TNAG-0303-FCO40-339-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 94

IMMEDIATE

CYPHER/CAT A

FM HONG KONG 290406Z

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IZALMONDS

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TO IMMEDIATE FCO TELNO 891 OF 29TH NOVEMBER 1971.

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DESPITE THE UNEXPECTED TIMING, THIS NEWS DOES NOT SURPRISE

US GIVEN THE VIEWS WE HAVE EXPRESSED ALL ALONG, AND PARTICULARLY IN TELEGRAM 567 OF 18TH JULY, 1969, THAT THE TARIFF WOULD MOT PROVIDE LANCASHIRE WITH A VIABLE DEGREE OF PROTECTION. WE HAVE ALSO BELIEVED THAT, IN ANY CASE, QUOTAS WOULD HAVE TO BE REIMPOSED AFTER BRITISH ENTRY INTO THE E.E.C. IN ORDER TO CONFORM WITH THE COMMUNITY'S COMMON COMMERCIAL POLICY ON COTTON TEXTILES. SO WE HAVE BEEN CONCERNED THAT HONG KONG'S TRADE AND INDUSTRY WOULD HAVE TO SUFFER THE LOSS OF EARNINGS ARISING FROM THE TARIFF FOLLOWED BY THE DISRUPTION CAUSED BY THE REINTRODUCTION OF A QUOTA SYSTEM. NOW I AM FACED WITH A SITUATION IN WHICH, HAVING RIDDEN THE STORM OF THE TARIFF PROPOSAL, QUOTAS ARE TO BE NEVERTHELESS RETAINED WITHOUT ANY APPARANT MODIFICATION IN THE TARIFF PROPOSAL AND THIS WILL BE EXTREMELY DIFFICULT TO EXPLAIN LOCALLY, PARTICULARLY TO

THE PUBLIC AT LARGE (AND DESPITE H.M.G.'S PREVIOUS ASSURANCES).

2. IF H.M.G. SO DESIRES WE CAN AGREE TO A. FURTHER EXTENSION OF OUR PRESENT QUOTA ARRANGEMENT AS SET OUT IN THE HEADS OF AGREEMENT · CONCLUDED IN 1966 AND EXTENDED FOR ONE YEAR AT THE END OF 1970. THE TERMS OF SUCH AN EXTENSION WOULD, OF COURSE, NEED TO BE DISCUSSED BUT IT IS WORTH NOTING THAT SUCH AN ARRANGEMENT COULD BE SLOTTED WITHOUT TOO MUCH DIFFICULTY INTO HONG KONG'S CURRENT ARTICLE 4-TYPE AGREEMENT WITH THE E.E.C.

3. THE QUESTION WOULD THEN ARISE AS TO THE TIMING OF THE IMPOSITION

OF THE TARIFF ON WOVEN COTTON TEXTILES FROM COMMONWEALTH COUNTRIES. WE HAVE ARGUED PREVIOUSLY THAT, IN VIEW OF BRITAIN'S FORTHCOMING MEMBERSHIP OF THE E.E.C., THE TARIFF SHOULD ONLY BE IMPOSED IN ACCORDANCE WITH THE DECALAGE TIMETABLE AGREED IN BRUSSELS EARLIER THIS YEAR. (WE HAVE ASSUMED, IN ANY CASE, THAT THIS FORMULA WOULD BE APPLIED TO KNIT COTTON COODS). HOWEVER, AS WE KNOW THAT THE D.T.}

HAS FOUND DIFFICULTY WITH THIS SUGGESTION IN THE PAST (ALTHOUGH -

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