TNAG-0386-FCO40-432-Exports-of-non-cotton-textiles-from-Hong-Kong-to-the-EEC-1973 — Page 205

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CONFIDENTIAL

TO PRIORITY GOVERNOR HONG KONG TEL NO 62 OF 18 JANUARY FOLLOWING TEL NOW REPEATED TO YOU AT REQUEST OF DEPARTMENT WAS SENT TO BONN TEL NO 54 OF 18 JANUARY

PROPOSED EEC-HONG KONG NEGOTIATIONS FOR RESTRAINTS ON TRADE ÎN NON-COTTON TEXTILES.

1. A MEETING HAS BEEN ARRANGED FOR THE AFTERNOON OF 22 JANUARY, IN BRUSSELS, OF THE GROUP OF EXPERTS ON TEXTILE MATTERS, TO DISCUSS THE COUNCIL DOCUMENT S/27/73 (COMER 6) OF 9 JANUARY 1973 PROPOSING IMMEDIATE NEGOTIATIONS WITH HONG KONG FOR VOLUNTARY RESTRAINTS ON EXPORTS TO THE COMMUNITY OF A WIDE RANGE OF NON-COTTON TEXTILES. WE UNDERSTAND THAT THIS REQUEST BY THE COMMISSION FOR A NEGOTIATING MANDATE IS THE DIRECT RESULT OF PRESSURE BY THE GERMAN GOVERNMENT: FURTHER, WE UNDERSTAND THAT GESAMTTEXTIL AND THE MINISTRY OF ECONOMIC AFFAIRS HAVE AGREED A SUPPLEMENTARY LIST OF TEXTILE PROD- UCTS WHICH THEY WOULD LIKE TO SEE ADDED TO THE COMMISSION'S LIST, AND ARE ALSO AGREED THAT THE COMMUNITY SHOULD SEEK IMMEDIATE SIMILAR ARRANGEMENTS WITH JAPAN, TAIWAN AND SOUTH KOREA, WITH SOMEWHAT DIFFERENT PRODUCT COVERAGE.

2. AT THE MEETING ON 22 JANUARY WE PROPOSE TO TAKE THE FOLLOWING

LINE:

(A) NEW RESTRICTIONS ON A COMMUNITY BASIS SHOULD CONFORM TO THE PRINCIPLES WHICH THE COMMUNITY WOULD LIKE TO SEE INTERNATIONALLY ACCEPTED, IN A SUCCESSOR TO THE LTA OR AMENDMENT TO GATT ARTICLE XIX. (B) THERE SHOULD BE OBJECTIVE CRITERIA FOR THE RECOGNITION OF MARKET DISRUPTION.

(C) RESTRICTIONS SHOULD BE OF LIMITED DURATION AND HAVE A SPECIFIC PURPOSE, RELATED TO A PARTICULAR SECTOR OF INDUSTRY, EG CREATION OF STABLE CONDITIONS FOR CAPITAL INVESTMENT AND INCREASE OF PRODUCTION TO ECONOMIC LEVELS, OR MINIMISATION OF UNEMPLOYMENT AND COMMERCIAL

LOSSES DURING RUN-DOWN.

(D) PRODUCT COVERAGE SHOULD BE SELECTIVE AND CONFINED TO AREAS IN WHICH SUBSTANTIAL AND INCREASING IMPORTS ARE CAUSING OR IMMEDIATELY

THREATENING TO CAUSE REAL DAMAGE TO COMMUNITY INDUSTRY, EG LOSS OF JOBS, FALLING MARKET SHARE, CANCELLATION OF INVESTMENT PLANS. (E) RESTRICTIONS SHOULD COVER SUBSTITUTABLE PRODUCTS ON A MULTI- FIBRE BASIS.

(F) BASED ON THE ABOVE AND ON OUR LONG EXPERIENCE OF HONG KONG IN- CLUDING RECENT SUCCESSFUL NEGOTIATIONS ON WOVEN POLYESTER COTTON FABRICS AND MADE-UP GOODS, WE BELIEVE THAT HONG KONG WILL AND SHOULD ONLY AGREE TO VOLUNTARY RESTRAINTS IF A WELL-DOCUMENTED, STATISTIC- ALLY SOUND CASE OF DAMAGE FROM PARTICULAR PRODUCTS TO THE COMMUNITY'S INDUSTY (OR ''REGIONAL' 16 NATIONAL SECTORS OF IT) IS CONVINCINGLY AND PERSEVERINGLY PRESENTED.

3. PLEASE LET THE APPROPRIATE AUTHORITIES KNOW ON 19 JANUARY THAT THIS IS THE LINE WE PROPOSE TO TAKE. YOU SHOULD EMPHASISE THAT WE BELIEVE AND INTEND THIS LINE TO HELP WITH THE GERMAN TEXTILE PROBLEM. WE HAVE SYMPATHY WITH THEIR DESIRE FOR RESTRAINTS ON NON-COTTONS OF WHICH THEIR IMPORTS HAVE INCREASED DRAMATICALLY AND TO AN

EXTENT THAT WE BELIEVE MAY WELL BE DAMAGING TO GERMAN INDUSTRY

ALTHOUGH NO SUPPORTING CASE HAS BEEN PUT FORWARD.

4. WE THINK THAT IF EITHER THE FEDERAL GERMAN GOVERNMENT OR THE

COMMISSION APPROACH HONG KONG AND/OR THE OTHER ASIAN COUNTRIES WITH A GOOD CASE ON SPEICIFIC ITEMS THEY WILL (AFTER INEVITABLE ARGUMENT) GET WHAT THEY NEED THE NEAR-COMPREHENSIVE PROPOSALS OF THE COMMISS-

ION ON THE OTHER HAND WOULD:

(A) BE LIKELY TO BE COUNTER PRODUCTIVE FOR THIS PARTICULAR PURPOSE: (B) MORE FUNDAMENTALLY, ESTABLISH AN OBJECTIONABLE PROTECTIONIST PRINCIPLE FOR THE COMMUNITY'S TEXTILE POLICY AND FOR FUTURE WORLD-

WIDE ARRANGEMENTS FOR TRADE IN TEXTILES.

5. POSTS IN OTHER COMMUNITY CAPITALS PLEASE SPEAK ON SIMILAR LINES

TO APPROPRIATE AUTHORITIES.

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