0003230
G.F. 323
42.
CONFIDENTIAL
- 9-
Second Working Session :
2.30. p.m., Thursday, 5th September, 1968
Mr. Stewart commented that an adequate spread of over- heads was essential to the success of any production enterprise and that if utilisation of capacity fell below a certain percentage the profit margin would be eliminated. The overheads factor was particularly important in the wide sheeting industry and, with production running at 86% of capacity, British weavers found themselves in considerable difficulty; this was why the B.O.T. Were obliged to take steps to curb imports.
43.
He then supplied the following statistics showing the shares of global quota countries and of Hong Kong in British domestic consumption since 1964 -
1964 1965 1966
1967 1968
Global
8.2%
5%
(?)
5.2%
8.1%
Hong Kong 5%
11%
10%
12%
13.5%
44.
Mr. Jordan replied that the figures seemed to indicate that in 1968 other suppliers were increasing their share in the market at an appreciably faster rate than was Hong Kong. Hong Kong's share in domestic consumption had remained fairly constant since 1965. Mr. Stewart pointed out that although suppliers such as Spain and Yugoslavia were not insignificant, total cloth imports from all global quota countries could not exceed 31 million square yards compared with Hong Kong's quota of 30 million square yards a year for finished fabrics only. Mr. Jordan commented that it was these other suppliers who had contributed most towards the recent increase in British imports of wide sheeting. By contrast, imports from Hong Kong in the period 1965-1967 had remained stable. As Mr. Stewart had stated that the British industry's trouble began in 1967, he could not see how Hong Kong could be held to blame for these problems.
45.
Contending this point, Mr. Stewart said there was a close and demonstrable connection between the present situation of market disruption and imports from Hong Kong. If imports of wide sheeting from Hong Kong and other low-cost suppliers had continued at a normal level, the market would not have been disrupted. It would be reasonable to take the "normal level" as the annual average of imports over the three years 1964-66 but discounting the very large shipments at the end of 1965 which occurred as a result of de-categorisation. This "normal level" was 17.4 million square yards. The B.O.T. proposed Hong Kong should limit exports of wide sheeting and sheets to 16.35 million square yards a year. The trade in 1967/68 had obviously been abnormal and, having regard to the existing situation of market disruption, H.M.G. could quite rightly and logically insist on a cut-back.
46.
Mr. Stewart further explained that the problem really had its roots in 1965 when there had been a sudden surge in imports from Hong Kong. But the practical mani- fest.tions had not been immediately apparent as the full impact had not been felt until stocks were off-loaded on to the market. Production had not begun to decline until in the...
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CONFIDENTIAL
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