RESTRICTED
f.
special argument applying solely in the textiles and clothing sectors which might prove effective in persuading the US to improve their offers.
Subject to the further work we have been doing the above criteria suggest that our main thrust in respect of the USA should indeed be on textiles and ceramics, while in the case of Japan it should perhaps be on aircraft with however continuing pressure for across-the-board improvements applying inter alia in the important woollen textiles area.
How does that seem to all of you?
If you think you know what lessons
should be drawn for your own sector I should be most interested to know what these are.
OFFERS WE DON'T CARE ABOUT
14. Again to some degree our comments arise naturally from the figures: we hardly care about the elimination for example of a tariff of 0.6% or the reduction of another from 20% to 8% rather than to the figure of 8.5% called for by the formula. Is it the case however that for, for example, yachts and razor blades and dinky toys greater than formula cuts might give our manufacturers a competitive edge in relation to US home production which just is not true in respect of military aircraft or machine tool parts or internal combustion engines. Cannot we just say that wherever the more than formula cut is significant and there is a decent Community trade there is prima facie some benefit, even if this represents no more than a mild increase in profitability?
I am inclined to think myself that this latter has to be the line, although we must I am sure go along with the Commission's view that in the main these greater than formula cuts are indeed "garbage" and in no way balance the ill effects on us of the continuing distortion of inter- national trade flows represented by the US treatment of woollen textiles and the Japanese treatment of several sectors. I am ready and anxious to take account of your views.
OUR OWN WITHDRAWALS
14. It follows from the above that we are still some way from con- structing a list of withdrawals or consulting industry on the subject. As however the last note said the more contact we have with industry on all this the better. One conclusion I draw is that we may have to speak more in terms of less than formula cuts and less in terms of complete exceptions. Secondly it will not be possible to be quite clear just how far we can except completely industries such as motor vehicles and copper semis where our common tariff levels are much in excess of US and Japanese tariff levels. Our expectation would still be that our success in getting the US and Japan to reduce their tariff peaks significantly will be sufficiently limited for it to be perfectly possible for us to be pretty unforthcoming where we are the ones who need to be most negative.
14. Logue.
T. Sharp
If. CRE1
21 February, 1978
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