TNAG-0301-FCO40-337-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 153

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The best way of achieving both of these ends was an extension of the Long Term Arrangement on Cotton Textiles to cover all textiles since this was an arrangement within the GATT which would not lead to protectionism in other fields. At present everything was waiting on the outcome of the bilateral talks between the U.S.A. and Japan, but if these failed and the Trade Bill was passed the chance of regulating trade in non-cottons by multi-lateral agreement would have been lost. The best course would therefore be for Hong Kong to indicate its own readiness to negotiate a restraint agreement with the U.S.A. and then for other countries to widen these talks into a multi-lateral agreement. If this embraced, say, the U.S.A., Western Europe, Canada, Hong Kong, Taiwan and South Korea, then Japan would either feel bound to join in or be placed in the position where the U.S.A. could legitimately impose restrictions against her goods without resorting to a damaging Trade Bill. Hong Kong believed that an early approach to the U.S.A. would result in the most favourable terms for her trade.

lip. In reply, Mr. Carey said that every one was concerned to avoid the spread of protectionism. The U.K. favoured a study within the GATT of the whole question of international trade in textiles, but in the past this had been opposed not only by Japan but by West Germany also. There was now evidence that the E.E.C. as a whole was coming round to acceptance of this idea, but this did not mean that they would welcome an initiative by Hong Kong at this stage. There was also no sign that the Americans were ready to talk to Hong Kong, and if such talks were begun this might adversely affect the impending Japanese decision on inclusion of Hong Kong in their UNCTAD offer. There were therefore strong arguments in favour of waiting a little longer for some indication of the way the U.S./Japanese talks were going. There were risks in this course, but the U.S. Trade Bill had failed last year and it should not be too readily assumed that it would succeed this year. There was at least the prospect of an economic upturn in the U.S.A. relieving some of the pressure for protection. A mis-timed offer to negotiate by Hong Kong might threaten general GATT principles without winning the support of other countries for an acceptable agreement. More consideration needed to be given to the form that such an agreement might take. It might not be a simple extension of the existing L.T.A., but involve some reduction in the present extent of protection in cotton textiles, particularly on yarns and cloth. Discussions would shortly be resumed with the E.E.C. Commission and would explore various possibilities as well as making plans for meeting the threat of renewed U.S. protectionism if that became unavoidable.

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15. Hong Kong agreed that they would not wish to approach the U.S.A. during the next month or so in order not to risk antagonising the Japanese while they were still considering the treatment of Hong Kong under their UNCTAD offer.

C.T. 1b

4th February 1971

Circulation:

Mr. Carey Mr. Ridley Mr. McEnery Kiss Welch

C.T.

Mr. Gray

CRE 1

Mr. Price

CRE 2

Mr. Leird FCO Mr. Heath

Mr. Gildea

CRE 3

Mr. Kinnear

Mr. Green

CRE 5

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