TNAG-0627-FCO40-775-Effect-of-GATT-Multi-Fibre-Arrangement-on-Hong-Kong-negotiat-1977 — Page 109

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say that although they would not necessarily be applied against all

developing countries from the start and might indeed offer apparent

prospects of growth to some at the beginning, they would soon begin to

bite when any meaningful trade developed.

At the same time as they are seeking to turn the MFA, which

at present permits only selective restraints, into an instrument to

permit "global" restraints against all developing countries, some developed countries are also seeking to turn the GATT, which at present

permits safeguard action against imports only when it is truly global,

i.e. non-discriminatory, into an instrument which permits the selective,

i.e. discriminatory, application of such safeguard action. And if the

long and unhappy experience of developing countries in the field of

textiles restrictions is any guide, selective safeguard action if

permitted under the GATT will almost certainly be used exclusively

against developing countries. It is very difficult not to suspect that

the developed countries concerned are trying to have the best of both

worlds.

The second proposal is that the growth rates of quotas should

be fixed in inverse proportion to the degree of import penetration.

This is based on an unsustainable and entirely false premise. The basic requirement in the MFA for determining the existence of market

disruption, and hence the justification for restraint, is that there

must be serious damage to domestic industry or an actual threat of damage.

The only valid measures of the state of any industry are the levels of

production and sales, not the rate of import penetration. This is

particularly true where the importing country also happens to be a

substantial exporter. To illustrate this point I will quote an example.

One of Hong Kong's trading partners once asked Hong Kong to restrain

the export of a certain product on the grounds that imports of this

product from Hong Kong were disrupting its market. When the statistics

supplied by the importing country were examined, it was found that import penetration was more than 100% and that, in spite of this, domestic

production had increased during the same period. You will ask how this was possible because one would have thought that the maximum degree of import penetration could not be more than 100% and also that if the whole market was supplied by imports then surely the domestic industry

could not exist, let alone increase its production. Well we don't know

/ No

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