TNAG-0332-FCO40-368-Visits-of-Secretary-of-State-for-Foreign-and-Commonwealth-Af-1972 — Page 46

AS AT

6.

(a)

(b)

Mr.

Confidential

· 3-

the growth rate of the Hong Kong economy was slowing down. In 1967, we had been affected by the disturbances and the growth rate fell in 1968 to 4-5%. A resurgence of confidence followed and by 1969 a strong growth movement was under way, and in 1969 and 1970 the growth rate rose to about 20%. In 1971 it dropped to about 10 - 11%, and the forecast for 1972 was for a further drop, perhaps to about 7%; Hong Kong has become locked into cotton textiles because of the affect of quotas. Only recently had Hong Kong started to move into mmf textiles, but already faced

restrictions (actual in the U.S., possible in the UK and EEC).

Haddon-Cave emphasized the importance of textile, to Hong Kong.

They formed 44% of exports and generated perhaps 20% of its national income. Hong Kong's greatest. worry was the imposition of comprehensive restraints on an ad hoc basis, following the American precedent, and Mr. Haddon-Cave hoped that any calls for restraints by the UK would be on a product by product basis only (in accordance with the GATT injury concept). Hong Kong was unclear about UK or EEC intentions though there was some indication the EEC intended to operate restraints on a selective basis. The approach favoured by Hong Kong was that the GATT Cotton Textile Arrangement should be extended to cover all textiles so that multilaterally agreed rules would be applicable. These were preferable to bilateral agreements. Whitehall had not agreed with our view at one stage but now appeared to be waiting to see what was going to come out of the forth- coming meeting of the Cotton Textiles Committee.