TNAG-0237-FCO40-273-Trade-relations-between-EEC-and-Hong-Kong-1990 — Page 151

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Flexibility

14. Ernst followed the line of the "Model Agreement" (the

actual status of which he could not or would not clarify).

He saw no difficulty in any future Article 4 arrangement

between Hong Kong and the whole Community containing carryover

and anticipation he kept harping on the figure of 5% -

and unlimited down swing from specific categories into the

basket. We pressed him very hard on the illogical EEC

opposition to including swing between specific categories in

their "Model Agreement" and, after a period of considerable

confusion, it became apparent that, in Ernst's case at least,

the trouble was largely due to a fundamental misconception of

the principles involved. He had not grasped from earlier

discussions the idea of limited swing in but had tended to

muddle the lack of limitation on down swing into baskets with

a similar freedom between specific categories or up from baskets.

(The quaint, but useful, French swing concession just made –

see Brussels Memorandum No.12 of 19 January, probably reflects

similar confusion of thought). However, in the end we appeared

to have explained things sufficiently fully for him to undertake

to review basic Commission policy in this regard in the context

of the CTC conclusions. We made the point of course, that the

principles of Article 3 of the CT should, by clear implication,

be honoured in an Article 4 agreement ("not inconsistent with the

basic objectives of this Arrangement") and we stressed the

A

value which Hong Kong attached to flexibility provisions.

15. From what Ernst said it appeared that part of his antipathy

toward swing seemed to come from a fear that, in a "good" year,

the EEC would be faced with a situation where a sensitive

specific category might be increased by a cumulative addition

of carryover, anticipation, swing and growth, thus producing

a limit far in excess of what had been negotiated. We reacted

that

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(a) this was a highly improbable situation;

(b) even if it happened it would reflect high market demand

for the category-in question and would therefore be

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/non-disruptive;