TNAG-0391-FCO40-437-Restriction-on-cotton-textile-exports-from-Hong-Kong-to-the--1973 — Page 65

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CARRY-OVER OF UNUSED 1973 COTTON AND NON-COTTON QUOTAS TO 1974

1.

You should be aware of the attached letter and the implications it holds for a further emotional come-back for Hong Kong.

2.

The background is this. As you will recall it has been decided in the context of the revision of the LTA and the other negotiations in GATT that current restraint agreements on textiles between the importing and export- ing countries should be continued for a further 6 months until 30 June 1974. At that time it is expected that they will be replaced by new multilateral agreements. The EEC extension has been arrived at by adding 50% to the 1973 quota and counting the period as being of one duration. Our own agreements with Hong Kong are of course separate at this stage from those of the EEC and DTI are not prepared to accept Hong Kong's assumption that the UK provisions should be extended on the same basis as those for the EEC. The reason of course goes back to the actual figures involved which, in the case of the UK, are more than for all the other members of the EEC together. In the letter attached, Mr Hope has rejected the Hong Kong assumption that the 18 month period should be treated as one and reminded Mr Mills that our own agreements allow only a limited (around 5%) carry-over and that the 6 month period of January to June 1974, should be treated as a separate unit. The reason for this is also given in the letter and is namely that under-utilisation in 1973 is likely to be as high as 90 million square yards which, if Hong Kong is known to use, could mean that this entire figure applying to the 6 months January to June 1974 allocation, could be shipped at one time causing serious market restrictions. The normal carry-over provision would run to some 31 million square yards.

*

3. I have discussed this with Miss Lowne. Whilst I understand the DTI feel quite strongly about the carry- over provision I think a more important calculation is that the Hong Kong Government Well use any referee by the DTI on this point as a useful precedent. And one has to admit that this is in character with Hong Kong practice. I am confident from what Miss Lowne said that there could be room for compromise on the actual

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