6
HMG's concept of "equity" did not, in Mr Haddon-Cave's view, invalidato Hong Kong's case for special treatment as a dependent territory. She should be treated according to her needs, not "equally" with other restricted Common- wealth and non-Commonwealth suppliers. The old clichés about her "resilience" and "ability to survive" in difficult ciroumstances in no way gave HMG the right to penalise her for her past success. Mr Ridley accepted these points, but said that Hong Kong's competitors had a much smaller share of the market in relation to Hong Kong and to their export potential; they were thus being even more restrictively treated. HIG was, however, fully aware that Hong Kong in common with UK importers faced a new and unsettling situation as a result of the change in policy.
7 The discussion then turned to the form of the proposed talks between the two sides. Mr Ridley folt it would be advantageous to use a fairly neutral formula about their objective; "amelioration" of the quota arrangement could appear to commit HMG both as regards the outcome of the talks and vis a vis other interested suppliers. While he did not wish to rule out the possibility of reaching some measure of compromise, he had to make clear to the Hong Kong authorities that HMG foresaw difficulties. Mr Heddon-Cave said Hong Kong could accept this, provided we could agree to a private agenda covering the points he had made during Monday's meeting, and which could be made available in strict confidence to officials of EXCO and TEXTAB.
8
The talks could take place after the Christmas holiday, probably in early January. Hong Kong was prepared, if necessary, to discuss problems in the non- cotton sector, in the course of these meetings, but on the understanding that there would be no attempt deliberately to widen their scope or blur their original purpose. The meeting was then adjourned until 5 p.m.
RESUMED SESSION, TUESDAY, 7 DECEMBER p.m. HELD AT MILLBANK TOWER
1 It was agreed that in his public statements to Hong Kong Government officials and to the Press the Governor could say that he was informed of HMG decision before the announcement was made in the House, and that he had been invited to send officials to London to discuss with Whitehall its implications for Hong Kong's trade. As a result of this visit, HMG had agreed to hold further talks in early January with a view to examining more fully the effects of the decision on Hong Kong's exports of cotton textiles.
2 Mr Ridley could send a private letter to Mr Haddon-Cave setting out in some detail the topics which the Hong Kong side would like to discuss in January, but reserving HMG's position; the draft text would first be cleared with Ministers in the DTI and FCO.
DRAFT LETTER FROM MR P W RIDLEY TO MR C P HADDON-CAVE
"During the course of discussions on 6 and 7 December about HIG's decision to retain the existing quotas on cotton textiles from Hong Kong and the other currently restricted countries, you put it to us that if the Hong Kong Govern- ment is being asked to accept that Lancashire now faces a new and unexpected situation, HMG must recognise that the policy decision to retain quotas and proceed with the introduction of the new Commonwealth tariff creates a new and unexpected sitúalionfor Hong Kong. In these circumstances, we agreed that further talks should take place in the week beginning 10 January 1972, and you indicated that you would like these talks to cover, in a sericus and meaningful way, how the effects on Hong Kong of this new policy could be ameliorated. "To this end, you said that you would like the talks to consider the following possibilities:
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