about the US case on textiles but we, and Hong Kong, are prepared to be realistic and to be cooperative on the assumption that, if textiles are dealt with, other
U.S. protectionist pressures can be contained.
3. Our concern is much wider than the protection of Hong Kong's interests. Too much restriction on textiles could start a fast rot in the GATT (where the situation is unstable enough already).
4. We ourselves are moving to a tariff on cotton textiles in place of quotas at the beginning of next year, and the more severe the restraints in the U.S. market the more difficult it will be for us to hold
our own policies.
5. We hope that all major countries will this year secure authority for the introduction of the Generalised Preferences Scheme. A simultaneous moving-back on
textiles would not go well with this.
6. There are accordingly limits beyond which Hong Kong cannot go in a bilateral agreement with the USA. We do not want to get into the negotiations now, but the Americans must be realistic about the extent to which Hong Kong can pull back her exports, limit further growth, and accept restrictions on detailed textile items. Too great an insistence upon a standard form of agreement between the US and all Asian suppliers could also cause
complications.
7. A benevolent Japanese attitude to any Hong Kong/US agreement will be important.
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