7. ALTHOUGH WE ACCEPTED THE ESC OFFER IN 1971 WITHOUT CUESTION, WE DID SO ON HMG'S ADVICE THAT IT WAS THE BEST WE COULD GET AND ON THE BASIS THAT THE SCHEME ITSELF WOULD BE SUBJECT TO REVIEW BEFORE THE UK HAD TO ALIGN WITH IT. IF THE OTHERS NOW ARGUE THAT HMG MUST ALIGN WITH THE SCHENE WITHOUT CHANGE, THEN WE WOULD SUGGEST THAT THE UK REPRESENTATIVES ASK THE OTHERS WHY THEY INSISTED ON EXCLUDING HONG KONG'S TEXTILES AND FOOTWEAR. IT SEEMS LIKELY THAT THEY WILL SAY IT WAS BECAUSE. HONG KONG WAS ALREADY COMPETITIVE OR INDEED TOVER-COMPETITIVE'. IF THEY ARE THEN ASKED THE BASIS FOR THIS JUDGMENT, WE CAN ARGUE
(^) THAT WE BELIEVE THAT HONG KONG IS A CREAT DEAL LESS COMPETITIVE NOW THAN IT WAS IN JANUARY 1971 { OUR SHARE OF THE TEXTILE AV)
MGARMENT MARKETS IN UNITED STATES, UK AND CERMANY HAS INDEED BEEN DECLINING OVER THE PAST FIVE YEARS: IN THE PAST YEAR OUR WACES AND CONSUMER PRICE INDICES HAVE 20TH RISON BY OVER 40 PER CONT):
(2) THAT OTHER COUNTRIES WHO DO BENEFIT FROM THESE PREFERENCES MAY WELL BE JUST AS COMPETITIVE AS HONG KONG, THEIR POORER PERFOR- MANCE UP TO 1971 HAVING BEEN DUE PRINCIPALLY TO THE MORE STRINGENT QUANTITATIVE RESTRICTIONS THEY THEN FACED IN EUROPE:
(C) THAT THE PURPOSE OF THE GPS IS TO ENABLE COUNTRIES TO IMPROVE THEIR CIRCUMSTANCES:
(D) THAT CONSEQUENTLY THE DONOR COUNTRIES NEED TO ESTABLISH OSJECTIVE CRITERIA BY WHICH A BENEFICIARY COUNTRY'S CONTINUING NEED FOR PREFERENTIAL ACCESS CAN BE JUDGED SO THAT THE SENEFITS OF THE SCHEME WILL GO ONLY TO THOSE THAT NEED THEM.
8. SINCE THE EEC'S 197. IMPORT STATISTICS ARE NOT YET AVAILABLE NONE OF US CAN YET JUDGE THE EFFECT OF THE FIRST FULL YYEAR OF THE EEC'S CPS ON THE DEVELOPING COUNTRIES' TRADE. THERE 15, THEREFORE, NO BASIS AT PRESENT FOR ANY ASSUMPTION THAT THE EXCLUSION OF HONG KONG OR THE INCLUSION OF ANY OTHER COUNTRY'S TEXTILES AND FOOTWEAR IS STILL JUSTIFIED.
9. SINCE HONG KONG SEEKS NO SPECIAL ADVANTAGE, BUT ONLY TO AVOID BEING DISADVANTAGED WE WOULD HAVE NO QUARREL WITH A SYSTEM THAT CRANTED OR WITHDREW PREFERENCES ON THE BASIS OF AN OBJECTIVE JUDGMENT OF COMPETITIVE NEED, AS DOES THE AUSTRALIAN SYSTEM.
10. WHITEHALL MAY WELL BE UNWILLING TO CONSIDER THESE IDEAS. WE TRIED THEM ON DENMAN AND GOLDSMITH HERE LAST WEEK. THE REACTION WAS THAT THEY WERE FINE AND LOGICAL, BUT THAT WITHDRAWAL OF PREFERENCE FROM ANY DEVELOPING COUNTRY WOULD BE POLITICALLY DIFFICULT AND THAT ANYWAY NO ONE WAS THINKING IN THESE TERMS YET. WE REPLIED THAT THEY WOULD HAVE TO SOME TIME (INDEED WE BELIEVE SOME MEMBER STATES ALREADY HAVE) AND THAT THE MORE DIFFICULTY ONE FORDSAW WITH A GOOD IDEA THE MORE NECESSARY IT WAS TO START EARLY. AND, FURTHERMORE, SUCH UK PROPOSALS COULD SE PRESENTED AS REING MADE MAINLY TO SOLVE THE PROBLEM OF ADAPTING THE UK SYSTEM TO THAT OF THE SIX, RATHER THAN TO SOLVE THE PROBLEM OF HONG KONG, JUDGING BY SIR CHRISTOPHER SOAMES' REACTION, THE COMMISSION AT LEAST IS EXPECTING TO HAVE TO SEARCH FOR A COMPROMISE SOLUTION FOR THE FORMER.
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11. THE GOVERNOR MAY WISH TO PUT SOME EMPHASIS ON THE POLITICAL DIFFICULTY THAT WOULD BE CAUSED HERE BY A TOTAL REJECTION OF HONG KONG'S REQUESTS.
12. WE WERE OF COURSE NOT AWARE OF THE WORDING OF PROTOCOL 23 UNTIL LONG AFTER THE MEETING AT WHICH MR RIPPON ACCEPTED THE CEC PROPOSAL. ALL WE HAD THEN WAS THE TEXT OF HIS REPLY (QUOTATIONS FROM WHICH ARE INCLUDED IN THE BRIEF), AND CODEL TEL 18/71 TO S OF S IN WHICH THE KEY PASSAGE WAS (FROM PARAGRAPH 6)
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