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(c) at the level proposed it would be broadly in line with the common
external tariff of the Six. Commonwealth exporters would thus be no worse off apart from the question of timing than they would be if we succeeded in joining the Common market; and their position in relation to our future negotiations with the Six would be better than at present to the extent that their right to sell in the United Kingdom market was not restricted quantitively;
fann mal à cartes.
12.
(a) the substitution of a tariff for quotas would enable the Commonwealth
Asian suppliers to compete on equal terms with the Canadians, whose very considerable trade
- equal to nearly one-quarter of the Indian
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quota has been built up only since restrictions were imposed on India and Hong Kong.
The objections to a tariff on imports from the Commonwealth are clearly formidable because:·
(a) India, Pakistan, Canada, Australia, New Zealand and South Africa have
contractual rights to duty-free entry. We should have to seek to negotiate with each of these countries a waiver of its rights and if in any case we failed, we should then have to consider whether it would be worth our while to denounce the whole Agreement with that country or to abandon our intention of proceeding with the tariff solution. The Commonwealth Preference system would have been breached by the United Kingdom for the first time for more than a generation and although the proposed change would have no practical effect on imports from Australia, New Zealand and South Africa, these three countries would see this as a sign of worse or come and would no doubt argue that we were writing off the preference in advance of joining the E.E.C. and some of them might be tempted to trade off our preferences in their markets in return for advantages elsewhere as and when an opportunity occurred. On the other hand, Canada has built up a substantial trade in cotton textiles since quotas were imposed on India, Pakistan and Hong Kong, and might be expected to react more strongly than the others. Commonwealth countries generally would also resent the fact that Portugal and the Irish Republic would gain a preference against them in our market.
(b)
(c)
India has a substantial trade with this country in cotton textiles. Since quotas on her exports were first imposed (effectively in 1959), new suppliers have appeared, both inside and outside the Commonwealth, and in recent years the effect of the bilateral quota for India has been to protect her from competition from other developing countries, particularly Pakistan. Any change in the quota arrangements would almost certainly operate to her disadvantage and the imposition of a tariff, accompanied by the abolition of quotas, would be particularly damaging because it would reduce her profit margins as well as the quantity which she would be able to sell in the United Kingdom market. Hong Kong, although she would strongly object to a tariff, would probably not suffer much trade damage because the abolition of quota restrictions would enable her to trade up into garments. Her position as a dependent territory raises a special political problem;
the introduction of a tariff should not, as we see it, necessarily lead to a lower level of imports from developing countries in 1975, as compared with the imports they would be likely to supply if quotas were retained. Moreover the Tariff system should improve the position of developing countries in relation to that of developed countries. However, developing countries would undoubtedly assume
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CONFIDENTIAL
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