TNAG-0627-FCO40-775-Effect-of-GATT-Multi-Fibre-Arrangement-on-Hong-Kong-negotiat-1977 — Page 132

3.F. 323

3.

2

Mr. Jordan then briefly went through paragraphs 10 to 24

of the paper which provided the counter-arguments to the points made by Mr. Meacher on the four weaknesses of the MFA outlined above. These counter-arguments are :

(a)

(b)

(c)

(a)

(e)

(f)

(g)

(h)

(1)

(j)

the MFA provides for a growth rate on quotas and not exports;

experience shows that in times of recession imports also decline along with consumption;

in the UK's case, because of the depreciation in sterling, it is misleading to compare imports in different years in terms of sterling - for example the UK's total imports of textiles and clothing in 1975 increased in sterling value by % compared with 1974 but declined in quantity by 12%.

during the concluding stages of the MFA negotiations at the end of 1973 the oil crisis was well under way and the MPA was accepted by participating countries in the expectation that economic conditions would deteriorate in 1974;

in any case the 6% growth rate in the MFA is neither guaranteed nor the minimua the MFA provides for and Hong Kong has accepted considerably lower growth rates in its bilateral agreements with the ELC and the USA;

import penetration levels are not a true measure of the state of a domestic industry which exports a high proportion of its production, and this is the case of the UK industry;

Article 3 of the MFA provides for fixed reference periods for the calculation of base levels for quotas, but the EFC chose to negotiate its bilateral agreements under Article 4 which does not contain such a provision and is designed to deal with a situation different from an Article 3 one;

the delays which occurred in the EEC's bilateral negotiations were often of the Community's own making and in Hong Kong's case did not result in higher quotas since the base period was 1974;

the developing exporting countries accepted the MFA, which is a derogation from their GATT rights, in the knowledge that importing countries are allowed to take action only against particular products from particular sources, when such products are causing market disruption, and hence that "innocent parties" are not liable to be caught by a global action;

the MFA was never intended to provide a safeguard against cumulative market disruption, and the proper instrument under which to take global action is Article XIX of the GATT, but importing countries are generally unwilling to do so hecause of the fear of retaliation against their own exports.