SECRET
£54 million), or 17% of the total, were exported to the United Kingdom. over 95% of the exports destined for the United Kingdom were entered under claimed preference; and over the whole range of
he goods concerned the preference margin amounted to about 17 of the c.1.f. level. on this basis the value of the preforential margin to Hong Kong in 1965 can be calculated to have amounted to about $156 million, or approximately £10 million.
5. But it is not only in these quantitative terms that Hong Kong. manufacturers and exporters value the British market. At present, in the absence of any sizeable domestic market in Hong Kong, Commonwealth preference enables llong Kong manufacturers to treat the United Kingdom as a quasi domestic merket, in which, though. they are in competition with U.K. based manufacturers, they benefit from the same level of tariff protection in respect of other non- Commonwealth overseas competitors as thited Kingdom manufacturers (there are a few exceptions, e.g. synthetic textiles, and a limited range of imports from FTA countries). When Hong Kong manufacturers, who perhaps more than any others in the world are conscious of the need for constant diversification, entor a ne: field of manufecture and export, they have been able to use the protection they have enjoyed in the U.. market to gain two or three years experience in the marketing of the particuler product, market research, adapting it to consumer tests, etc. etc. Having tried the product-cut In the . It is usually only after they have gained valuable experience of marketing the product in the U.K. that they set about capturing other overseas markets. My own belief, based on talks I hove had with Chinese and British manufacturers and exporters in Hong Kong, is that they attach more importance to thân qualitativo valuation of the U.2. market than to its quantitative valuation.
The 1961/63 Negotiations
6. No decisions on how to treat Hong Kong had been reached before the negotiotions broke down. We had originally proposed Association under the Treaty of Rome, which eventually` would have given Hong Kong free entry to the whole of the enlarged Community. but the six rejected this out of hand on the grounds that Hong Kong 1s economically in an entirely different status from the other Associated Territories producing mainly tropical products and row materials, 1.c. her exports are in fact in direct competition with industries in the E.E.C. The Six equally rejected an afternocive proposal that we put forward, namely that long Kong should continue to enjoy free entry on her exports to Britain alone; they argued that this would be incompatible with the Cormoņ Barket, de therefore proposed that the common external tææfff should be imposed on Hong Kong's exports to Britain only by gradual stages, and that the effect sho ld be examined with a view to taking remedial action