CONFIDENTIAL AND PERSONAL
P. A fels
Foreign and Commonwealth Office
London SW1A 2AH
7 March 1977
Sir M MacLehose GBE KCMG KCVO
HONG KONG
0
Dive thing,
THE FUTURE OF THE MULTI-FIRRE ARRANGEMENTS (MFA)
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1. I have been turning over in my mind the comments in your telegram No 131 of 4 February, in the light of the useful talks which officials had with David Jordan last month. think that I should tell you how opinion both within Whitehall and in the Community is shaping up on the MFA issue.
2.
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Coming fresh to this problem, I am convinced as I imagine you are that everyone in the FCO is fully aware of the importance that textiles production holds in the economy of Hong Kong and of the fact that disruption of that production is likely to have an impact on Hong Kong's economy. This is, indeed, fully under- stood throughout Whitehall. But equally there is intense anxiety over the serious difficulties which confront the textile industries in the member countries of the Community and especially in the UK. Unemployment levels in the UK industry are extremely high and there is little hope of reducing them in the immediate future. This is a serious social and political problem, and I doubt if I am stating anything new when I say that the pressures on Ministers to provide further protection for the textile industry are strong and will increase so long as import penetration of the UK market continues to grow. But it is against this background that we have to shape policy.
3. There is a firm belief here that the MFA, as it stands, has provided insufficient safeguards against market disruption, which is regarded in the UK and elsewhere in the Community as the major problem facing the textile industry. The expectations for world trade expansion, which led HMG and the governments of other developed textile producing countries to accept the present MFA have simply not been realized and therefore the growth rates we have accepted so far are not suitable in the short term. The Community will need to seek further protection.
1. You are naturally concerned about the possibility of a cutback in Community quotas on Hong Kong's textile exports, but I am afraid that, given the pressures here, I cannot supply the unqualified assurance you asked for in paragraph 13 of your telegram. The Community is considering various possibilities concerning the future of the MFA and hopes soon to agree its mandate for the renegotiation. There is some head of steam in
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