TNAG-0287-FCO40-323-Briefs-for-visits-in-UK-of-Governor-designate-of-Hong-Kong---1971 — Page 16

CONFIDENTIAL

Our Ref: 25/376AC(C)

21st July, 1971.

You wished to be given son background

material on the exchange between British and Hong Kong officials over the management of Hong Kong's external commercial relations.

2.

These exchanges began in 1968 and had their origin in a difference of opinion between British and Hong Kong officials over how requests from the Swedish and Norwegian Governments for restraints on non-cotton textile exports from the Colony should be handled. The exchanges were continued at various levels, up to and including Sir David Trench, until the end of 1970, when the search for an agreed statement on the principles and practice which should govern such manage- ment was, as far as I am aware, quietly suspended.

3.

In essence, the difference of opinion referred to above arose from a belief on the part of British officials that the requests should be turned down because the important G.A.T.T. principle that quantitative restrictions are justified only where injury (or threat of injury) exists to domestic pro- ducers of like o directly competitive articles would be breached by meeting either the Swedish or the Norwegian requests. This belief was pressed on the Hong Kong Government in circumstances where Hong Kong officials considered it was necessary to preserve long Kong's trade by conceding restraint (albeit with re- luctance), in the absence of an assurance by HMG that it was prepared to take retaliatory action against the Scandinavians should they unilaterally restrict imports of the Hong Kong products in question (because there was no agreed restraint).

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