TNAG-0237-FCO40-273-Trade-relations-between-EEC-and-Hong-Kong-1990 — Page 79

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G.F. 323

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10.

4

(b) it was in any case too early a period since

restraint limits had been agreed for 1970 covering by far the greater part of the trade and these contained significant grow th factors which had to be taken into account

in considering possible 1971 limits.

The actual figure for 1969 agreed restraint limits plus 1969 liberalised trade and for 1970 agreed restraint limits were 12,841 and 10,894 metric tons respectively. Adding 1969 liberalised trade to the 1970 agreed restraint limits, but without applying any growth factor, produced a figure of 13,448 metric tons. To this would have to be added a growth factor for the liberalised trade at least as high as that applied in fixing 1970 limits. As a result, the base figure for any possible calculation of a restraint limit would have to be very substantially higher than the 11,986 metric tons on which Ernst's authority from the Council was based. Ernst said that he would have to go back for further authority if Hong Kong insisted on other figures. His instructions had been to work on the basis of 1969 actual exports plus 3% growth per annum for the three years of the projected agreement. On the matter of grow th, Dorward noted that whatever the base a figure of anything less than % be unacceptable to Hong Kong because that was the minimum figure prescribed in Annex B of the C.T.A. Ernst noted that on at least one occasion Hong Kong had accepted a restraint limit lower than provided for in the C.T.A., this being that negotiated by "my friend Dr. Stedfeldt" on behalf of Germany in 1966. He said that in this present case it was the Commission's intention to build in the growth factor for a period of three years. They had started from a position of 1-2% growth on their previous estimated figures but now that they had had a chance to examine the actual figures for Hong Kong exports in 1969 he could offer a limit of 12,672 metric tons per annum.

. .This represented, for each of the three years of the proposed agree-

ment, 3% per annum growth on the 1969 figure built in. Dorward responded that this was unacceptable for three reasons:

(a)

(b)

(c)

it was based on 1969 actual figures which, even if there had been no later figures on which to base the calculations, would in themselves have been too low since the appropriate base would have been the restraint limits rather than the actual trade;

it disregarded established 1970 restraint limits with the growth which had been built in to them, and

it was ultra vires the C.T.A.

11.

Ernst noted these points but said it had not been easy for the Commission to achieve agreement on the offer which he had made; it would be extremely difficult for him to have the basis changed. Dorward replied that, these difficulties notwithstanding, Annex B, paragraphs 2 and 3 of the C.T.A., existed and must be respected. Ernst said that these referred to Article 3 of the C.T.A. and the purpose of the present discussion was to formulate the basis for an Article 4 agreement. Dorward denied this and said that the E.E.C. offer, to be acceptable to Hong Kong, must conform to the terms of the C.T.A. in regard to growth, coverage and flexibility as a minimum position. Jones added that an Article 4 agreement had to be acceptable to both sides. Exporting countries needing something additional to persuade them to accept such an agreement, otherwise importing countries were required to use Article 3 and establish a market disruption case item by item.

/12. At this

CONFIDENTIAL