TNAG-0244-FCO40-280-Exports-of-textiles-from-Hong-Kong-to-USA-1970 — Page 15

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5.

A

CONFIDENTIAL

we

What we might say to Trezise would be that we have

understood that there were various difficulties for the Americans in applying Article X1X fully: we understood that, at least unless and until the Trade Bill is passed, they would have limited powers to offer compensation; also gathered that they were only really concerned about limiting supplies from four Asiatic exporting countries, 1.0. they might have it in mind to discriminate in their restrictions. We should invite Trezise to outline the U.3. ideas on these two aspects, but should not concur in any conclusion that it was therefore useless to consider

American problems on the basis of Article XlX.

6. The line of thought we might pursue asXENXAÌĆeratixe is to point out that the main requirement of Article X1X is that action should be action with the agreement of the interested contracting parties, and that it seems to us that the interested contracting parties (however determined) might in some circumstances agree to some derogation from the requirements in respect of non-discrimination and compen- sation. Thus if the levels of restraint were fairly generous (e.g. 1969 levels plus growth) the claims for compensation might not be very substantial. Also while the Article in principle requires non-discriminatory application, the Omission from restrictions of relatively minor suppliers

would not be unreasonable though there might have to be Bome understanding that advantage would not be taken of such a loophole.

7. It is true that the Japanese have said they "reserve their rights under the GATT" if the Americans invoke Article X1x. We should not give the impression that it will be easy for the Americans to get away with anything derogating from Article XX. But they have one card to play i.e. if they are ready to leave the control of trade at the exporting end, this is something of value in return for which the exporting countries might agree not to insist on full compen- sation or on the extension of restrictions to all suppliers.

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2.

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