would consider the use of quotas only on particular products under the long term cotton arrangement of the GATT and only if total imports of cotton textiles rose significantly above the present level and caused dis- ruption to the market in those particular products." In our own press there has been more than one interpre- tation of this key sentence, but the Financial Times suggests the likeliest at X of 92
At some stage
we must ask the Board of Trade what they really mean before we are ourselves asked by Hong Kong.
5. The renewal of the quota arrangements for the year before tariffs come in will have a bearing on this same question when and in what circumstances HMG would con- sider the reimposition of quotas. The Heads of Agreement which govern the trade at present have as you know a built-in growth factor which is not incon- siderable and which is still a contentious issue in the. matter of the sheeting agreement. Unless HMG does not propose to include a growth factor (on top of the present growth factor) in 1971 by the time the tariff is introduced Hong Kong's quota will already be "significantly above the present level" (of her own trade). Is a further significant rise above that level necessary before the reimposition of quotas can be considered? This and the sort of question you asked yourself about a possible increase in Portuguese imports affecting the overall level is what we may expect Hong Kong to ask and we do not know the answer.
6.
If as I say the Board of Trade's telegram is quite neutral and non-committal then no doubt we could send it off without prejudicing the next phase in this matter. But if it is prejudicial to the two main issues to which we now need to address ourselves, con- sultation and explanation, then we shall need to submit the answer to the Secretary of State. I have developed these lines of thought in order to save time when the draft reaches us. Four days have already passed since the Association's message was received.
3.v./to
MV
(H. H. Stewart) 24 July, 1969
on
(118). PApl.
124/9/60
28/7
24/7
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