CONFIDENTIAL,
be UK would be unlikely to gain, either reduction in imports or protec- ion of the UK textile industry from implementation of the proposals since
ports from India would substitute those from Hong Kong.
he Secretary of State replied that HMG was fully associated with the
minity's decision to foster a Community industry with more adequate otection than that given under the MFA. He had not yet seen the actual Fures by which it was proposed that this should be done and undertook to ok at then in the light of what the Governor had said. While he could ot promise a change in the quota levels, he said that he would try and
prove them if this could be consistent with the UK's basic requirement f giving its own industry adequate protection. He appreciated the ficulties which might be caused in UK/Hong Kong relations if the oposals went ahead but pointed out that press reports on possible etaliation against British exports to Hong Kong meant that if the UK is concerned in the projects were now to lose the two orders, this ould be attributed in the UK to Ilong Kong reacting against the EEC
tion even if the decision were taken on purely commercial grounds.
he Governor said that if the proposed cut back were designed to give
ade o the UK, this would be fully understood in Hong Kong where the K's i dustrial protection problem was appreciated. He had noted the ecretary of State's view that the objective of the exercise was to make oom for new sources of supply with the implication that the EEC would refer certain sources to others such as Hong Kong. But the threat of nt back in quota levels and the element of discrimination were a political
eision and he was not in a position to stop the Hong Kong Press from
ulating about the future of the major projects for which the UK had deced.
he Secretary of State said that there was a need to avoid disruption by apid growth of new suppliers but it was not feasible to take action to xclude these suppliers completely. The bilateral agreements had to be negotiated so as to ensure no further increase in import penetration or certain highly sensitive products. The Governor pointed out that it us the element of discrimination in favour of India and Pakistan and against
og Kong that was not understood but the Secretary of State said it wis ficult even to persuade some members of the EEC that Hong Kong was a eveloping country a classification on which the UK had insisted.
Dorward explained that the most unpalatable feature of the proposals
The implication that the solution to the EEC's problems was to deprive ong Kong of a substantial part of her principal source of export earnings. t appeared to some in Hong Kong that political expediency had dictated he decision to grant preferential status to Greece, Spain and Turkey hen it was felt that these countries had no greater claim to such treat- ent than Hong Kong. Quota levels freely agreed in earlier years were to e reduced in 1978 with no additional advantage to UK industry but a
bstantial disadvantage to the textile industry in Hong Kong. The main bints now at issue were both discrimination against Hong Kong's interests ad potential absence of discrimination in favour of the UK in Hong Kong. e said that the growth potential allowed in the UK to Hong Kong for ensitive products was a mere half of 1% per annum; a further cut back
uld therefore seem to be unduly harsh. The Secretary of State said at any growth rate in import penetration of more sensitive products buld be unacceptable to the textile industry. In conclusion, he agreed
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