TNAG-1157-FCO40-1437-Visits-by-FCO-Ministers-to-Hong-Kong-1982 — Page 79

CONFIDENTIAL

MULTI-FIBRE ARRANGEMENT : ESSENTIAL FACTS

THE NEW AGREEMENT

1.

On 30 November Hong Kong and the EC Commission finally

initialled a new bilateral textiles agreement under MFA 3

covering the period 1983 1986, after negotiations which had been started in June this year. This agreement still has to be

ratified by the Council of Ministers, probably on 13 December.

However, this should be a formality.

2.

In a

The terms eventually agreed give an average cut-back of 7.6% in the 5 sensitive categories of clothing imports in Group

1 (the Commission's initial mandate was for 10% cut-backs;

Hong Kong was reluctant to go beyond 6%). With minor exceptions, cut-backs will be applied in the same percentage to

all Member States. The annual growth rate is set at 0.5%

(compared with 0.1% originally sought by the Community). gesture of recognition to the Hong Kong open market, the

Commission are aiming for slightly deeper cut-backs on the other "dominant" suppliers, though the difference will in practice only be marginal. For the UK, the important point is that as a result of the negotiations with Hong Kong we can be certain that

"global ceilings" will be respected. These set an overall limit

on low-cost imports in each category from all sources combined.

3.

In the less sensitive textile categories, Hong Kong agreed to growth rates of between 1% - 4% (2% - 8% previously). It also accepted the surge mechanism, new fraud provisions, and

a new basket exit mechanism (See paragraph 9).

MFA GENERAL BACKGROUND

4.

The

Because of the exceptional sensitivity of the textile sector, there have been special arrangements regulating

international trade in low-cost textiles for over 20 years.

MFA which dates from 1974 is the latest and widest such

arrangement. It was renewed for a third time (hence MFA 3) by

CONFIDENTIAL