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prodding by the Commission, progress in this area of the Community's development has been slow. Member States have been reluctant to
come to grips with issues, some of which can be delicate and contentious and where their individual policies do diverge widely, And, as the absence of agreement on the more contentious aspects of a common commercial policy has not, so far, created serious difficulties for the working of the Community, there has been no serious pressure to overcome this reluctance. The Treaty of Rome, does, however, provide that a common commercial policy should be in operation by the end of the transitional period, namely 31st December, 1969. There is thus very little time left if this provision is to be met and the Commission have recently been con- centrating their efforts to ensure that at least the essentials of a common policy are in place by the end of this year or the early
· part of next year at the latest.
2.
This paper attempts to explain the need for a common commercial policy within the context of the development of the E.E.C. as a whole; to describe what this involves, including the steps taken so far and the work now going on in this field; to assess the significance of all this for Hong Kong's trade with the Community; and to describe, in particular, how the policy is being developed with regard to cotton textiles. Finally the implications for British entry of what is being done in the Community in these fields is briefly touched on. As far as possible the paper will try to avoid going too deeply into technical issues but will rather attempt to bring out the main policy questions involved and to assess the sort of posture that should be adopted by Hong Kong in the face of likely developments.
The Customs Union and Economic Union
3.
The Treaty of Rome provided for the establishment of a Customs Union between the Member States, and it laid down precise steps for the achievement of this. But it also looked forward further towards the development of an Economic Union involving closer integration of economic policies, although in this it gave no guidance as to the time table that should be adopted or even the steps that should be taken to achieve its aim, leaving it to the Institutions of the Community to develop the policies required. The essence of a Customs Union is that there should be free trade between the countries comprising the Union and a common system of protection against imports from other countries. Goods produced within the area of the Customs Union and imports coming from outside, which have paid the common tariff and been subject to any other common import regulations, should then be free to move anywhere within the area of the Customs Union without the intervention of further frontier controls (this is known as "free circulation").
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(2)
(2) A Free Trade Area (e.g. EFTA), on the other hand, although it provides for free trade between the Member Countries, allows each country to maintain its own tariff and other requirements for imports from countries outside the Area. In these circumstances there can be no "free circulation", as with a customs union, as this would lead to imports being diverted to the member countries with e.g. the lowest tariffs. Another consequence of a Free Trade Area is that more complicated origin rules have to be devised to ensure that products claiming the benefit of the free trade provisions really are products of a substantial manufacturing process in one or more of the member countries. This is the case with EFTA, which has very complicated origin rules. The project for a wider European Free Trade Area (comprising the E.E.C. and other countries belonging to the then Q.E.E.C.) broke down in December, 1958, ostensibly because France feared that the absence of a common tariff and other elements of a common import policy would lead to deflections of trade, no matter what origin rules were devised to try to minimise this. real reasons, however, were largely political and similar to those which have since led France to veto Britain's entry into the E.E.C.
The
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