Reference. HKK 6/548/8
9.4.
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Mr. Carter
The Board of Trade still has to reply to the telegram from the Hong Kong Textile Associations at (67) Part A. Mr. Whitehead told me that Mr. Saunders, CRE, was going to draft a reply which would probably be an interim reply only to be followed later by a substantive answer to the Associations' points. That draft was to be sent to us and we would need to telegraph the Governor and ask him to deliver it to the Associations. No draft has yet been received probably because the President of the Board of Trade will have to approve it.
2.
Unless the telegram is completely neutral in tone and amounts to no more than an interim acknowledgement, I think that we shall have to consider the draft very carefully indeed. Over the first stage of this tariff exercise i.e. that leading up to the decision to impose a tariff, there is no doubt that we have lost ground with the Hong Kong Government and Industry just as the Hong Kong Government will have lost ground with their own Industry. It may be that some of that lost ground can be recovered over the second stage i.e. over the period following the announcement of the decision and leading up to the imposition of the tariff. In particular we shall have to try to bring home to the Board of Trade the great importance of consulting Hong Kong before measures are taken. It is the lack of such consultation over the first stage which has aroused the most hostile comment in the Colony. This has been evident in the press and at 89 there are extracts from statements made in Hong Kong which illustrate the same thing.
3. What we should most like therefore is that the
reply to the Associations' telegram should indicate
that the Board of Trade will consult Hong Kong over
the second stage. On our own papers there is no
indication at all that the Board will be willing to do this, Hong Kong not being included among those countries with whom HMG must negotiate on account of agreements about duty free entry. On the other hand you cleared your telegram at (66) with Mr. Stewart in the Board of Trade and there is thus a commitment in the FCO at least to listen to any further views Hong Kong may wish to express. There is also an obvious commitment to negotiate with Hong Kong the extension of the quota arrange- ments between the expiry of the Heads of Agreement at the end of 1970 and the inception of the tariff in 1972. This is an occasion the Board of Trade will not be able to avoid unless they are going to impose quite arbitrary levels of cotton imports from Hong Kong over that year's interval.
4.
Leaving aside the question of consultation with Hong Kong over the next stage we can be certain that Hong Kong will have a number of questions to ask because at one point at least the President's statement in the House was not clear. Whether it was deliberately imprecise we do not know and we certainly do not know what the correct interpreta- tion is. I refer to the sentence "the Government
/ would
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