which is not proposed stands unchanged;

(a) "it was subsequently decided to offer 3 per cent growth for

1970 in return for an immediate standstill on the issue of export authorisations" : as I have already explained, from our point of view 3 per cent was not an offer; and I had already decided to suspend the issue of export author- isations before Stewart's note reached me;

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(e)/