TNAG-0302-FCO40-338-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 53

CONFIDENTIAL

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Bir L Monson

T TIL FOLICY

1. I am a palled at the rospects for our relations with Hong Kong if the DTI get their way and an announcement is tude in Parliament on 29 November or thereabouts to the effect that from 1 January 1972 exporters to our market will have to face not only the proposed tariff but also quotas.

I have just received the attached draft of the DTI submission on the matter. There are two points in particular in the draft to which I would draw attention - (1) the implication in paragraph 4 (sidolined "y") that Hong Kong will be better off with quotas than without quotas and (ii) the complete lack of any proposals involving any kind of consultation with our traditional Commonwealth suppliers.

3.

Gince I have been in the Departɛent Hong Kong have repeatedly flung back at us the absence of consultations at the time it was decided to do away with the quota system and to go on to a tarif. Turin, the talks we had with Hong Kong last November (when the Governor was here) Hong Kong's intercat in this question was amphesised more than once. You will remember that arrangements were then made for consultations in London with a special delegation from Hong Kong. We had the consultations lsst February, and as a result we spelt out in a Saving Despatch to Bong long the way in which we would apply the Crosland formula.

her hippon visited Hong Kong in September 1970 he told a jeint me ting of the Trade and Industry Advisory Board and the Textiles Advisory Board that he "foresaw no danger of Hong Kong having to face both tariffs and quotas before British entry into the "C".

4 non Mr Royle saw Hr Keeble, Kr Hale and myself last week he

poke strongly against the proposals of the DTI. He said that the pressure from Lancashire should be resisted and that we Bald only be considering the question of quotas in a year's time;

If however there were signs that our arlet was being disr tod as a result of an increase in the flow of importa then e should proceed during 1972 in accordance with the terms of the Crosland formula. He asked that Mr Rippon be made aware of the problem. He also suggested that if Er Godver found himself 1 difficulties in the PC the matter should go to the Cabinet.

5. r ale has now receive the final version of the DTI paper for the 10C and he will be circulating the FCU prief later today. I have asked that copies be sent to you and also to ir Stanley Toninoon.

CCNFIDENTIAL

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