CONFIDENTIAL
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unemployment, the difficulties being experienced by sectors of the Community textile industry, the concept of 'stabilisation', the value to exporters of an agreement which the EEC would scrupulously respect, etc. He made a particular point of the Governor's reference to discrimination against Hong Kong and invited elaboration.
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The Governor replied that there was clear evidence of a political decision to favour some countries at the expense of others. Mr. Caspari said there was no discriminat- ion against Hong Kong as such, but that the five "dominant" suppliers (including India for one product) would be treated alike, and Hong Kong happened to be a dominant supplier.
5.
The Governor referred to Hong Kong's excellent track record in reaching and honouring mutually acceptable agreements by adopting a flexible approach in bilateral negotiations. And he recalled that it had been the Hong Kong delegation to the GATT Textiles Committee who had first introduced the concept of "reasonable departures" from particular provisions of the MFA. Mr. Dorward added by way of illustration that the growth rates for most sensitive products in the current HK/EEC Agreement were well below 6 percent. It was not reduced growth rates, nor even the general concept of stabilisation of EEC imports at 1976 levels of trade which Hong Kong found particularly objection- able, rather it was the suggestion that base limits for Hong Kong might be set well below the actual performance achieved in 1976 in certain categories.
6.
Mr. Elliott said he had been instructed to indicate that the UK would be concerned at any question of discrimination against Hong Kong. The UK would expect to see fair treatment for Hong Kong in the formulation of the mandate.
7.
Mr. Haferkamp commented that the Commission's objective was to reach agreements resulting in a regime which would avoid the risk of increased protectionism resulting from unilateral action by Member States (as had occurred earlier in 1977 when the French imposed additional import controls on textiles) and which would thereby give exporters security in future trading opportunities.
The Governor responded that he saw danger in the EEC formulating and attempting to force on some of its trading partners a regime so restrictive and discriminatory that it might induce third countries to follow suit as a result of domestic political pressures, and thereby produce the very proliferation of protectionism which the EEC was trying to
avoid.
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Finally, Mr. Haferkamp said that the experts were still discussing the details of the Community's position and that the information which the Governor had given would be taken into account. He admitted that the Community had a very uncomfortable task ahead of it, but said that the Community intended to carry out that task in a fair and open way. He thought that the Community should be able to
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