TNAG-0464-FCO40-529-Entitlement-of-Hong-Kong-to-EEC-Generalised-Scheme-of-Prefer-1974 — Page 68

(a)

(e)

Hong Kong should bear in mind that there are already disturbing suggestions by a number of Community countries that the new textile agreements should be on the basis of import control instead of export restraint.

While we fully understand how objectionable GSP discrimination is to Hong Kong, we believe that in practical terms elimination of this discrimination is of less importance to her than the securing of the maximum access possible under the new restraint arrangements. Even as a full beneficiary under the EEC's textile GSP, Hong Kong would only obtain duty-free entry for a small proportion of her exports to the Community. We suggest that Hong Kong should reserve such negotiating muscle as she has for the textile agreement negotiations rather than expend it (almost certainly fruitlessly, and probably counterproductively) in a GSP context. By negotiating under Article 4 she could still insist on selective restraints in accordance with the MFA's provisions, but would be entitled to more liberal terms than under Article 3.

We also believe from various statements by the Commission that once the Hong Kong/EEC textile agreement is signed up, the EEC would be more disposed to reconsider Hong Kong's inclusion (or at least partial inclusion) in the textile GSP, if not for 1975 then for 1976. The Commission are genuinely embarrassed over their inability to find any Hong Kong textile products which they could recommend for inclusion in the 1975 GSP, and we and Hong Kong should work upon their uncasy conscience. We should be more likely to make progress in this way than by trying to use strong- arm methods.

Note on MFA Articles 3 and 4

4.

Article 3 lays down a procedure for the negotiation of restrictions where imports are causing market disruption, as defined in Annex A of the Arrangement. Quota base levels must be determined in accordance with Annex B which also requires that quotas should increase annually by not less than 6%, although a lower positive growth rate is permissible in exceptional

cases.

5.

If however the two sides fail to reach agreement within 60 days, the importing country has the right under Article 3 to impose import controls unilaterally, at the same time reporting its action to the Textile Surveillance Body.

6. Article 4 deals with agreements negotiated on "mutually acceptable terms" to eliminate real risks of market disruption. On overall terms, such agreements hhall be more liberal than restraint measures under Article 3.

?.

Articles 3 and 4 of the MFA are similar to Articles 3 and 4 of the former Cotton Textiles Arrangement. Hong Kong's cotton textiles agreements with the UK and with the Six have hitherto been on the "mutually acceptable" Article 4 basis, under which she has administered the controls herself. Hong Kong Government has therefore been in a position to allocate the quota between her textile exporters who are able to plan their business with greater confidence, and obtain a better price, than would be the case if the licences. and therefore the choice of supplier, were in the hands of the importers.

2

The