TNAG-1029-FCO40-1279-Visits-by-FCO-officials-to-Hong-Kong-1981 — Page 84

CONFIDENTIAL

ESSENTIAL FACTS

MULTI-FIBRE ARRANGEMENT (MFA):

1.

A multilateral framework agreement regulating international trade

Originally negotiated in 1974 as a 'temporary' arrange-

in textiles.

ment; extended 1977 by Protocol which permitted 'reasonable departures'

due for renewal again at the end of this year.

from 1974 provisions;

Complemented by a series of bilateral agreements between importing

and exporting countries.

EC agreements including agreement with

Hong Kong do not expire until end-1982.

2. Hong Kong dominant low cost supplier of textiles world-wide. Hong

Kong quotas much greater than any other supplier's.

3. In 1978 EC used 'reasonable departures' Protocol to cut back quotas

for Hong Kong (and South Korea) below previous year's level. There

-

will be pressure within EC to repeat the exercise this time round. But

it would provoke a very hostile reaction by Hong Kong. Hong Kong already

pointing to drop in UK low-cost imports last year (while imports from

US, largely unrestrained, rose sharply);

also to productivity gains

in UK industry.

4. At time of recession most developed countries in fact likely to

favour some tightening of restraints on MFA suppliers (Germans main

exception). In UK Prime Minister has spoken publicly of need for

'tough' successor. Developing countries naturally want liberalisation.

But immediate return to GATT rules would deprive them of guarantee

of market access which each enjoys individually under MFA and expose

them to safeguard action which automatically affects all suppliers.

They have acknowledged publicly this would not be in their interest.

5. Governor discussed MFA with Sir K Joseph, Mr Biffen and Mr Parkinson

on recent visit to London (9-13 March). DOT lead department in

Whitehall.

6. (Not for use) Mr Biffen has recommended to colleagues that while

trying to keep Hong Kong down to very low or even nil growth rates UK

CONTIDENTITET AT

/should