TNAG-0465-FCO40-530-Entitlement-of-Hong-Kong-to-EEC-Generalised-Scheme-of-Prefer-1974 — Page 5

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national preference schemes operated by non-EEC countries such as Austria and Switzerland, and is a bad example to Hong Kong's other main trading partners, Japan and the USA. All these arguments

have truth in them.

5.

A further complication arose from 1 January 1974 when the United Kingdom, on aligning with the Community's GSP, found herself in the position of having to discriminate against her own dependent territory in favour of several of Hong Kong's foreign competitors. The removal of this anomaly has been an important aim in the negotiations with our EEC partners and continues to be so.

6.

There have been extensive discussions between Hong Kong and British officials about the best way of achieving progress in the Community. The consensus of those who have to direct the negotiations in Brussels has been that there was no possibility of substantial progress in 1975. They also argued that, since the GSP only applies to a proportion of trade, even in the affected items, and given Hong Kong's ability to climb over tariff barriers, it was in practice more important to work for the reduction of quantitative restrictions, especially under the Multi-Fibre Arrangement (see below). Mr Jordan, the Hong Kong Director of Commerce and Industry, agreed that there was force in this. But he stressed the importance of, presentation in Hong Kong to show that the UK were doing what they could to help.

7.

The arrangements for the 1975 GSP, agreed by the Council of Ministers on 12 November, extend the GSP to Hong Kong rubber and plastic footwear, though leather footwear and textiles were still excluded. It was, however, agreed that the case of Hong Kong textiles would be reviewed when the Community's GSP for 1976 was drawn up.

Given the importance of textiles to Hong Kong's economy, there is still much to be done to remove discrimination against Hong Kong. But even the footwear concession had to be fought through against substantial Irish, Italian and Dutch opposition, end the achievement is not negligible. The Secretary of State for Trade in his message to the Governor (UKREP. Brussels telno. 3 to Hong Kong) stressed the fact that the Community was no longer

/insisting

CONFIDENTIAL