FROM: Sir John Eden Bt MP
DEPARTMENT OF TRADE AND INDUSTRY
1 VICTORIA STREET
LONDON SW1
01-222 7877
50
The Minister for Industry
35
Anthony Royle Esq MP
Foreign and Commonwealth Office Downing Street SW1A 2AL
Bran Tony.
HONG KONG TEXTILES
1
4 February 1972
As I promised you in our talk on Tuesday, I have looked very carefully at the Governor's three requests as set out in Hong Kong Telegram No.72.
On the first point (hardship yardage) I don't think there is much in dispute. In his letter to Haddon-Cave on 21 January, Philip Ridley here confirmed what we had already told the Hong Kong negotiators during the talks - that should an overall agreement be reached for modification of Hong Kong's quota arrangements for 1972, and if the UK Government decided in principle to agree to license pre-existing orders outside the quotas from anywhere, the claims of Hong Kong would be given sympathetic consideration. In practice, I think this gives Hong Kong what she is asking. Certainly, we would extend to Hong Kong the equivalent of anything we gave to other supplying countries. But it is only fair to add that the figures we now have of orders placed before
8 December in restricted countries as a whole suggest that we shall be unable to concede hardship yardage to anybody without undermining the intent of the decision to retain quotas.
The Governor's other requests both concern transferability from one product category to another within the overall quota limits, and we have to consider their combined effect. I appreciate the Hong Kong Government's need to show that they have got some benefit from the talks for all sections of their industry. At the same time, the sub-division of the quota into product categories is basic to preventing exporters from concentrating too heavily on particular products and so swamping the market; the Lancashire industry has repeatedly voiced to me its fears lest individual sectors be picked off one by one in this way. Any concessions involving greater flexibility increase this risk.
In January, we went a long way to meet Hong Kong's wishes for greater flexibility in the made-up and clothing group, the sector which appeals to them most because it brings the highest return. We were ready to agree to transfer into this group 4.6 million square yards, or 5% of the group total, from the
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