TNAG-0629-FCO40-777-Effect-of-GATT-Multi-Fibre-Arrangement-on-Hong-Kong-negotiat-1988 — Page 6

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small suppliers and newcomers to the EEC market would have to be accommodated and dominant suppliers such as Hong Kong would be asked to "make sacrifices" to accommodate them.

XCC(77)67

(e)

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Mr Tran then outlined certain proposals, the most important elements of which were:

(a)

(b)

(c)

for 8 items which the EEC regards as very sensitive, both economically and politically, the proposed limits for 7 of them would involve cut-backs in the restraint limits for 1977 in the current EEC/HK bilateral agreement ranging from 3% to 39% and would in 6 of the 7 cases involve reductions from the actual level of Hong Kong exports in 1976 ranging from 5% to 27%;

the proposed term of the new agreement would be four years from 1 January 1978; and while the overall growth rate from 1979 onwards would be 6% per year, for these 7 items the growth rate would range from 0.25% to 2% per year;

there would be no flexibility provisions for the 8 very sensitive items the minimum flexibility provisions set out in the MFA are 7% swing (i.e. transfer of yardage into one item from unused yardage in a different item), 10% carryover (i. e. yardage unused in one year may be carried over for use in the following year in the same item) and/or carryforward (anticipation of the following year's yardage for use in the current year in the same item) of which carryforward shall not be more than 5%; and the flexibility provisions in the current EEC/HK bilateral agreement largely follow the MFA provisions;

(d)

these cut-backs would be applied both at the EEC level and at the Member State level (i. e. on aggregate limits and sub-limits for individual Member States).

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These 7 items accounted for about 54%, in terms of both value and quantity, of Hong Kong's total exports of textiles and clothing to the EEC in 1976. It is also estimated that if the 1978 limits proposed for these 7 categories were imposed, then the potential loss in the value of Hong Kong exports in 1978 to the EEC as compared with the export possibilities under the terms of the current arrangements could be as high a $1, 426 million(at 1976 prices moreover). To put

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