TNAG-0631-FCO40-779-Effect-of-GATT-Multi-Fibre-Arrangement-on-Hong-Kong-negotiat-1977 — Page 97

Mr Jenkins (EID(E))

HONG KONG AND THE MFA

CONFIDENTIAL

307

HKK 121 616/1

INDEX

3

- NO 1977

..

(28)

51

ESTRY

ion Take

1. Mr David Jordan, the Hong Kong Director of Commerce and Industry, called on me on 31 October to discuss the EEC/Hong Kong bilateral textile negotiations in Brussels. I am sure you are only too aware that these negotiations have got into something of a mess, and I need not go over most of the points made by Jordan - these have already been made very cogently by the leader of the Hong Kong delegation in his statement on 21 October. The Hong Kong delegation have formed a very low opinion of the EEC negotiators: among other things they suspect the EEC of having subscribed to TEXCOM/W/44 in bad faith.

2. I would, however, like to draw your attention to some points made by Mr Jordan about the British role in the negotiations. When the Governor came to London in September he was, I think, left in little doubt about the difficulties facing the UK textile industry and about the limitations that these placed on our ability to help Hong Kong. But he was nonetheless given a firm assurance "that the UK would do what it reasonably could to help Hong Kong's case". Yet, the experience of the Hong Kong delegation has been that, far from helping them, the UK have been taking the hardest line against them of all the member states. Mr Jordan referred in particular to the example of woven cotton fabric. Here the 1978 quota figure being proposed by the Commission for Hong Kong is, according to Mr Jordan's figures, over 50% below what it would have been if the current agreement had been continued into 1978. Since 70% of EEC imports of cotton and synthetic fibres are accounted for by the UK, the Hong Kong Government are forced to the conclusion that the pressure for this extremely high rate of cutback must come from the UK.

3. It is not just the Hong Kong delegation in Brussels who feel that the UK are leading the EEC pack. As I was able to see all too well for myself when I was in Hong Kong last week, there is a general feeling in the Hong Kong business community that the UK is doing the dirty on Hong Kong in Brussels. Mr Jordan repeated the warning that we stand to lose substantial commercial benefits as a result. He referred again to the project to build a new power station for the China Light and Power Company, for which a consortium of British firms, headed by GEC, are making a strong bid with considerable government backing. He said that the argument had been put forward that it was illogical for Hong Kong to deny the contract for this project to the UK because of the EEC attitude towards textiles, since the only alternative supplier was Japan whose. policy towards textile imports was far more protectionist than ours. This missed the point which was that the EEC policy deliberately discriminated against Hong Kong, while Japan at least treated everybody equally badly. More significantly, in the China Light and Power case, what

CONFIDENTIAL