TNAG-0613-FCO40-761-Visits-of-Governor-of-Hong-Kong-to-UK-1977 — Page 51

BACKGROUND

CONFIDENTIAL

7. Negotiations with Hong Kong were broken off on 8 November in a much publicised press statement by the Commission's chief negotiator (Tran Van Thinh). This breakdown followed Hong Kong's refusal to discuss the EEC's figures (which involve big cutbacks on 1976 levels for six sensitive products: cotton cloth, woven and knitted shirts, blouses, jerseys and trousers), and their counter-proposal of 1976 levels with no cuts, which they said was their last word on the subject. Hong Kong has also criticised the EEC's proposed new product classifi- cation (designed to repair previous confusion and avoid quota evasion).

8. A breakdown in itself, at this stage of the negotiations, was not particularly alarming given the tactics employed on both sides. However the Commission also threatened to "parcel out" the existing offer to Hong Kong to other suppliers. We felt this was unduly provocative and protested at the highest level. Mr Dell saw Commissioner Davignon on 10 November and received an assurance from the Commissioner that this would not happen. However subsequent press reports suggested that the idea was by no means dead.

9. FCO and UKREP made great efforts to persuade both sides to cool down. There were major developments on Friday, 18 November. First of all the Governor of Hong Kong indicated that, having consulted the Textiles Advisory Board, he might be prepared to send his team back

to Brussels on three conditions:

(a) that the Commission should revise its offer and indicate

(b)

(c)

흐흐

its maximum position;

EEC to confirm that quotas would be export administered;

there should be adequate transitional arrangements to cover the introduction of new product classification if EEC would not reconsider its proposal.

CONFIDENTIAL

/10.