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amendments and modifications to our Cotton Textile Agreement with Hong Kong. Although these modifications would not have given Hong Kong a bigger quota in aggregate, they would have permitted greater flexibility in transfer between categories. We also offered to redefine garment quota headings to bring them more into line with Hong Kong's agreement with the EEC (again a method allowing greater flexibility to Hong Kong).
7. Mr Haddon-Cave agreed with these proposals but his trade advisers did not. The proposals are to be considered by the various Hong Kong bodies, including the Executive Council.
EEC
8. Hong Kong may argue that when we enter the Common Market they should have a bigger textile quota. We expect the EEC Commission to undertake during 1972 the task of renegotiating the quota levels set in their present restraint agreements to take account of the fact that, after the accession of the candidate countries, the agreements will apply to the whole of the enlarged Community. We shall be closely involved in this and during the discussions we shall of course bear in mind the views expressed by Hong Kong.
EFTA
9. We cannot give Hong Kong a formal undertaking that they will not suffer further from duty-free EFTA competition, but we can assure Hong Kong that we are watching the position very carefully, and that
we do not rule out the possibility of an approach to Portugal if her
cotton textile exports reach a level where they seriously undermine our
import controls.
It would be difficult to take restrictive action against an EFTA
partner.
However, Portugal has twice secretly agreed in the past to
restrict her exports of cotton textiles to the UK.7
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