TNAG-0210-FCO40-246-Briefs-and-background-notes-for-visit-of-Deputy-Under-Secret-1969 — Page 73

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explanatory of the background.

The General Agreement on Tariffs and Trade (GATT)

LL. Hong Kong sets great store by its rights under GATT which it enjoys by virtue of its accession as a dependent

territory. The GATT represents an attempt to govern

international trade along liberal lines, with quantitative restrictions (and other non-tariff barriers) reduced to a minimum. There is an escape mechanism (Article XIX) which permits importing countries to impose quantitative restrictions when imports of any particular commodity are

causing serious injury to a domestic industry. But this

should be a difficult Article to invoke because it is intended

for use in a non-discriminatory fashion against all importers of the commodity and compensation has to be offered in other fields of trade for the restrictions imposed.

5. Ten years ago the cotton textile exports of the low-cost producers put a strain on the GATT regime. Importing countries were reluctant to resort to non-discriminatory action

under Article XIX when the source of their difficulties

lay in the exports of low cost producers. The U.K. had already initiated inter-industry arrangements with Commonwealth countries (India, Pakistan, Hong Kong) for the

limitation of their cotton textile exports to this country. Agreement was therefore reached in 1962 (entitled the Long-Term Arrangement on Cotton Textiles or L.T.A. for short) to permit discriminatory bilateral arrangements between importing and exporting countries for the restraint of trade in cotton textiles. Specific ground rules Were laid down for such restrictions. Hong Kong was a signatory of the L.T.A. and, within the rules laid down, has been left to conduct and conclude negotiations with a number of importing countries;

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