TNAG-0300-FCO40-336-Entitlement-of-Hong-Kong-to-generalized-tariffs-preferences--1971 — Page 228

7. Hong Kong is still very concerned about the effect of the GPS on their textile exports. Although their estimate is that Taiwan will not become in the future a beneficiary of the EEC offer, they are concerned about weighted competition from South Korea (and of course other developing countries). An acceptable solution for Hong Kong would be for clothing to be withdrawn from the EEC offer and this would certainly make international sense if the GATT study identified clothing as the modern textile trade problem.

8. One development in Hong Kong thinking since my visit last year was the increased importance they are giving to the views of Britain (as a customer, not the metropolitan power) and Germany on any deal they do with the Americans. This is partly because they realise, much more than they did 18 months ago, how key a position they may be forced to occupy on the international textile stage. It is partly also because of the new position now arrived at (although not formalised) whereby freedom of action for Hong Kong involves a de facto GATT relationship with UK: they welcome this, but appreciate that it can operate against them as well as in their favour. Finally, to crown all this, the relative importance of the US market to Hong Kong has I think declined, because of their rising exports into Europe.

Hong Kong position on Kennedy

9. Whatever the strength of the lingering thoughts referred to in paragraph 6 above, there is absolutely no doubt that Hong Kong's negotiating position for Kennedy is far tougher than I had thought possible and indeed corresponds very closely to sound GATT doctrine on damage. In particular, the following are Hong Kong sticking points:-

(a) any limitation to be confi ned to individual clothing items where some kind of damage case can be made out;

(b)

(c) any artificial categorisation as between cotton and

other fibres to be limited by the capability of "swing" (or roll-out) from the cotton quotas to an appreciable percentage the Hong Kong aim is 50%. (There are technical difficulties in combining the existing cotton quotas with any new mmf quotas because the cotton quotas involve a degree of categorisation unacceptable in mmf clothing because of the sticking point at‍ (a) above);

no artificial categorisation as between clothing items of knitted fabric and of woven fabric;

(a)

no automatic trigger point. involving restraints for any items other than those identified in (a) above, but only an offer of a routine notification of the general level of export authorisation for non-restricted items taken as a whole ("the basket"), with no commitment other than consultations to establish whether any new damage items have arisen;