TNAG-0302-FCO40-338-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 152

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16.

Paragraph 25 of the DTI draft submission sets out

in more detail the argument for this option. In

deciding on the tariff policy, it was always envisaged

that imports would remain at a relatively high level;

and that following liberalisation, in the short term,

they would rise. This was to be one of the key elements

to provide the pressure to get rid of the less viable

firms. While there is some evidence to show that

imports may respond more quickly to demand than

domestic production, we believe that the latter should

revive by mid-72. Although overseas suppliers have

clearly controlled prices better in the past than UK

producers (a relative difference of 20% from 1968 to

1970), there is some sign that price increases since

December 1970 have been at about the same level for

hoth foreign and British textile suppliers.

Tariffs and quotas

17.

This system involves invoking LTA in conditions of

market disruption. The levels of restraint would be

those of the 12 months of the 15 month period preceding

the decision to seek restrictions. Such a system would would

hold down potentially sizable suppliers like Korea and

Taiwan; it would however mean a row with at least some

Commonwealth countries and some very difficult and

hurried negotiations to extend our bilateral agreements

with Hong Kong and India, both of whom strongly

resented the proposed tariff policy. Our main defence (statements to Hong Kong are at Annex ; to India at Annex ) of the move to tariffs from quotas was that

the latter froze trade in traditional patterns. We

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