TNAG-1402-FCO40-1874-Future-of-Hong-Kong-continued-participation-in-the-General-A-1985 — Page 59

CONFIDENTIAL

a major source of danger to the open trading system, that

the industrialised West has shouldered so many GATT

obligations towards developing countries, the NICs and Japan

without securing effective rights in return. The imbalance has grown so far that we have to admit privately, (whatever we continue to say publicly) that the fulfilment of our existing obligations has proved and is proving, fraught with political difficulty for Ministers. VRAS are a notorious symptom of this. A new GATT Round will aim to resolve some problems. But it would nonetheless be dangerous to put the GATT system under further strain, by imposing on all Contracting Parties further obligations to new members, without any assurance of our ability to fulfil them, nor any likelihood that the political unpopularity of the imports following such obligations could be offset against tangible economic benefits

in the new member's market.

15. Relevant to the assessment of this balance of risks and

opportunities is the current status of both QRS and safeguard measures under the GATT. In trade policy terms

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•

use of

GATT

Chinese grey cloth). But such arguments are applicable only where current GATT rules provide effective protection against unfair competition for example, against "attractively priced" goods which were in fact, dumped or heavily subsidised.

rules could not be effective in dealing with a non-market economy, so the arguments against QRS are correspondingly less significant. Aside from QRS, the normal provisions of the GATT allow for "safeguard action" (Article XIX) where a sudden increase in imports threatens serious injury to domestic producers. But these provisions are to a large extent a dead letter, inadequate to deal with the problems posed, for example, by Japan. The new Round may provide a revised Safeguard clause, but this cannot be guaranteed. In short, current GATT rules do not offer a satisfactory alternative to the present

range of trade sanctions available for use against China. Morever we could expect strong pressure from producers in this country against any sudden dismantling of the Community's existing defences against Chinese imports. Other Member States, however are in any case likely to take the initiative in