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The
so-called global quota of 136 m. sq. yds., half of which is allocated to and administered by the countries concerned on the basis of their past trade. other half is pooled and allocated to United Kingdom importers. A more detailed description of the quota scheme is to be found at Annex 3.
Other countries' quotas
8.
Most other industrial countries impose quantitive restrictions on some imports of cotton textiles from some countries in accordance with the GATT Long Term Arrangement. The U.S.A. restricts imports of most types of cotton textiles from a wide range of developing countries. The effect has been to limit imports to about 10 per cent of domestic consumption. Germany and the Benelux countries have been obliged under the Treaty of Rome to bring their liberal policies more into line with those of the French and Italians. Imports from the developing countries amount to no more than 8 per cent of domestic consumption. On the other hand restrictions apply to only a handful of countries and even then a number of important items, such as yarn, sheets and many articles of clothing, are not subject to control in at least one of the importing countries. The Scandinavian countries do not, as a rule, restrict imports of yarn and cloth, which they apparently regard as raw material, but recently they have begun to impose restrictions on imports of garments from a number of low-cost suppliers.
The problem and its solution
9.
The question which has to be decided is whether the industry is to be given continued protection over and above the existing tariff when the present arrangements end; and, if so, what form that continued protection should take. It may be assumed that the importing countries will secure the extension of the GATT Cotton Textile Agreement after September 1970 for a further period. In these circumstances it would be politically unrealistic to leave our own industry to fend for itself without effective protection, though from a purely economic standpoint this could well be the right solution, at least in the longer term. In our view the effective choice is therefore between a continuation of the quotas in some form and a tariff on the lines of paragraph 2 (i) above.
10. The Textile Council came down in favour of a tariff principally because: (i) they recognised that the effectiveness of the quotas was likely to diminish as consumption of cotton textiles declined; (ii) a tariff would concentrate imports in sectors where the United Kingdom industry was less efficient, with consequent encouragement of the production of those goods for which our industry has a relative advantage and (iii) the margin of protection under a tariff is both stable and predictable. Thus a tariff on imports from the Commonwealth in the view both of the Textile Council and the Board of Trade, would restore confidence to the industry in a way which quotas (as described in paragraph 7 above) have not succeeded in doing and would stimulate the investment required to make the industry competitive.
11.
Other advantages seen for the tariff are that:
(a) the stimulus to efficiency would be greater under the tariff and
there would be advantage to the United Kingdom economy as a result of the increase in revenue from the tariff; and because internal prices would be more likely to fall, the consumer might well be better off than under quotas;
(b) there would almost certainly be advantage to the balance of trade in cotton textiles as a result of the reduction in the price of imports before payment of duty and it is unlikely that this advantage would be offset by increased volume.
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