0003230
G.F. 323
CONFIDENTIAL
- 4 -
the problem was to establish first whether any restraints were necessary; then secondly the appropriate coverage; thirdly, the relevant limits for that coverage on the basis of C.T.A. principles; and finally administrative arrangements.
13.
Ernst said that the E.E.C. would be ready to make a state- ment on the justification for their comprehensive restraint request, but not before mid-September. In the interim he suggested a pragmatic approach by Hong Kong in examining the E.E.C. offer which he would table on the working hypothesis already. proposed. He did not want at that point to dwell on the consequences of failure to reach an agree- ment, but he said the E.E.C. offer could not be maintained indefinitely. It was the result of months of work and compromise between Member States and could not be altered without reference to Ministers.
14.
Ernst suggested that it would be useful if he went over the basic elements of the draft Agreement, which he described as being very similar to the existing Agreement between Hong Kong and the Benelux. He noted first that it provided for the suspension of exist- ing restrictions against Hong Kong cotton textiles in the Member States. This would ensure the effective removal of the C.T.A. Artiole 2 import restriction still maintained by France. As regards restraint limits, there was provision in the Agreement itself for an overall ceiling and group and category limits. A Note Verbale attached to the Agreement would record the distribution of these various limits among Member States; and this Note would also contain a provision for swing between Member States which would be a matter for ad hoc agreement, following a specific request by Hong Kong.
15.
The flexibility provisions in the draft Agreement were those which had been suggested by Hong Kong at earlier meetings; namely 10 per cent swing, carryover and anticipation. The only exception was that swing would not be permitted from Group I (cotton fabric grey or bleached) to Group II (other cotton textile articles). Export control with an automatic issue counter-part import licensing system was also provided for. An Annex to the Agreement would provide for unlimited re-exports after processing and the exclusion of transit trade from the scope of the restraint. No specific provision had been suggested for the re-export of grey cloth but there would be no problem if Hong Kong wished such an arrangement.
16.
Dorward thanked Ernst for his exposition and said there were possible alterations to the English text which he might suggest at a later stage. In this respect he asked how firmly the E.E.C. was wedded to the wording of the draft. Ernst said that they were not inflexible, but substantial alterations to the text, albeit merely for the purposes of clarification, might create certain difficulties of a technical nature. He suggested that as far as possible clarifi- cation and amplification of articles in the Model Agreement should be incorporated in side letters.
17.
Ernst recalled that on previous occasions both sides had commented on the statistical discrepancies which generally resulted in Hong Kong export figures showing a lower tonnage than the correspond- ing E.E.C. import figures. He said he could not explain the discrepancy fully; although it was probably due to different period coverage as a result of shipment times and the utilisation of conversion factors at the Hong Kong end and actual weights at the E.E.C. end. Despite the fact that E.E.C. import figures were higher, however, he had taken them as a basis for calculating the limits which he would offer.
CONFIDENTIAL
/18.
No comments yet.
Private notes are available after approval.