TNAG-0238-FCO40-274-Trade-relations-between-EEC-and-Hong-Kong-1970 — Page 183

0003230

G.F. 323

CONFIDENTIAL

8

Second Session : 4.30 p.m. Wednesday,

29th July, 1970

28.

Dorward said that he had received a telegram from Hong Kong reporting a message from the German Consul General that the E.E.C. Commission had informed Bonn that since it was anticipated there would be an early settlement of a Hong Kong/E.E.C. Agreement, there would be no need to extend the Hong Kong/German Agreement which was due to expire on the 30th September. Dorward expressed the view that this seemed a very optimistic opinion since, without attempting to prejudge the outcome of the current negotiations, the practical difficulties in regard to the calculation and allocation of quota to which he had already referred would make it impossible to avoid dislocation of the trade unless the restraint agreement with Germany was extended or Hong Kong reverted to free trade.

29.

Ernst said the E.B.C. had no wish to cause dislocation of the trade and could see no difficulty in the way of a straightforward extension of the restraint arrangements. By this he did not mean, however, a formal extension of the current agreement because this would be complicated by 9.E.C. legal considerations. Dorward said he could envisage some de facto arrangements whereby Hong Kong would issue quota for a further 3 months proportionate to the limits in the existing Arrangement. Ernst said that if this could be done, he could guarantee that there would be no difficulty in such ship- ments being admitted into Germany.

30.

Dorward said that he had not had enough time to study the restraint limits which Ernst had proposed at the first session but that this would be done as soon as practicable and he expected that Hong Kong would have certain counter proposals to make.

31.

He recalled his earlier statement that Hong Kong could not consider coverage in the absence of factual justification from the S.E.C. of their request. But on the strength of the tables which he had handed over to Ernst at the first session, he suggested that some consideration might be given, if necessary in a preliminary way, to Group I. Dorward noted from the tables that on the basis of 1968 figures Hong Kong's share of E.E.C. consumption of Group I fabrics was only 0.38 per cent; and Hong Kong had enjoyed only 3.49 per cent of the import market. In contrast to, for example, India, Hong Kong exports in 1969 of these fabrics to the E.E.C. were well below the 1968 levels. There was, therefore, not the slightest apparent justification for restraint, even on the grounds of equity to other suppliers.

32.

Ernst said that personally he agreed that the case for restraint was a weak one, but he said control might be justified by the danger which existed of Hong Kong shipping substantial quantities of Chinese grey fabrics to the E.E.C. The offer of a Group I limit had deliberately been set high in order to compensate for the lack of apparent justification for seeking restraint; and indeed, if Hong Kong thought the offer was not good enough, it might be possible to raise the limits still further.

33.

Dorward expressed himself bewildered at the suggestion that the way to justify restraint on a patently non-disruptive item was to increase the restraint limit. As far as he could see, there was no case for any concession on Hong Kong's part and he could not see how he could recommend otherwise to his Government.

At a time when the

CONFIDENTIAL

/B.B.C.