TNAG-0762-FCO40-966-Effect-of-GATT-Multi-Fibre-Arrangement-(MFA)-on-Hong-Kong-ex-1978 — Page 55

RESTRICTED

TN(T)(78)3

6 March, 1978

GATT MULTILATERAL TRADE NEGOTIATIONS (MTNS)

IMPROVEMENTS TO US AND JAPANESE OFFERS

I attach a copy of a note prepared in CRE1 last week which was handed over to the Commission on 3 March (and also handed over to some other member state delegations). We made the normal caveats about how it was inevitably incomplete and also said that, in the case of the things on List C, we would not necessarily oppose some criticisms of the failure of the US to apply the formula in those cases where the US rate was higher than the CCT.

2.

The discussion in the Article 113 Committee (Deputies) on

3 March on this subject in fact went quite well since the Commission now are disposed to concentrate their requests for improvements on those places where there is a big tariff disparity and where there is a good trade and they are not now proposing to go into sub- stantive talks with the Americans until there has been consideration of possible Community withdrawals. This seems to us satisfactory even though there is the risk that we shall never get into a position to say anything and be held to be dragging our feet. far as Japan is concerned the question of principle will be dis- cussed at the meeting of the Article 113 Committee (Full Members) on 10 March of whether the Community should press for greater than formula cuts in Japanese bound rates where these bound rates are higher than those currently applied.

So

3. There is no immediate advice CRE1 need from sponsoring divisions on this subject at this stage, although as ever we appreciate comments or questions any of you may have based on the material already provided and we welcome rather than discourage any contact you may have with industry on the whole subject.

CANADIAN INDUSTRIAL OFFER

4.

An elaborate Canadian offer has been received and has been discussed briefly in Brussels. Canada is suggesting that she apply the formula in a version which cuts her tariffs quite a bit more modestly than the formula being applied by the major participating countries and achieves a smaller degree of harmonisation. The cuts suggested are however still substantial and there are balancing greater than formula cuts. Assessment of the offer is bedevilled by the fact that for a wide range of exports we enjoy preferences, in some cases large ones, in the Canadian market, and these stand to disappear by the time the MTN cuts take place. (There is great obscurity about precisely when they would go, i.e. suddenly in one fell swoop with the rate applying to us going up to the MFN rate or gradually as the MTN rates go down: however that may be the important point is that, value these preferences though our exporters do,we have no grounds for insisting on keeping them and when the Canadians remove them we have to grin and bear it.) We would expect that CRE1 and CRE2 will need to be in touch with some production divisions at least in the course of our evaluation of this offer over the next two or three weeks.

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